Earnest Money Dispute After Contract Termination?
Was your Offer to Purchase and Contract terminated, and now you're unsure how to recover your earnest money deposit? You’re not alone. Real estate transactions can be complex, especially when disputes arise over contract terms and money held in escrow.
As a North Carolina attorney, I help buyers and sellers resolve disputes over earnest money deposits and guide them through the legal process of recovering funds when a deal falls through.
What Happens to the Earnest Money Deposit After a Contract is Terminated?
When buying residential property in North Carolina, the buyer and seller typically agree to two upfront payments: the due diligence fee and the earnest money deposit.
- The due diligence fee is a non-refundable payment made by the buyer for the right to investigate the property during the due diligence period. During this time, the buyer can conduct inspections, secure financing, and determine whether to move forward with the purchase.
- The earnest money deposit is a good faith payment made by the buyer to show they are serious about completing the purchase. Unlike the due diligence fee, the earnest money deposit may be refundable—particularly if the buyer terminates the contract within the due diligence period.
What If There’s a Dispute Over the Earnest Money?
If the contract is terminated and the buyer and seller disagree on who is entitled to the earnest money, the escrow agent (usually the closing attorney or real estate firm) may deposit the funds with the Clerk of Superior Court in the county where the property is located.
To recover your money, you must file a Petition to Recover Disputed Monies—a type of special proceeding under North Carolina law.
What to Expect in an Earnest Money Dispute Hearing
The Clerk of Court will schedule a hearing and review the evidence submitted by both parties. You will need to provide documentation that supports your claim to the funds—such as the real estate contract, termination notice, timeline of events, and communication with the seller or their agent.
Although some hearings are uncontested, it's best to prepare for a contested proceeding. If both parties had agreed on how the money should be distributed, the escrow agent would not have needed to involve the court. That’s why having a knowledgeable North Carolina lawyer on your side can make a significant difference.
Need Legal Help to Recover Your Earnest Money?
If you're involved in a real estate contract dispute or need help filing a Petition to Recover Disputed Monies, I can assist you every step of the way. I offer experienced legal representation for buyers and sellers in North Carolina navigating complex real estate issues.