What Happens to the Deposit When a Real Estate Deal Falls Through? | St. Johns Law Group

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When a Real Estate Deal Falls Apart: What Happens to the Deposit?

By St. Johns Law Group – St. Augustine Real Estate Attorneys

Few moments in a real estate transaction create more tension than when a deal falls apart and the earnest money deposit becomes the center of the dispute. Whether you’re a buyer trying to recover your deposit or a seller seeking to keep it, understanding Florida’s real estate laws and contract deadlines is critical to protecting your rights.

Understanding Florida Real Estate Deposit Disputes

In most Florida real estate transactions, the buyer provides a good faith deposit (also called an earnest money or escrow deposit) to show serious intent. This deposit is held by a neutral third party—often a title company or law firm—until the transaction closes or terminates.

But when a deal unravels, both the buyer and seller may claim entitlement to those funds. The result? A deposit dispute that can quickly escalate into mediation or even litigation.

Common Causes of Deposit Disputes

Deposit disputes can arise from nearly any breakdown in a transaction. The most common causes include:

  • Inspection and repair disagreements under the FR/BAR “As Is” contract

  • Financing contingencies where the buyer’s loan is denied or delayed

  • Missed deadlines or notices, such as inspection termination or loan approval dates

  • Seller default, such as title defects or failure to make promised repairs

  • Ambiguous addenda or conflicting terms in poorly drafted contracts

Because each dispute turns on contract language and timing, documented proof and accurate timelines make all the difference.

What Is an Interpleader Action?

When both sides demand the same deposit, the escrow agent (usually the title company or attorney) can’t safely release the money without risk of being sued. In that case, Florida law allows the agent to file an interpleader action—a lawsuit asking the court to decide who gets the funds.

During an interpleader:

  1. The escrow agent deposits the funds with the court.

  2. The agent is discharged from further liability.

  3. The buyer and seller litigate who’s entitled to the deposit.

  4. The court may award part of the deposit to cover stakeholder fees and costs.

At St. Johns Law Group, we represent both parties in interpleader cases—buyers seeking refunds and sellers pursuing liquidated damages—as well as escrow agents who need neutral representation to avoid liability.

How St. Johns Law Group Helps

Our St. Augustine real estate attorneys act quickly to assess your contract, calculate key deadlines, and develop a negotiation or litigation strategy. We routinely assist clients by:

  • Reviewing contracts, addenda, and email communications

  • Preparing demands for escrow release or default notices

  • Guiding clients through mediation as required under FR/BAR contracts

  • Filing or defending interpleader actions in St. Johns County and surrounding courts

  • Pursuing or defending liquidated damages and specific performance claims

Because St. Johns Law Group also handles closings, title issues, and contract drafting, we understand every side of the dispute—from escrow operations to courtroom litigation.

What You Should Do If You’re in a Deposit Dispute

If your deal is falling apart and the deposit is in question:

  1. Do not sign any release without legal advice.

  2. Preserve all documentation (emails, inspection reports, appraisals, financing letters).

  3. Mark your deadlines using a critical dates calculator.

  4. Consult an attorney early—timing and notice language can determine the outcome.

Why Choose St. Johns Law Group

  • 13 attorneys, 265+ years of combined experience in real estate, contracts, and litigation

  • Deep local knowledge of St. Augustine, Ponte Vedra, Palm Coast, and Northeast Florida

  • Regular coordination with title companies, agents, and escrow offices

  • Dedicated and Responsive® in every case

When the stakes are high and the clock is ticking, our firm provides fast, practical representation to protect your investment and resolve disputes efficiently.

Learn More

Visit our full guide:
➡️ Real Estate Deposit Disputes & Interpleader – St. Augustine Attorneys

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Contact St. Johns Law Group

📞 Call: (904) 495-0400
📧 Email: info@sjlawgroup.com
📍 Office: 104 Sea Grove Main Street, St. Augustine, FL 32080

Dedicated and Responsive® Real Estate Attorneys Serving St. Augustine, Ponte Vedra, Nocatee, and Palm Coast.