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The buyer and seller executed an Arizona REALTORS® Residential Resale Purchase Contract (the “Contract.”)  Thereafter, the buyer attempted to cancel the Contract and demanded the return of the $50,000 earnest money deposit based on property condition.  The seller objected, claiming the cancellation was provided after the inspection period expired.  The buyer and seller, through separate counsel, have submitted competing demands for the earnest money to the escrow company.  The escrow company has advised the parties that it will only disburse the earnest money pursuant to a court order or based on mutual instructions.   


Is the escrow company contractually required to decide the issue and disburse the earnest money pursuant to the Contract? 


See Discussion.


The Contract authorizes the escrow company to disburse the earnest money in the event of a dispute at Section 3f.  However, the contractual language does not require the escrow company to make a decision.  Thus, the escrow company may insist on mutual instructions or a court order as a condition to disbursing the earnest money.   

Note:  Even if the escrow company makes a decision and disburses the earnest money as it deems appropriate, the parties may still pursue their rights and obligations in a court of law.  The parties are legally entitled to litigate the issue even after the escrow company has made a decision.