Transaction Coordination

Earnest Money Dispute: Who Gets the Deposit?

What happens to the deposit when a deal falls apart and both sides claim it: the release, the demand, what escrow holders and brokers must do in Texas and Florida, interpleader and mediation, and what the TC tracks.

Ijharul Islam October 21, 2026 8 min read

Earnest money dispute, in short: when a deal falls apart and both sides claim the deposit, the escrow holder keeps it until both sign a release, a court rules, or a state procedure applies. Under the Texas resale contract the other party has 15 days to object to a demand; Florida brokers must notify the Commission within 15 business days.

More on this topic: Contract to close: process and checklists, every guide in one place.

Who is entitled to the money depends on the contract: whether the buyer terminated inside a contingency deadline, or defaulted. This guide covers what happens after that question is in dispute. For when the deposit is due in the first place, see the earnest money deadline. It's general information, not legal advice: the parties' lawyers and the broker decide, not the TC.

Key takeaways

The contract decides who is owed the deposit; the escrow holder decides nothing and normally needs both signatures, a court order or a state procedure to release it.
Texas (TREC 20-19): either party or the escrow agent sends a release; if one side won't sign, the other demands the money, and the escrow agent may pay out if no written objection arrives within 15 days.
Florida brokers holding disputed deposits must notify the Commission within 15 business days and start a settlement procedure within 30 business days (Rule 61J2-10.032).
Interpleader lets the holder hand the dispute to a court so the claimants litigate against each other, not against the holder.
The TC's job is the paper trail: termination notice, release, demand dates and every response date, not an opinion on who's right.

Who gets the earnest money when a deal falls apart?

The purchase contract decides who gets the earnest money, so the first question is always why the deal ended. Broadly:

Buyer terminates under a contingency, on time (inspection, option, financing or appraisal, as written): the deposit usually goes back to the buyer.
Buyer defaults (misses a deadline without terminating, or refuses to close): the seller may be entitled to it, often as liquidated damages if the contract says so.
Seller defaults: the buyer usually gets the deposit back and may have other remedies.

Most disputes come from timing: a termination notice sent a day late, or a contingency that was arguably waived. That's why what happens when a contingency deadline is missed matters so much here. The escrow holder doesn't decide any of this.

What can the escrow holder do when both sides claim the deposit?

The escrow holder can usually release disputed earnest money only on a release signed by both parties, a court order, or a procedure the contract or state law sets out. A title company, escrow company, attorney or broker holding the money is a stakeholder, not a judge. Its common options:

Mutual release: both parties sign a release saying who gets what; the holder pays out.
Contract demand procedure: some forms (Texas, below) let the holder pay one party if the other doesn't object in time.
State procedure: some states require brokers to notify the regulator and pick a resolution path (Florida, below).
Mediation or arbitration, if the contract requires it or the parties agree.
Interpleader: the holder asks a court to decide and steps out of the fight.

Who holds the money matters: rules for a broker's trust account differ from a title or escrow company's. See escrow vs title company for who does what.

How does the Texas resale contract handle an earnest money dispute?

The TREC resale contract (20-19, dated 05-04-2026) uses a release-then-demand process in Paragraph 18. What it says:

Step	What 20-19 says	Timing
Release	On termination, either party or the escrow agent may send a release; the parties sign counterparts and return them	None stated
Release of escrow agent	If no closing occurs, the escrow agent may require a written release of its own liability and payment of unpaid expenses before releasing money	Before release
Demand	If a party won't sign, the other may make a written demand; the escrow agent promptly copies it to the other party	Promptly
Objection window	If no written objection reaches the escrow agent, it may pay the demanding party, less unpaid expenses	15 days
Refusing to sign	A party who wrongfully fails or refuses to sign an acceptable release is liable for damages, the earnest money, reasonable attorney's fees and costs of suit	7 days after receiving the request

Paragraph 16 sends unresolved disputes between buyer and seller to mediation, with costs shared equally, and Paragraph 17 lets the prevailing party (including the escrow agent) recover attorney's fees. Some articles online describe a penalty of three times the earnest money; that isn't in the 20-19 text, so check the form version on your contract.

What must a Florida broker do with disputed escrow funds?

