Earnest Money Deposits: Everything you ever wanted to know

Think of an earnest money deposit as a security deposit.  Once a home goes under contract, the seller will no longer seek other offers during the time the buyer needs in order to fulfill the contract.  In exchange for not advertising their property for sale, the seller wants some security that the buyer will not break the contract.  How does the seller get that security?  Money!

 

Most often, the earnest money deposit is a check the buyer submits with their offer.  It is only cashed when both buyer and seller have agreed to all terms of the offer, and everyone has signed the contract.  The check is then cashed immediately by the buyer’s agent’s company and held in escrow until settlement.  A buyer will get their earnest money deposit back at settlement, and the amount gets credited back to them…it usually goes towards the down payment or closing costs.

 

There is no standard amount for an earnest money deposit.  Sometimes a seller will request a minimum amount, but in general, it is up to the buyer to decide.  Since the check is cashed when the contract is ratified, the funds for the amount need to be liquid.  In case the buyer needs a few days to pull money from different accounts, it can be written into the contract that the check will be held a specified number of days.   As a guideline, realtors consider 1-3% of the sales price to be enough of an earnest money deposit.

 

The larger the earnest money deposit, the better a buyer looks to the seller.  Sellers see it as less risk, and think that a large earnest money deposit means a buyer has the cash to obtain financing.  In the days of multiple contracts, this was often a deciding factor when sellers had to choose between offers.  In a market where property values decline as time goes on, it is especially important because a seller could “lose” money if s/he has to put it back on at a lesser price if the contract fell through.

 

There is a risk of losing the earnest money deposit if a buyer breaks the contract, after removing certain contingencies.  There are, what I call “Get Out of Jail Free” cards, which are opportunities for the buyer to legally get out of the contract with their earnest money deposit and no further obligation if done before the contract contingency time period expires.  In the DC area, these are some of the typical contingencies:

 

- Home Inspection

- Appraisal

- Financing

- Condo or Home Owner’s Association document review period

 

I will talk more about these contingencies in a future blog, but you should always consult your realtor as laws often change and vary between jurisdictions.

 

If there is a dispute over the earnest money deposit, the company who holds it freezes the funds.  Both seller and buyer need to come to an agreement about the dispersal of the earnest money deposit.  The seller might give it all back to the buyer without qualm, or they might want it all and then some.  It is a negotiation that should involve the realtors and their legal counsil.  Don’t get too caught up on this, because buyers have those “get out of jail free cards” to protect them regarding the major issues of a home.  Your realtor will also educate you about the contract and protect you from breaking a contract.  Overall, this hasn’t been a problem for most real estate transactions.

 

If you have any questions about Earnest Money Deposits, let me know and I’m happy to answer them!

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167 thoughts on “Earnest Money Deposits: Everything you ever wanted to know

  1. I have a question…if there is a dispute over an earnest money deposit, is the seller still ‘tied’ to that buyer until the dispute is settled? Or can the home still be sold to another buyer, just with the original EMD still in escrow?

    This would be a huge help…and references to real estate law if they’re handy!

  2. Hi Lacey,

    This is a question for a real estate attorney because it involves breaking a contract. In the DC area, realtors must usually obtain a written release form signed by both the buyer and seller before we can put the home back on the market. If there is a dispute over the earnest money deposit, the buyer may not sign the release (which usually outlines how the EMD is to be distributed). Consult a real estate attorney.

  3. If the buyer breaks the contract and loses the earnest money, where does it go? Does it go to the seller, the real estate agent, or the escrow company?

    • Hi Melissa,

      Whenever you are talking about breaking a contract and taking money from another party, you’ll want to involve a real estate attorney in your jurisdiction. In the many real estate transactions that I’ve participated in, no one has breeched the contract and lost their earnest money deposit.

      In the DC area, if the buyer cancels the contract outside of their contingency periods, the seller and buyer both need to sign a release that states what will happen to the earnest money deposit. It is a negotiation. The seller may elect to release the deposit back to the buyer. Conversely, the seller may want to take it all. If both buyer and seller cannot come to an agreement, it will most likely go to arbitration.

      Once money is collected , however, the seller’s agent may be entitled to a portion of the earnest money deposit. Read the listing agreement for the terms.

