Is The Seller Required To Return Earnest Money?
Posted on: 14 April 2016
Earnest money is an important part of the home buying process. Unfortunately, if the sale does not go through, it is possible that you could lose your deposit on the home. If your sale fell through, here is what you need to know.
Why Is Earnest Money Lost?
Earnest money is essentially a deposit that guarantees the sale of a home will go through. In the event that it does not, the seller could have the legal right to keep the money.
There are several situations that could lead to you losing your money. One possible way to lose the earnest money is to not have any contingencies in your purchase contract. Contingencies leave you with an out in the event that something occurs, such as the home does not pass inspection.
Another way to lose the money is to simply have a change of heart. Remember, the earnest money is a guarantee. If you fail to hold up your end of the bargain, you lose out.
Earnest money can also be lost if you failed to follow the timeline for purchasing the home. Although the seller has some responsibilities for ensuring the sale of the home goes through, it is ultimately yours to complete inspections and get the money together by the close date. If you fail to do so, the seller can choose to keep the money or allow you additional time.
What Can You Do to Recover the Money?
If none of the aforementioned scenarios fit your situation, it might be possible to recover part or all of your earnest money. Before involving the court system in the situation, your attorney can attempt to negotiate with the seller for the money.
For instance, if the seller failed to complete all of the agreed upon repairs before close and you opted out of the purchase of the home, the seller should return your money if the purchase contract had a contingency calling for it. If that is the case, the seller should be willing to negotiate for the return of the money. If the seller refuses to return the money though, you can either head to arbitration or file a lawsuit for the money. If you choose arbitration, the decision made by the arbitrator is usually considered final.
The best way to protect yourself from losing earnest money is to work with a real estate attorney throughout the home buying process. He or she will ensure that the documents signed offer protections for you so that you can successfully close on your home.
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