Buying a home is a complex and often protracted process. You will need to scour the listings for a property that meets your family’s needs and is in the right area. You also have to think about how much you will pay for the mortgage, as well as property taxes and insurance, which can vary drastically from neighborhood to neighborhood. Many people need help to navigate the process.
Of course, it isn’t much easier for sellers, who have to open their house up to strangers and wait for someone to make a reasonable offer. Putting down earnest money when you make an offer on a property is a good way to let the sellers know that you are serious in your intentions to purchase the home.
Unfortunately, it is possible for real estate transactions to fall through even after you have put down earnest money and had the sellers accept your offer on a property. If that happens, you may find yourself wondering if there are circumstances in which you can get your earnest money back.
If the seller backs out, they have no claim to your money
Sometimes, it is the seller who breaks the real estate contract. Perhaps they intended to move but were not able to find a place to buy. Maybe their life circumstances unexpectedly changed and a move is no longer in their best interest.
Regardless of why it happens, if the seller is the one to back out of the sale, you should receive your earnest money back in full. If the seller attempts to retain your earnest money despite failing to follow through with the transaction, you can take legal action against them to recoup that amount, which could represent several thousand dollars depending on the value of the home.
You get the earnest money back if there’s a problem with the property
Sometimes, both you and the seller want the sale to go through, but other things happen. The lender could determine that the sale price is not appropriate given the outcome of the appraisal and refuse to finance the sale.
It is also possible that the house won’t pass certain inspections, meaning that either you can’t close or you couldn’t assume residency at the property. In those circumstances, you can expect to get your earnest money back, although the seller may not be particularly thrilled about losing out on those funds after the sale falls through.
If your house doesn’t sell, you may also have protection
Many people intending to move from one house to another make the offer on a property contingent on the sale of their current home. If your home doesn’t sell before the closing date, you likely won’t want to assume a second mortgage for an indeterminate amount of time.
Sometimes, the seller may be willing to push back the transaction. Other times, they may want to relist their property to move it as quickly as possible. Provided that your initial purchase offer included a reference to the necessity of the sale of your current home, you should be able to back out of the transaction without losing your earnest money.