3 Things That Can Forfeit Your Earnest Money Deposit to a Home Seller

Dated: July 25 2020

Views: 475

When you make an offer on a home, you typically include an earnest money deposit. This is a sum of cash that shows the seller you're serious about buying - and it makes him or her more comfortable taking the home off the market because you have some proverbial "skin in the game." In many cases, you can get your earnest money back if you have to cancel the transaction - but only if you have a valid reason. Here are three things you might do that could forfeit your earnest money deposit to the seller. 

3 Things That Can Forfeit Your Earnest Money Deposit to a Home Seller

Earnest money can be forfeited, such as when you:

  • Waive your contingencies, such as financing and home inspection contingencies
  • Don't follow the timeline for financing, inspection, appraisal and closing
  • Get cold feet

Here's a closer look at each.

Losing Your Earnest Money Deposit by Waiving Your Contingencies

Home-sellers can keep your earnest money deposit if you waive your contingencies but try to back out of buying the home. Contingencies are built into real estate contracts to protect both sides, and they generally allow you to back out of a deal if you can't get financing or if the home inspection turns up something you can't live with. However, if you waive your contingencies and either of those things happens (or something else happens, for that matter), the seller may be entitled to keep your deposit.

Losing Your Earnest Money Deposit by Failing to Follow the Timeline

Your real estate purchase contract will have information in it regarding when you have to get financing, have the home inspected and appraised, and when you have to close. If you don't stick to the timeline in your signed contract, the seller can say that you're not upholding your end of the bargain - and he or she may be entitled to keep your earnest money deposit while telling you to take a hike.

Losing Your Earnest Money Deposit by Getting Cold Feet

You usually can't just back out of a real estate transaction becuase you get cold feet. That's why it's so important to be sure you're making an offer on the home you really want. If you do back out without a valid reason that's covered in your contingencies, the seller can usually hang on to your cash.

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Chip Boyer

Chip is the IT Manager for Alex MacWilliam Real Estate. He handles the technology needs of the company as well as helping agents in their day to day problem solving.....

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