Earnest money fights are some of the most common—and stressful—disputes in Georgia residential real estate. Under the standard Georgia Association of REALTORS® (“GAR”) Purchase and Sale Agreement, the contract does a lot of the heavy lifting in deciding who gets the deposit and how escrow disputes are handled.
What the Georgia GAR contract is
“GAR contract” refers to the statewide form package published by the Georgia Association of REALTORS®, especially the Purchase and Sale Agreement, Form F201, which most agents use as the default contract for residential deals. These forms set the standard rules on price, contingencies, earnest money, escrow procedures, and default, and they’re revised annually (including important earnest‑money tweaks for 2026).
Earnest money under the GAR Purchase and Sale Agreement
The GAR contract treats earnest money as the seller’s primary remedy if the buyer defaults without excuse. Key points:
- A contract can be valid even with $0 earnest money—offer, acceptance, and consideration are what matter—but without a deposit, the seller has very little financial remedy if the buyer walks.
- The buyer pays earnest money to a designated “Holder” (often a broker or closing attorney) in a form acceptable to that Holder; 2026 revisions stress that checks/ACH must be drawn on a U.S. financial institution.
- The Holder must promptly deposit the funds (GAR defines a specific banking‑day window, which tightens the more general “promptly” standard in license law).
The contract also addresses interest: if the escrow account is interest‑bearing, the GAR form allows the Holder to keep the interest, satisfying Georgia license‑law requirements that the parties agree in writing who receives it.
Seller’s remedy: liquidated damages
GAR F201 makes the seller’s remedy very clear: if the buyer defaults and the seller terminates, the sole remedy is retention of the earnest money as liquidated damages. The seller expressly waives the right to sue for specific performance or additional damages in most residential deals using the standard form.
For sellers, that means:
- The size of the earnest‑money deposit is effectively the cap on recoverable damages if the buyer simply fails to close without a contractual excuse.
- In 2026, certain construction deposits in new‑construction forms are now also included in the liquidated damages pot if the buyer defaults, increasing the seller’s potential recovery.
For buyers, it means walking away after all contingencies have expired almost always equals forfeiting the deposit—no partial refunds and no automatic second chances.
How escrow disputes arise
Disputes usually surface when a contract terminates and both sides claim the earnest money. Common flashpoints include:
- A buyer terminates, insisting a financing, inspection, or appraisal contingency was properly exercised; the seller believes the deadline or procedure was blown.
- A seller claims buyer default; the buyer argues the seller breached first (for example, by failing to make agreed repairs or deliver clear title).
- The earnest‑money check bounces or is never delivered on time, and the parties disagree on whether there was a binding contract or a curable defect.
Because the Holder is usually a broker or attorney who may represent one party, the 2026 GAR revisions emphasize disclosure that the Holder may also be someone’s client and clarify timing and dishonored‑funds language to reduce “you favored your own client” accusations.
The Holder’s job: follow the contract, not pick a side
Under the GAR contract, the Holder is not supposed to “split the baby” or invent their own compromise. Instead, the earnest‑money paragraph instructs the Holder to disburse funds only upon:
- Closing (where money goes to the purchase price), or
- A written agreement signed by buyer and seller, or
- A court or arbitrator’s order, or
- A clear, undisputed contractual outcome (for example, the buyer properly terminated before due‑diligence expired and the seller signed the termination/return form).
GAR commentary goes out of its way to say the Holder cannot unilaterally “split” the money between the parties—there’s no reasonable reading of the contract that authorizes that.
If the Holder can’t safely determine who’s entitled to the funds after a “reasonable time,” they have the right to interplead the money into a court of competent jurisdiction. In an interpleader:
- The Holder deposits the earnest money with the court and exits the dispute.
- The court decides whether buyer or seller gets it.
- The Holder can deduct its court costs and attorney’s fees from the funds, and the prevailing party is typically entitled to recover any amounts shaved off for those costs.
Practical tips to avoid (or win) earnest‑money fights
For Georgia buyers and sellers operating under the GAR contract:
- Right‑size the deposit. Sellers should pick an earnest‑money amount that actually compensates for lost time and market exposure; buyers should not post more than they can emotionally afford to lose if they mismanage contingencies.
- Track deadlines in writing. Inspection, financing, and appraisal periods in the GAR forms are rigid; missing them by a day can flip the earnest‑money outcome. Document notices and terminations exactly as the contract requires.
- Clarify the Holder’s policies on checks, ACH, and clearance times before tendering funds, and avoid sending money that might bounce or be delayed from overseas institutions.
- When a dispute surfaces, consider a written compromise before forcing the Holder to interplead; once it goes to court, part of the pot often evaporates into fees.
Used carefully, the Georgia GAR Purchase and Sale Agreement gives both sides a predictable roadmap for how earnest money and escrow disputes will be handled. Most of the pain comes not from the form itself, but from missed deadlines, vague amendments, and wishful thinking about what the Holder is allowed to do once everyone starts fighting over the same pot of money.
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