What happens to the earnest money deposit if a deal goes bad? The answer isn’t simple. (iStock)

Q: This is not a question but a follow-up comment on your recent article on a problem a seller was facing when a buyer defaulted on his contract to buy and then never responded to the seller’s demands to turn over the earnest money.

As you know, real estate laws and real estate practices vary from state to state, as well as from city to city. You mentioned there being three options for the parties involved.

Because of an Ohio House bill, which I think became effective in 2009, in Ohio we now have a fourth option. If we wish, we may include language in our purchase contract that specifies that if the buyer and seller fail to reach a written resolution within two years, and there is no court order determining disbursement, the money can be returned to the buyer after two years unless there are pending legal proceedings. This has been widely adopted throughout Ohio and is a provision of all the real estate board forms that I am aware of.

A: You’re right, real estate laws and customs vary from state to state, from county to county and even from neighborhood to neighborhood. For this reason, we try to give general answers and then suggest that our readers consult with professionals where they live for more specific options.

Interestingly, your fourth option would be good for the buyer of our prior column, but it was the seller that had the issue. The buyer in our column failed to show up at the closing and left the seller high and dry. For that seller, even in Ohio under the fourth option, litigation would be the only way to get the money. And, if the buyer just waits out the clock, the buyer will end up getting the money back, which isn’t always the just resolution.

Sam has had real estate deals in which the buyers have simply disappeared. In one case, the buyer left the country to help an ailing friend and was out of contact for a full year. No one seemed to know where this buyer was, and the buyer never responded to emails, phone calls or mail. During the Great Recession, Sam heard of some sellers abandoning their homes by simply disappearing.

In the first situation, the seller was left to wonder what to do; in the other, the buyer was left without the ability to buy the home since the seller was nowhere to be found. We assume that the Ohio solution is an attempt to guide real estate brokerage houses that may hold the earnest money from the purchase or sale of a home with fund disbursement.

While the law may assist in some situations, it might also force sellers to take legal action to get the earnest money.

On the other hand, in situations where buyers disappear, even after the two years are up, the party holding the earnest money may not know where to find the buyer to send the money back. Ultimately, a seller and buyer will have to decide how to proceed when a seller refuses to release the earnest money back to the buyer or a buyer refuses to release the earnest money to the seller.

This might be a fifth option: Under the umbrella of litigation, the parties can consider using arbitration. Many real estate contracts now have arbitration provisions. So, if the parties have a dispute, the aggrieved party can use the arbitration mechanism, which we’d hope would be less expensive for both parties.

Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (4th Edition). She is also the CEO of Best Money Moves, an app that employers provide to employees to measure and dial down financial stress. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact them through her website, ThinkGlink.com.