What happens to escrow deposits if a sale falls through due to buyer’s default?

In real estate transactions, an escrow deposit serves as a financial commitment from the buyer to ensure that they are serious about purchasing the property. If a sale falls through due to the buyer's default, the seller has incurred potential losses and inconvenience. In this scenario, the most appropriate action regarding the escrow deposit is that it may be forfeited to the seller as compensation for the breach of contract.

This is because the buyer's failure to complete the transaction can lead to the seller missing out on other potential buyers and can involve costs related to relisting the property. The forfeiture acts as a form of liquidated damages for the seller, compensating them for the breach and serving as a deterrent against buyers who might disregard their contractual obligations.

In many jurisdictions, including North Carolina, the terms surrounding the handling of escrow deposits are typically outlined in the purchase agreement. As such, unless otherwise specified, it's common practice that the seller has a right to claim the escrow funds in the event of a buyer's default.