Earnest Money Deposit Disputes in California
When you make an offer on a home in California, you typically put down an earnest money deposit — often 3% of the purchase price, held in escrow — to show the seller you are serious. On a Bay Area home, that deposit can easily exceed $30,000. When a deal falls apart, both sides may claim that money, and escrow will not release it without mutual instructions or a court or arbitration order.
When is a buyer entitled to the deposit back?
If you cancel the purchase within your contingency periods — inspection, appraisal, or loan contingencies under the California Association of Realtors Residential Purchase Agreement — you are generally entitled to your full deposit back. Even after contingencies are removed, a standard liquidated damages clause typically limits what an owner-occupied home seller can keep to no more than 3% of the purchase price, and the seller must actually be entitled to it.
What if the other side refuses to sign the release?
California Civil Code § 1057.3 gives you a specific tool. Once you make a written demand for return of the deposit, the other party has 30 days to sign the escrow instructions needed to release the funds. A party who fails to do so — and who is not withholding the money to resolve a genuine good faith dispute — can be liable for the deposited funds, treble damages (capped by statute at not less than $100 and not more than $1,000), and, importantly, your reasonable attorney’s fees incurred in enforcing the section.
That attorney’s fees provision is the part most people miss, and it changes the leverage in these disputes considerably: it means the cost of making you chase your own money can fall on the party holding it. Note the flip side — the statute has a real good faith exception. If the other side had a reasonable belief they were entitled to the funds, there is no claim under § 1057.3, and whether their belief was reasonable is a question for the trier of fact. In many cases, a firm demand letter from an attorney that lays out the § 1057.3 exposure is enough to get the funds released without filing suit.
How Jimmy can help
Jimmy Nguyen is a San Jose real estate attorney and licensed California broker who represents buyers fighting to recover their earnest money deposit. He can review your purchase agreement and cancellation timeline, send a demand letter, negotiate a resolution, or take it to arbitration or court if the seller will not budge.
For residential and commercial transaction guidance, see our Real Estate Law, Commercial Real Estate, and Real Estate Law FAQ pages, or read How Much Is My Nondisclosure Case Worth? on our blog.
Is escrow holding your deposit hostage? Email jimmy@lawjn.com with the details, and Jimmy will follow up to set a complimentary phone consultation.
Tell Jimmy about your deposit dispute
Write out what happened with your deposit and Jimmy will review it personally. There is no charge for the initial case evaluation. Please keep it to the facts for now — until an attorney-client relationship is established in writing, what you send may not be protected as confidential.
Jimmy represents home buyers in seller non-disclosure, agent misconduct, and earnest money disputes in California. He is a licensed broker in California and Nevada.