A Florida broker who gets conflicting demands, or has a good-faith doubt about who's owed escrowed funds, must notify the Florida Real Estate Commission and use one of four settlement procedures in Fla. Stat. § 475.25(1)(d)1. Rule 61J2-10.032 sets the clock:

Requirement	Deadline	Source
Written notice to the Commission	15 business days after the last party's demand (or after the good-faith doubt arises)	Rule 61J2-10.032(1)(a)-(b)
Start a settlement procedure	30 business days after the last demand or doubt	Rule 61J2-10.032(1)(a)-(b)
Procedures allowed	Escrow disbursement order from the Commission; arbitration (all parties consent); interpleader or other court action; mediation (all parties consent in writing)	§ 475.25(1)(d)1
Mediation deadline	Must be completed within 90 days after the last demand, or the broker moves to another procedure	§ 475.25(1)(d)1
Non-responding party	Certified or emailed notice; no response by the seventh business day counts as authorization to release to the other party	Rule 61J2-10.032(1)(c)
Settled or in court before an order issues	Notify the Commission within 10 business days	Rule 61J2-10.032(2)(c)

The statute lets the broker return the deposit to a buyer who in good faith fails to meet the contract's financing clause without these procedures, and the rule exempts deposits under HUD's own sales contracts. This procedure applies to brokers; a title company or attorney holding the deposit follows the contract and its own rules.

What is interpleader in an earnest money dispute?

Interpleader is a lawsuit in which the party holding the money brings in everyone who claims it, so they litigate against each other and the holder avoids paying twice. Cornell's Wex legal dictionary notes federal interpleader runs under Rule 22 or 28 U.S.C. § 1335, while state rules govern interpleader in state court. Florida lists it as one of a broker's four options. It costs time and fees, so the holder usually tries for a signed release first.

What does the TC do during an earnest money dispute?

The TC keeps the record straight and the deadlines visible; the brokers, the parties and their lawyers make the decisions. A working checklist:

Save the termination notice and the date and method it was delivered; note which contract paragraph it relies on.
Pull the contract's dates: acceptance, each contingency deadline, and whether any were extended by amendment.
Confirm who holds the deposit and what release form they require (many title companies use their own).
Send the release for signature and log the date each party received it.
If a demand is made, diary the objection window from the date the holder sends it, and any state notice deadlines.
Don't tell either party who is entitled to the money: refer them to their agent, broker or attorney.
Keep everything in the file; retention rules still apply to failed deals (see document retention requirements).

How do you track dispute deadlines in Closingbird?

Closingbird counts deadlines from acceptance or closing, in calendar days or business days that skip weekends and US federal holidays only. A dispute window runs from a demand or a notice, so for each one (the 15-day objection window, a Florida 15- or 30-business-day notice) set it as a fixed date on the file, and its owner gets a reminder every morning. Send the release from the file with built-in e-signatures, or ask a party for a signed release with a no-login upload link.

Frequently asked questions

Can the title company release earnest money without both signatures?

Usually not. It needs a release signed by both parties, a court order, or a procedure the contract or state law provides, such as the Texas contract's 15-day demand and objection process.

Can a seller keep the earnest money if the buyer backs out?

Only if the contract entitles the seller to it, typically when the buyer defaults rather than terminating under a contingency on time. Even then, the holder usually needs a release or a court order before paying the seller.

How long does an earnest money dispute take?

It can take days if both sides sign a release, or months if it goes to mediation, arbitration or court. Florida, for example, gives mediation 90 days from the last demand before the broker must switch procedures.

Who pays for mediation in Texas?

Under Paragraph 16 of TREC 20-19, the parties to the mediation share the costs equally.

Does the agent or TC decide who gets the earnest money?

No. The contract governs, and the parties, their brokers or a court resolve disputes. A TC shouldn't tell either side who is entitled to the deposit.

Run it in Closingbird

Keep the release, the demand and every response date on the file, with a fixed-date deadline and a morning reminder for each window. Start a free trial (14-day free trial, no credit card required) or see pricing.

Sources

Checked in October 2026. Rules and prices change, and many vary by state, so confirm with the source, your state's real estate commission or your broker before you rely on them.

#earnest money #contract deadlines #escrow