Q: Having recently moved to Washington, we are now in the process of looking for a house to buy. We understand that a earnest-money deposit must be made, but we are quite reluctant to give either the seller or the agents our hard-earned dollars. Are we overly concerned? Can you suggest a way of protecting our money?

A: You have no doubt heard about the woman who advertised a condominium in Virginia one weekend, and took a number of deposit checks from potential purchasers. There was only one minor problem; the lady was only house sitting, and did not own the peoperty at all. I presume she is enjoying the fruits of her illegal action somewhere.

The moral of this story, obviously, is to be wary when giving a total stranger any of your hard-earned money.

But how do you protect yourself? The first advice is that under no circumstances should you give a self-seller any money by way of deposit.

Once you have agreed on the amount of the deposit (and remember this is a negotiable item) let your attorney or a bank hold the money in escrow. Under this arrangement, the escrow agent must be given appropriate instructions as to how and when to release these funds. Generally speaking, the escrow agent will adhere to the terms of the written contract.

Second, as a buyer, make sure you can get your money back if certain conditions do not happen. These conditions are called "contingencies," and at least you should include in your contract a contingency on obtaining financing and a contigency on satisfactory inspection of the property.

Every standard form contract in this area contains a forfeiture-of-deposit clause. Read this over carefully, so as to fully understand what will happen to your deposit money if you decide not to purchase the property.

If there is a contigency-on-financing clause in the contract, you are entitled to a full refund of your deposit if you are unable to abtain the necessary financing. But keep in mind that the burden of obtaining this mortgage money is yours. You just can't sit back, do nothing, and then at the end of the contingency period (usually 30 to 45 days) seek to get your deposit back.

If, on the other hand, after obtaining financing you suddenly decide to back out of the deal, the forfeiture clause will usually require that you lose your entire deposit. After all, this is only fair, since your seller has taken the house off the real estate market for a period of time, and the sellers are probably counting on your money to buy another piece of property.

But, read the forfeiture clause carefully. Generally speaking, the seller has an election of remedies. He or she can elect to keep the deposit, in which case the buyer is relieved from any additional liability. If there is a real estate agent involved, the deposit money is then divided equally between the agent and the seller.

Alternatively, the seller might have suffered real damages beyond the amount of the deposit. For example, in reliance on the sales contract, the seller might have contracted to buy another house and made a good faith deposit on that new house.

The market value of the seller's house might have dropped, or interest rates might have gone up considerably in the interim. Under any of these circumstances, the seller generally has an election to sue the purchaser for the damages incurred as a result of the breach of the sales contract.

Deposit money should not be taken lightly. After all, whether the purchaser is putting down $500 or $5,000, that is hard-earned money. No one certainly wants to throw any money away.

When you sign a contract to purchase properly, make sure you will get the interest on the deposit if you go to settlement. Additionally, if you have any doubts or questions about the real estate company that will be holding your money, insist that it be deposited in a bank or savings and loan association in a separate escrow account

Benny L. Kass is a Washington attorney. Write to him in care of the real estate section, The Washington Post, 1150 15th St. NW. 20071.