Earnest money is common in many types of residential real estate transactions. These funds are deposited into an escrow company, which holds them until the transaction has been completed. The amount of earnest money required is specified in the Arizona Residential Resale Real Estate Purchase Contract that both parties have signed.
But what happens when something causes the deal to fall through? Here are the steps you need to take when obtaining earnest money back in Arizona.
What is Earnest Money?
Earnest money can be simply explained as a deposit that’s made in earnest — sometimes referred to as an “earnest payment” — by a prospective buyer to prove they are serious about making the real estate transaction. It’s put down in good faith to entice the seller, who agrees to not sell the property to anyone else during the specified transaction timeline.
When the transaction has been completed, the earnest money is credited towards the sale. However, in some cases, the sale may not be completed for one reason or another. In these instances, you may be able to get your earnest money back, depending on what the real estate purchase contract says.
Commonly, earnest money is due within 24 hours of the noted acceptance date of the real estate contract by the buyer. However, if the contract is signed on a Friday in the late afternoon, typically the earnest money isn’t deposited into an escrow account until the next business day.
Obtaining Earnest Money Back in Arizona
It is possible to get your earnest money back in Arizona, but there has to be an underlying reason that qualifies. In a typical residential real estate earnest money dispute, the escrow officer distributes the earnest money to the non-breaching party in accordance with the terms and conditions of the AAR contract; in other cases the AAR contract would be referenced with the parties attending mediation or litigating the dispute.
- Inspection Contingency: According to the AAR contract, buyers often have 10 days from the time that they receive disclosure from the seller to inspect the home. If something is discovered during the inspection process and the seller isn’t willing to remedy the situation, the buyer can renege on the contract and obtain the buyer’s earnest money back, provided the buyer has given the proper notice.
- Mortgage Contingency: If there is a mortgage or financing contingency in place in the AAR contract, and the buyer fails to qualify for the amount of the loan needed, the earnest money will be refunded to the buyer. But if the contingency deadlines have already passed, regardless of the contingency, the seller will usually get to keep the earnest money.
- Appraisal Contingency: When a seller represents a home for sale at a certain price but the appraisal comes in at a much lower figure, often the buyer can back out of the deal and get a refund of the earnest money due to low appraisal.
- Issues with Title: A common reason for an earnest money dispute is lack of a clear title. If during the title check the results determine that there are issues with the title that could impede on the sale of the home, the buyer will be refunded the earnest money.
- Earnest Money Dispute: If the earnest money is being disputed, the escrow company has the authority to, and sometimes determines which party was not in breach of contract and can furnish those funds to that party; other times the parties may need to mediate or litigate the dispute to determine who is entitled to the earnest money.
Earnest Money Dispute Lawyers in Arizona
Earnest money disputes in Arizona can be costly, depending on how much money you’ve invested in the purchase of a new home. MacQueen and Gottlieb have extensive experience representing both buyers and sellers in earnest money disputes. Our team of experienced legal professionals can help resolve real estate disputes often without the need to pursue extensive and costly litigation. If you are involved in an earnest money dispute in Arizona, contact us today at (602) 562-7218 to schedule an initial consultation or make an appointment online.