Process for Claiming Earnest Money by Residential Seller

Process for Claiming Earnest Money by Residential Seller

General Information. In the context of purchasing a home pursuant to the Texas Real Estate Commission's
form for One to Four Family Residential Contract (Resale) ("Contract"), earnest money is usually deposited with an escrow agent by the buyer as a show of good faith and security for negotiating the purchase of the home. The earnest money amount is negotiable between the parties. If the buyer and seller close on a particular piece of property pursuant to a Contract and earnest money has been deposited with an escrow agent, the earnest money must be applied first to any cash down payment, then to buyer's closing costs, and any excess refunded to the buyer. However, the earnest money is also implicated if the contractual relationship between the buyer and seller break down and the Contract is either terminated or if either the buyer or seller defaults or breaches the Contract.

* Seller's claim to earnest money.

If the buyer defaults on the Contract, by, for example, willfully failing to close by the closing date without justification or excuse, the seller has the option to terminate the contract and receive the earnest money as liquidated damages.

Process for receiving earnest money from the escrow agent.

1. Either party may request the written agreement of the other party to terminate the Contract and release the earnest money. In the event such agreement is reached, the escrow agent may require payment of unpaid
expenses incurred on behalf of the parties and a written release of liability of escrow agent from all
parties.

2. Either party may make a written demand upon the escrow agent for the earnest money.

a. The escrow agent shall give notice of the demand to the other party by providing the
other party a copy of the demand. The notice will be effective when it is deposited in the U.S.
mail, postage prepaid, certified mail, return receipt requested, addressed to the other party at the
address set forth in the Contract.

b. A party who receives notice by the escrow agent of the demand of the other party for the
earnest money must provide the escrow agent any objections to the demand within thirty (30)
days after the effective date of the notice provided by the escrow agent. Notice of objections to
the demand will be deemed effective upon receipt by the escrow agent.

c. If the non-demanding party does not provide the escrow agent with objections to the
demand by the other party for the earnest money within thirty (30) days of the effective date of
the escrow agent's notice, the escrow agent may disburse the earnest money to the party making
the demand reduced by the amount of any unpaid expenses incurred on behalf of the party
receiving the earnest money and the escrow agent may pay such expenses to the creditors.

d. If the escrow agent complies with the provisions of the Contract related to the demand
and disbursement of the earnest money, the parties agree to release the escrow agent from all
adverse claims related to the disbursement of the earnest money.

e. In the event the other party timely objects to the release of the earnest money or the
escrow agent will not otherwise release the earnest money despite a written demand for the
earnest money, and no mutually agreeable resolution can be achieved, the parties will have to use
available legal processes to resolve the dispute, which may include a civil lawsuit or mediation
before a neutral third party.

* This is not a substitute for specific legal advice. As a seller, you should rely on specific legal advice from your legal counsel regarding your rights and available remedies under the Contract or at law which may be broader or narrower than termination of the Contract and claiming the earnest money as liquidated damages, and may differ from contract to contract.

This document developed by NETC Legal Counsel Neal Adams of Adams, Lynch and Loftin, P.C.
Process for Recovery of Earnest Money by Residential Buyer

General Information.

In the context of purchasing a home pursuant to the Texas Real Estate Commission's fonn for One to Four Family Residential Contract (Resale) ("Contract"), earnest money is usually deposited with an escrow agent by the buyer as a show of good faith and security for negotiating the purchase of the home. The earnest money amount is negotiable between the parties. If the buyer and seller close on a particular piece of
property pursuant to a Contract and earnest money has been deposited with an escrow agent, the earnest money must be applied first to any cash down payment, then to buyer's closing costs, and any excess refunded to the buyer. However, the earnest money is also implicated if the contractual relationship between the buyer and seller break down and the Contract is either tenninated or if either the buyer or seller defaults or breaches the Contract or in those circumstances described below or otherwise in the Contract.

* Buyer's recovery of the earnest money.

Pursuant to the Process for receiving earnest money from the escrow Contract, under the following circumstances, the buyer agent maybe entitled to a refund of the earnest money:

1. If the buyer is unable to obtain financing within an
agreed number of days after the effective date of the
Contract, the Contract will terminate and the earnest
money will be refunded to the buyer.

2. If buyer's objections to the survey and title
commitment are not cured by the closing date, the
Contract will terminate and the earnest money will be
refunded to buyer unless buyer elects to waive the
objections.

3. If an option fee is paid and the buyer gives the seller
notice of termination of the Contract within the option
period, the option fee will not be refunded to the buyer,
however, the earnest money will be refunded to the
buyer.

4. If seller fails to close by the closing date, seller will be
in default and buyer has the option to terminate the
Contract and receive the earnest money.

5. If any part of the property is damaged or destroyed by
fire or other casualty loss after the effective date of the
Contract, if the seller fails to restore the property to its
previous condition as soon as reasonably possible, but
in any event by the closing date, due to factors beyond
the seller's control, the buyer has the option to
terminate the Contract and the earnest money will be
refunded.

6. If, due to factors beyond seller's control, seller fails to
deliver the title commitment to the buyer, the buyer has
the option of terminating the Contract as the sole
remedy and receive the earnest money.


7. If, due to factors beyond seller's control, seller fails
within the time allowed to make non-casualty repairs,
the buyer has the option of terminating the Contract as
the sole remedy and receive the earnest money.


8. If seller fails to comply with the Contract for any other
reason, the seller will be in default and buyer will have
the option to terminate the contract and receive the
earnest money.

1. Either party may request the written agreement of the
other party to terminate the Contract and release the earnest
money.

2. Either party may make a written demand upon the
escrow agent for the earnest money.

a. The escrow agent shall give notice of the demand to the
other party by providing the other party a copy of the
demand. The notice will be effective when it is deposited
in the U.S. mail, postage prepaid, certified mail, return
receipt requested, addressed to the other party at the address
set forth in the Contract.

b. A party who receives notice by the escrow agent of the
demand of the other party for the earnest money must
provide the escrow agent any objections to the demand
within thirty (30) days after the effective date of the notice
provided by the escrow agent. Notice of objections to the
demand will be deemed effective upon receipt by the
escrow agent.

c. If the non-demanding party does not provide the
escrow agent with objections to the demand by the other
party for the earnest money within thirty (30) days of the
effective date of the escrow agent's notice, the escrow agent
may disburse the earnest money to the party making the
demand reduced by the amount of any unpaid expenses
incurred on behalf of the party receiving the earnest money
and the escrow agent may pay such expenses to the
creditors.

d. If the escrow agent complies with the provisions of the
Contract related to the demand and disbursement of the
earnest money, the parties agree to release the escrow agent
from all adverse claims related to the disbursement of the
earnest money.

e. In the event the other party timely objects to the release
of the earnest money or the escrow agent will not otherwise
release the earnest money despite a written demand for the
earnest money, and no mutually agreeable resolution can
be achieved, the parties will have to use available legal
processes to resolve the dispute, which may include a civil
lawsuit or mediation before a neutral third party.

* This is not a substitute for specific legal advice. As a buyer, you should rely on specific legal advice from your legal counsel regarding your rights and available remedies
under the Contract or at law which may be broader or narrower than termination of the Contract and recovery of the earnest money, and may differ from contract to contract.
This document developed by NETC Legal Counsel Neal Adams of Adams, Lynch and Loftin, P.C.