Escrow laws in Florida are regulated under Florida Statute § 651.033 and are designed to protect the interests of buyers and sellers during the real estate transaction process. The main purpose of the escrow account is to securely hold funds until both parties meet their obligations. But what happens when the deal doesn’t make it to the finish line and those obligations aren’t met?

In Florida, escrow often takes center stage when real estate deals fall through. Whether it’s due to financing issues, inspection concerns or just cold feet, understanding what happens to that earnest money deposit can save you time, stress and possibly a legal headache.

What is Escrow?

Escrow is a financial arrangement where a neutral third party (i.e., the escrow agent) holds funds and documents on behalf of both parties involved in a real estate transaction. The escrow agent, often a title company or attorney, safeguards the money until closing or until the deal terminates.

Common Reasons a Deal May Fall Through

Real estate deals may unravel for any number of reasons. Here are some common examples:

  • Financing fails – The buyer can’t secure a mortgage in time.
  • Inspection issues – Major problems are found during the home inspection.
  • Low appraisal – The home appraises for less than the sale price.
  • Contingencies not met – The buyer’s home doesn’t sell or repairs aren’t made.
  • Buyer’s remorse – The buyer simply changes their mind.
  • Seller breach – The seller refuses to proceed, backs out or fails to meet contract obligations.
Who Gets the Escrow Money When a Deal Falls Through?

The answer to the (sometimes literally) million-dollar question depends on the terms of the contract and why the deal fell through. Every situation is different, but typically, if the buyer cancels the contract per a contingency (e.g., financing or inspection), they’re generally entitled to a full refund of their deposit. If the buyer walks away without a valid contractual reason, however, the seller may be entitled to keep the earnest money as liquidated damages, unless the contract says otherwise. On the seller’s side, if the seller backs out of the deal without legal cause, the buyer can usually demand a return of the deposit and may seek additional damages.

But What if There’s a Dispute?

Escrow disputes arise when there’s a disagreement over whether the conditions required to close the transaction have been satisfied. In the case of a dispute, the escrow agent won’t release any funds until the dispute is resolved. 

Some of the most common approaches for resolving escrow disputes begin with negotiation and work their way up to mediation, arbitration and litigation, if going to court becomes necessary. We encourage you to lean on professionals who are skilled negotiators and legal experts if you find yourself in an escrow dispute. 

Often, the quickest and simplest way to resolve an escrow dispute is through direct communication and negotiation between the buyer and seller. A minor misunderstanding about the inspection report or repairs can sometimes be easily resolved if both parties are willing to compromise. 

Contact our Team at Sirulnik Law and ADS Title Services

When a Florida real estate deal falls through, escrow can become a battleground. Knowing the rules around escrow releases, contract contingencies and dispute resolution can help you avoid a drawn-out fight over the deposit. To protect your interests and assets, turn to our team at the Law Offices of Alex D. Sirulnik, P.A. and ADS Title Services, Inc. 

To learn more about how we can help you during every step of the real estate negotiation and closing processes, contact us to request a free consultation.