  4. I am in the process of trying to purchase a pre-foreclosure in Alabama. I put in an offer on the home and they cashed my earnest money check 2.5 months ago. The home is still listed as active on the mls. The offer has a proposed closing date of July 31. I have not heard anything back from the sellers bank on acceptance/denial of the offer. I understand that the process of purchasing a pre-foreclosure can take weeks but I just want to ensure that the proper process is being followed.
    If they accept the offer, do they have to give me more time to get inspection/financing being that the proposed closing date is now two weeks away?
    Also, is there a limit on how long they can hold earnest money?

    • Hi Chris,

      I’m not sure what the custom is in Alabama. Here in the DC area, a pre-foreclosure is known as a “short sale.” As you already know, short sales are a long process (often taking months, not weeks, for a response) because the seller’s lender needs to approve your offer. It sounds like the seller approved your offer, and your agent deposited your earnest money check.

      When I write an offer on a short sale, I write in the offer that the earnest money deposit will not be cashed until we receive the approval from the bank. Furthermore, I specify that all contingency dates start after the sellers deliver the third party approval (aka their lender’s approval) in writing. I don’t have my buyers spend money on anything (home inspection, appraisal, termite, etc.) until we get that third party approval. Oftentimes, the seller will approve the contract and the bank doesn’t. Then the buyer is out the money spent on those items.

      In DC, there is no time limit for how long the earnest money deposit can be held, unless you wrote into the contract that if the sale doesn’t go through by a certain date, you would get a refund. Who is holding your earnest money deposit? Is it your agent’s company? If so, I’d ask them to return it to you until the offer is fully approved.

      It looks like you need to re-read the contract to see what your rights are. Did your agent specify that your inspection dates started from seller’s approval or third party approval? If it is the latter, then you should be allowed time to conduct your inspections and push back settlement until you have removed those contingencies.

      I think you ought to speak to your settlement attorney to ask for advice.

  5. Hi
    I was waiting on a short sale to be approved by a third party (Bank). The closing date on the contract has passed and due to my circumstances, I was no longer interested in the property. So i wanted to pull my contract, but when i contacted the agent he informed me that he had a verbal approval from the bank, i still asked him to pull the contract. Will i get my earnest money back since the closing date has passed and the bank approval documents for the sale documents have yet to arrive.

    Thanks in Advance for the advice

    • Hi M,

      First of all, you can retract your offer at any time before your offer is accepted and a signed copy is delivered back to you. On many of the short sales offers I’ve submitted, the listing agent just sends the offer directly to the bank for approval, which does not make it a contract. But on occasion, the seller signs off on the offer before they send it to the bank for approval, which makes it a contract.

      Second, your contingency has expired which should mean your contract is voidable. I can’t really get into it too much because each jurisdiction has different contracts and laws, and I don’t know yours. But I can say that in the DC area, we have a Third Party Approval contingency, and if the bank does not approve your offer within that time period, you automatically can void the contract.

      Third, all contracts must be in writing in order to be enforceable (at least in our area). So a verbal agreement from the bank is not an enforceable contract.

      Anytime you do not have a contract, or anytime you break your contract within your contingency periods, you should get 100% of your earnest money deposit back.

      As always, consult a local real estate attorney to know your rights.

      • Hi
        Thanks for the reply , I had another concern,
        my real estate agent is stalling for some reason, he has already taken 3 days and still hasn’t sent the notice to the selling agent to pull the contract, his reason is that he has been busy, should i be worried because in between this time the bank could send the approval for the short sale.

  6. Hi,
    We have made an offer on the foreclosed house (located in Iowa) and our offer was accepted pending upon inspection. The inspection didn’t go too well and we went back to negotiation table. After offering bank less money and 2 weeks later we still didn’t hear back from the seller and withdrew our offer all together. Another 2 weeks went by and our earnest money check was cashed…. Can they cash this check that was given with the prioror to inspection offer and was contigent upon the inspection that failed?

    • Hi Ana,

      I’m not sure what the real estate laws are in Iowa, but in my area when a bank accepts your offer it is a ratified contract. You made your contract contingent upon a home inspection, and you have the right to cancel the sale within a certain time period after the inspection (check your contract for the exact date). However, if you go back to them with the request that they lower the price (or fix anything), you have not canceled the contract but you have opened it up to negotiation. In our area, if the last person to respond doesn’t get a reply from the other party within a certain amount of days, it is understood that that person automatically accepts the terms in the last negotiation. So to illustrate, you asked the seller to reduce the price. If the seller doesn’t respond within X number of days, they have, by default, accepted your reduction request.

