When real estate transactions occur, most times money is put up to show the buyer is earnest in their intent to buy. Usually this money will be returned to the buyer if they decide to terminate their contract before their due diligence, or free look time period runs out. If the buyer continues with the contract, this money will go towrds the purchase of the home.
This is all well and good if everything happens as it should. But what happens if the buyer does not deposit the earnest money as required by the contract within the time limits given? Sellers get very nervous and the agents send around paperwork notifying everyone of the delay. Usually that takes care of the problem and the earnest money gets deposited, albeit late.
Now the big problem. What happens if the earnest money does not come in and the buyer terminates the contract after their due diligence time frame? The buyer is on the hook for the money which is now due to the seller. If the brokerages cannot cajole the buyer to comply, attorneys may now get involved. The buyer is in default on the contract. The hard part now is bringing a legal action against the buyer. If the seller chooses to pursue the buyer through legal means, the contract along with all timelines will become very important. These cases happen rarely, but when they do, they can be a mess to clean up.