When you enter into an offer to purchase and contract for real property, you typically agree on a due diligence fee and an earnest money deposit. The due diligence period is when the buyer pays an agreed-upon amount to then gather information about the property and determine if the property they have contracted to buy is the right property and purchase for them. The earnest money deposit is an agreed-upon amount of money the buyer pays the seller to show good faith and seriousness about purchasing the property. The due diligence fee is non-refundable; however the earnest money deposit can be refundable if within the bounds of the contract.
The earnest money deposit is returned to the buyer if the buyer chooses to not buy the home within the due diligence period. If a dispute arises between the seller and the buyer regarding who is owed the earnest money deposit after the contract is terminated, then the escrow agent may deposit the funds with the clerk of court in the county where the property is located. Either the seller or the buyer can then file a special proceeding action known as a Petition to Recover Disputed Monies.
The Clerk of Court determines who the rightful owner of the monies is and will distribute the disputed monies accordingly. A party needs to have sufficient evidence to prove they are owed the disputed monies and needs to be prepared to present this evidence at a hearing with the clerk. This proceeding can be contested or uncontested, but it is best practice to presume it will be contested by the opposing party since the escrow agent would have paid it out to one of the parties if both the buyer and seller agreed to begin with. This is why it is better to have as much evidence prepared as possible to prove your case at a hearing.
How we can help:
- At a consultation, we can discuss your options and what evidence you will need to present to the
clerk. - We can prepare the petition and all necessary paperwork for the clerk and serve the proper
parties. - One of our attorneys can argue your case at a hearing.
Stott, Hollowell, Windham & Stancil, PLLC
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