At Wilson Realty Group, many of our clients ask us “What happens to the deposit if the deal falls through?” The answer is, “It depends.”
However, in the state of Virginia the Virginia Association of Realtors (VAR) has recently made some changes to the Earnest Money Deposit (EMD) language in the standard Residential Contract of Purchase form. The new language states:
DEPOSIT: Purchaser shall make a deposit of $___________ to be held by _______________________________ (the “Escrow Agent”) in the form of: ¨ check ¨ cash ¨ other _______________________ (the “Deposit”). Purchaser [select one]: ¨ has paid the Deposit to the Escrow Agent OR ¨ will pay the Deposit to the Escrow Agent within ______ days after this Agreement is fully executed by the parties. If Purchaser fails to pay the Deposit as set forth herein, then Seller may terminate this Contract by written notice to Purchaser and neither party shall have any further obligation hereunder. The Deposit may be held in an interest bearing escrow account. The Purchaser and Seller waive any claim to any interest accrued or earned by such account and acknowledge that any interest shall be disbursed to the Escrow Agent. The escrow account shall conform to the Virginia Real Estate Board Regulations, and the Deposit shall not be released by the Escrow Agent until one of the following occurs: (i) It is credited toward the Sales Price at Settlement; (ii) Seller and Purchaser have agreed in writing as to its disposition, (iii) a court of competent jurisdiction orders a disbursement of the funds; OR (iv) it is disposed of in any other manner authorized by the Virginia Real Estate Board. If the Property is foreclosed upon while this Contract is pending the terms of Section 54.1-2108.1 of the Code of Virginia shall apply to the disbursement of the Deposit. Foreclosure shall be considered a termination of this Contract by Seller and, absent any default by Purchaser, the Deposit shall be disbursed to Purchaser.
The couple of key points in this language are:
1. Escrow Agents may keep any interest earned while holding the EMD
2. Short sales may delay EMD deposits based on written agreement
3. Foreclosures constitute Seller default on a Purchase contract and Buyer receives deposit
4. Failure to delivery EMD from the Buyer allows Seller to cancel contract at any time
At Wilson Realty Group, we see thousands of contracts and are well versed in Real Estate forms from Virginia, Maryland and DC. Don’t take a chance on your next house by going alone. Call us today, 202-642-5478, and let Wilson Realty Group help walk you through the contract process of your next deal.