What You Need to Know About Earnest Money

Here’s some advice on how to handle earnest money deposits.

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A lot of people don’t understand what earnest money is for, and more importantly, when there’s a dispute, how it is handled.

Earnest money is “good faith money” that you put up into an escrow account on a home you want to buy. It’s a non-interest account that removes the home from the market and protects the seller if you default for any reason not defined in the contract.

There are plenty of outs in a resale contract. It’s very buyer-friendly and there are multiple periods tucked into it to give you the ability to terminate the deal if things don’t go right.


There are plenty of outs in a resale contract, but earnest money is tricky.


When you’re out of options and you back out, the seller typically gets to keep that earnest money. What happens if there’s a dispute?

If a breach of contract occurs, the earnest money needs to go to either the buyer or seller. A release of earnest money must be signed by both parties for the title company who conducts the closing to release it to the party who is supposed to get it.

If one party won’t sign, a formal demand has to be made and the title company sends a demand letter telling the other party to sign the letter. If they don’t sign it then, most title companies will still not release the earnest money because they don’t want to release it to the wrong party by interpreting the contract. You will have to contact an attorney at this point to be able to get that earnest money back. The final step is small claims court.

This is a confusing process, but it’s a lot easier when you have an expert on your side. In most cases, these cases don’t go to court, but they always can. If you have any additional questions for me about real estate, don’t hesitate to reach out via phone or email. I look forward to hearing from you soon.

Categories: San Antonio Real Estate.