      I bring this up because you may not have had the right to cancel the contract if you countered the home inspection terms. In that case, the bank had every right to cash your Earnest Money Deposit (EMD). In fact, in my area, the EMD must be cashed within 7 days after contract acceptance, even if it looks like the deal will fall apart.

      When you are dealing with breaking a contract and returning the EMD, buyer and seller must usually sign a release form. Even if you had canceled the contract immediately after having the home inspection and had every right to take back your EMD, the seller still needs to sign off on it.

      Of course, I’m going by my area laws. Your laws could be completely different. You will want to read your contract (and the forclosing bank’s addendum) to see if you can find out more information. I also encourage you to consult a real estate lawyer whenever breaking a contract to make sure you are doing it right so you get 100% of your EMD back.

      Good luck!

      Dawn

  7. The buyer broke the contract just a few days before the closing date but never provided anything in writing. I called the owner of the escrow company about the earnest money and she said there needed to be a written agreement between us and the buyer before the earnest money could be released. I called the buyer to propose a compromise and she said the money was gone. It went to cover an appraisal fee and the rest (a small amount) as an escrow fee. I was VERY surprised and said, “I don’t think that’s legal” We as sellers provided NOTHING in writing, but SHE said she signed something and has since washed her hands of it. We live in Washington. Thanks for taking the time – I like your name!

    • Hi Dawn,

      I’m sorry that you are having this experience. Is this a For Sale By Owner? Are there real estate agents involved? If there are agents involved, I would file a formal complaint with the real estate board because it sounds like buyer’s agent has mishandled the earnest money deposit. In the DC area, the earnest money deposit must be cashed within 7 calendar days unless otherwise agreed to in writing. The money is supposed to be held in escrow until settlement. That means that the money cannot be touched, and should not be used for an appraisal fee or anything else.

      I’m not sure if the buyer had the right to break the contract or not. It depends on what was written in the contract. However, when anyone breaks a contract, it should be done in writing. If the buyer voided the contract legally based on their contingencies, the buyer should be able to get their full earnest money deposit back…but only when BOTH of you have signed the release outlining how the earnest money deposit is to be dispersed. The buyer signing the release and “washing her hands of it” does not solve anything. She is still on the hook until you both have come to an agreement. If the buyer breached the contract, you may be entitled to the full amount of the earnest money deposit, plus if you incurred damages, you may be entitled to more.

      The quicker you get the release signed, the sooner you can put your home back on the market. You may be able to relist it and state that it is “Pending Release” or accept a back up offer until this is resolved, but generally, you can’t move forward until the primary contract is officially (in writing) voided by both buyer and seller.

      I recommend contacting a real estate lawyer to help your situation. And if you did a For Sale By Owner, next time, use an agent.

      Dawn

  8. Can you cancel a contract on a REO property because you have not received the HOA docs? This is in maryland. Does the Maryland HOA act apply

  9. Hello
    My house sale recently fell through and I was wondering if MY agent is entitled part of the earnest money? I am the seller and the buyers backed out a week before closing.
    Thanks

    • Hi Diane,

      Your agent may be entitled to part of the buyer’s earnest money deposit as compensation. However, your agent may elect not to collect this fee if you did not settle. Consult your listing agreement, and talk to your settlement attorney.

  10. We made an offer on a property in Washington. We did the inspection but our financning fell through after asking 4 different mortgage companies. We did not waive the financing contingency yet so we submitted the rescission form to the seller asking to refund our earnest money back. Unfortunately, she crossed it out and asked to give her the earnest money. We believe and our Agent told us that we have the right to get our money back. Even the Listing Agent said that we are right about it but he cannot force his seller to sign it. What is the best thing for us to do now? Thanks!

    • It sounds like you have the right to get your earnest money deposit back, but if the seller refuses to release your money, I would try a few things:

      1. First, have your agent’s manager speak to the other agent’s manager. Perhaps an authority figure explaining the circumstances directly to the seller will prove helpful. The seller cannot go under contract with someone else while there is a dispute and the release has not been signed. The seller is running out of time to go under contract before Thanksgiving. I believe the market slows significantly between Thanksgiving and New Years. So the quicker the seller resolves this, the better it will be for her to find another buyer quickly, and for the best terms possible.

