Putting down an earnest money deposit shows a real estate seller that you are serious about buying the property. Still, events can happen that make you think twice about your purchase. So you should know if the seller will keep your deposit even if you try to back out of the deal.
The Motley Fool explains under what circumstances you are likely to get your earnest money back and how you might lose it.
Contingencies in your real estate contract
Generally, real estate offers depend on certain conditions. Your contract should have contingencies that allow you to withdraw from the purchase.
For instance, an inspection contingency lets you back out if a property inspection discovers too many problems or costly defects to deal with. Likewise, a financing contingency permits you to cancel the deal if you cannot secure funds or get a mortgage for the property.
Using contingencies to recoup your deposit
If one or more contingencies do not happen as you wish, you should get your earnest money returned to you. Since you fulfilled your part of the contract, the seller should have no legal resource to keep your money.
However, you could lose your deposit if you find nothing wrong with the property and you otherwise fail to notify the seller that you wanted to cancel the purchase. Basically, if you have no justification to walk away from the purchase, you will likely lose your earnest money.
The detailed nature of real estate contracts makes it important to read one over carefully to see what you are committing to. Also be aware of any unfulfilled seller obligation, such as a requirement to disclose details about the property, which could give you grounds to seek a return of your earnest deposit.
