Looking for advice on this situation. Buyer Backed Out of $500K Home Purchase - Who Gets the $15K Earnest Money? Any guidance would be greatly appreciated.
Details: I'm in a situation where I need to understand my legal options. Has anyone dealt with something similar?
Tenant rights vary enormously by state and even by city. What's legal in Houston might be a crime in San Francisco. Always check your local tenant protection ordinance, not just state law.
Tenant rights vary enormously by state and even by city. What's legal in Houston might be a crime in San Francisco. Always check your local tenant protection ordinance, not just state law.
As a landlord, the most expensive mistake is not documenting the property condition at move-in. A detailed photo walkthrough with timestamps protects both parties and eliminates most deposit disputes.
As a landlord, the most expensive mistake is not documenting the property condition at move-in. A detailed photo walkthrough with timestamps protects both parties and eliminates most deposit disputes.
Real estate agent here, not an attorney, but I have handled dozens of earnest money disputes in Texas and California. The answer almost always comes down to the specific language in your purchase agreement and whether the buyer contingencies were properly waived or expired.
In most standard residential purchase agreements (like the CAR forms in California or the TREC forms in Texas), the buyer has specific contingency periods for inspection, appraisal, and financing. If the buyer backs out within an active contingency period for a reason covered by that contingency, they typically get their earnest money back. If they back out after contingencies have expired or been waived, the seller is usually entitled to keep the earnest money as liquidated damages.
The tricky part is the release process. In most states, both parties must sign an earnest money release form before the escrow company or title company will disburse the funds. If one party refuses to sign, the money sits in escrow until there is either a mutual agreement or a court order. I have seen earnest money sit in escrow for over two years while the parties fought in court.
For a 15K earnest money dispute, the practical reality is that litigation will cost each side 10-20K or more, which means neither party has a strong economic incentive to go to court. Anecdotally, most of these cases settle through mediation (which is often required by the purchase agreement before litigation). Common outcomes: a 50/50 split, or a 70/30 split in favor of the party with the stronger contractual position.
My strongest advice: read the liquidated damages clause in your contract carefully. California Civil Code Section 1671 governs liquidated damages in residential real estate, and there are specific limitations on how much earnest money can serve as liquidated damages (generally capped at 3% of the purchase price). If your contract exceeds that threshold, the liquidated damages clause may be unenforceable.