Can I get my earnest money deposit back?
An earnest money deposit also known as a good faith deposit, is intended to show the seller of a home that you’re a serious buyer and are committed to the purchase. But before you incorporate your earnest money deposit in the offer, it is absolutely imperative that you understand what is and isn’t possible with the deposit.
The earnest money deposit is part of a legally binding agreement when making your offer on a house you wish to purchase. When it comes to getting your earnest money deposit back, it all depends on the agreement you created. There are a variety of scenarios to consider and in some situations you can get the money back but it depends on how the deposit is incorporated into the offer.
When considering the earnest money deposit, your real estate agent is absolutely critical in helping you set the terms of how the deposit will work during the negotiations. Before making your offer, here are some scenarios to consider when it comes to your deposit.
Scenario 1: Offer is contingent on inspection.
If the sales contract and offer agreement make it clear that the offer is contingent upon the home inspection, in most cases you will be able to make a clause to receive the earnest money deposit back. If this language isn’t explicitly in the agreement, you will more than likely forfeit the deposit.
Scenario 2: Appraisal comes back much lower.
If your mortgage lender conducts the appraisal and the value comes in much lower, and the seller won’t budge on price, you can walk away from the deal. Typically in these situations the title company or real estate attorney involved in the transaction will return the earnest money.
Scenario 3: Buyer gets cold feet.
The buyer can opt out of the transaction at any point, however, the ability to receive the earnest money deposit back is largely a factor of how the agreement is worded. Additionally, once the offer is signed by both parties, buyers can still get out of the deal, but the deposit is not returned to the buyer.
Scenario 4: If buyer can’t get financing.
If you can’t get financing for your home purchase, you may or may not be able to get the earnest money deposit back. It depends on the sales agreement, how its worded and any special clauses you include. This is why it is critical to get pre-qualified for a loan by a mortgage professional before making any offers.