Clarifying Earnest Money Obligations in Iowa Real Estate Contracts

Earnest money is a “good faith deposit” made by a homebuyer to a seller, and is typically held in an escrow account until the close of sale. But what happens when a buyer doesn’t provide earnest money as outlined in their purchase agreement?

It’s a scenario that can leave agents, sellers, and buyers uncertain about what to do next. It was also a topic of discussion during a recent attorney panel at the Iowa REALTORS® Convention.

While conversation about the topic was lively and informational, Jodie McDougal, a real estate and construction attorney with Fredrikson & Byron and a panel participant at Convention, explored the topic further, producing a helpful handout for Iowa REALTORS® members.

The handout explores the fact that earnest money is a contractual term and obligation, not a contingency, and whether or not a seller can move on to another offer if an original buyer fails to provide earnest money.

This resource offers valuable insight for REALTORS® navigating earnest money issues in real-world transactions. While the handout provides helpful general information, REALTORS® should always review the specific language in their purchase agreements and seek legal counsel before taking action.

Looking for more info? Check out a recent Legal Hotline Hot Topics video, which also touched on earnest money.