Earnest Money Disputes In Washington State

What is Earnest Money?

In the purchase of real estate, it is common for a buyer to put down a deposit called earnest money. This deposit is made to a seller to represent the buyer’s good faith towards buying the real property at issue.  Earnest money is typically held in an escrow account until closing, at which time the deposit will be applied as down payment towards the purchase of the property.

Earnest Money as Damages

Many disputes over the purchase of real estate center around entitlement to earnest money in the event of breach of a Purchase and Sale Agreement.  Purchase and Sale Agreements frequently list the forfeiture of earnest money as the exclusive remedy in the event of a breach by the buyer.  In these cases, the damages for a buyer’s breach are essentially known beforehand, thus constituting a form of liquidated damages.  Additionally, per RCW 64.04.005(1), the earnest money to be forfeited may not exceed 5% of the total purchase price.

When a party to a Purchase and Sale Agreement breaches (or allegedly breaches) the Agreement, and the parties cannot resolve their issues amicably, the escrow officer holding the earnest money will interplead the earnest money deposit funds with the court, leaving the parties to litigate their respective claims of entitlement to those funds.

Experienced lawyers with a background in resolving real estate disputes, particularly those involving breach of Purchase and Sale Agreements, can be helpful in navigating through related legal issues.  At Beresford Booth, our lawyers hold extensive real estate experience, including counseling individuals through disputes over the purchase and sale of residential and commercial properties.  We would be pleased to assist with any real estate issues that come your way.

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