About escrow disputes

When one party defaults on a contract, is the deposit returned to the buyer or kept by the seller?  
Usually the Seller is adamant that they are entitled to the escrow.  In most situations, however, they are not entitled to it.  For example, financing waivers.  Recently one seller was confident he was entitled to the escrow deposit because the buyer let his contingency date pass and his agent did not extend the financing contingency.  Because the buyer did not SIGN a waiver, he got his money back. 
Lenders take longer to provide a loan commitment and therefore, the homeowner takes his home out of the market for that extended period of time, missing opportunities.  Most sellers feel this is unfair. Some agents put a condition in the contract that if the financing contingency waiver date is not met, the Seller gets the deposit.  
When escrow is in dispute and the buyer or seller won't sign off, no one wins.  A buyer can easily place a lien on the sellers home in the amount of escrow to return and when it's time to close, the seller has to pay off the lien in order to have clean title.  Additionally, if the parties can't agree within a reasonable period, the title company will likely deposit the funds with the local clerk of courts, and either party may then file a court case to argue why they believe they're entitled to the deposit.  More time, more energy, and more money for attorneys.  It's not always what they want to hear, but if discussed in advance, it will be a lot easier to deal with if a dispute occurs.
By:Kathy Zorn
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