When a homebuyer presents a seller and their listing agent with a purchase offer, the buyer typically includes something called an earnest money deposit. Earnest money, sometimes called good faith money, is defined as “money paid to confirm a contract.” Earnest money shows the seller that you’re serious about buying their home. How, you ask? Basically, you write a check that goes into an escrow account. It waits there until closing day, when it will be refunded to you or applied toward your closing costs. There are some instances, however, when you might not get that earnest money back. Here are some examples of how to lose your earnest money deposit for good.

You waived your contingencies. 

Sure, a hefty earnest money deposit combined with few-to-no contingencies is a great way to get a seller’s attention and show them you really want to buy their house. But waiving contingencies could create major problems for you later on. For example, if you didn’t take advantage of the home inspection contingency and serious defects are found during the inspection period, you might not be able to back out without forfeiting your earnest money deposit. Similarly, if you’re unable to secure a home loan but waived the financing contingency, the sellers may keep you on the hook for the purchase or keep the earnest money as recompense if you back out. It might sound like a good bargaining tool, but leaving contingencies out of your purchase agreement can be costly.

You ignored the “time is of the essence” bit.

Most purchase agreements will include timelines for certain jobs to be done. For example, it may require a home inspection to be done within two weeks of the agreement being signed. This gives all parties ample time to get their ducks in a row and perform any subsequent tasks that arise from the inspection or appraisal. If you don’t have the inspection completed by the date outlined in the contract, you may be in breach of contract and might have to forfeit your earnest money. 

You got cold feet. 

If you’re under contract and simply decide this property isn’t for you, or you’re just not ready to buy after all, the sellers have every right to keep your earnest money. That said, as long as you haven’t waived those aforementioned contingencies, you have an out. But if you lack any contingencies and just decide not to go through with the purchase, the seller most likely won’t give you your money back. Consider it a consolation prize for them missing out on other buyers while you were under contract. 

No one wants to wave goodbye to a hefty sum of money without having something to show for it. Keep these tips in mind, and you shouldn’t have a problem getting your earnest money deposit back on closing day.


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