      2. If that doesn’t work, I would contact the settlement attorney who was going to do your settlement (or one your real estate agent has a good relationship with). Sometimes the settlement attorney will do that for free. He cannot represent either party’s interest, but he can explain the terms of the contract to the seller.

      3. Threaten legal action. Sometimes the threat is enough to convince the seller to release the deposit.

      4. If all else fails, get a lawyer.

      Good luck!

      Dawn

  11. I am the listing agent for short sale. I worked diligently to get short sale approved and was able to get everything for buyer and full commission for buyers’ agent. Purchase loan was directly approved thru BofA giving them better than they requested on contract. There were no inspections done but they are using the inspection paragraph to cancel. He sends me cancellation contract and it turns out he never put buyers ernst money into escrow after Bank of America shortsale approval on October 8th. Is this comingling of funds?

  12. Hi Becky,

    First, a disclaimer: I’m not a lawyer and you should verify what I say with someone in your jurisdiction. Here’s my opinion:

    Comingling of funds means that the agent who deposited the earnest money put it into the same account used for purposes other than only holding escrow checks. However, NOT depositing an earnest money check is an offense against the agent who was supposed to have deposited it. In Maryland, the check must be deposited within 7 calendar days, even if the purchaser writes into the contract that the check should be held until after the third party approval is delivered.

    As for voiding the contract, is the buyer still protected under any contingency periods, or have they expired? If the buyer still has time left on the inspection contingency, then it seems like he can void and get his earnest money deposit back. Technically, the buyer is supposed to have an inspection before they cancel the contract based on that contingency. But the buyer does not have to state a specific reason in order to void based on the inspection. In my area, all the buyer has to do is provide a copy of the inspection report to the seller and inform them of their intent to void. So you could ask the buyer to provide you with a copy of the report, and make them shell out a couple hundred bucks for an actual inspection. BUT I wouldn’t do that because once you receive the report, then YOU’D be obligated to disclose any material defects that were discovered during that inspection. It’s best to just let it go, and not be held personally responsible for any issues you did not disclose.

    Now, if the contingency periods have expired, then the buyer is still on the hook. If they want to void after their contingencies have passed, they risk their earnest money deposit. Just be sure to check the language in your contract, because some contingencies (like financing) continue if they are not removed.

  13. I put an offer on a flipped house, and because we were getting an FHA Loan, it required 2 appraisals. The first one came in at the amount we offered… the second one came in at $14k less than what we offered. According to my lender, if there is more than a 5% difference in the appraisals, they lowest one must be used. The seller didn’t want to go with the lowest appraisal, so they put the house back on the market. It has since had another offer and they are under contract with another buyer. My problem is: The seller won’t give me my earnest deposit back. Am I entitled to get it back since they are the ones that backed out of the contract? I never signed a contingency removal.

  14. Hi Sarah,

    I’m sorry that the sale did not go through based on the second appraisal. I, too, am frustrated with the FHA and their need for excessive documentation. No two appraisers will give the same value to a home. I’ve had plenty of appraisal issues this year, so know that you are not alone.

    I think you have the right to receive your earnest money back. For one thing, the seller cannot be under contract with 2 different buyers at the same time. I believe that’s illegal. He can advertise it if he says it’s “pending release” to get a backup offer. However, no one should touch the earnest money until a release is signed by both buyer and seller. You must give him permission to be let out of the contract. The release should also outline how the earnest money is to be dispursed.

    Since you were covered by your appraisal contingency, you should be entitled to receive 100% of your deposit back.

    If your agent cannot convince the seller’s agent that you need to get your EMD back before you release the seller from the agreement, perhaps the managers can get involved. If that doesn’t work, threaten legal action. Sometimes you can get the settlement attorney to review your contract and speak to the seller. If all else fails, involve your own real estate attorney.

    Good luck!

  15. Contract was signed by two sisters and buyer for 1.7 million in Jan. 2010 Sale was than pending court approval. Third sister and co-owner did not signed contract in Jan. 2010. $51,000 went to escrow.Sale took place in Southern Calif. After court approval buyer backed out of deal and offer 1.5 million for property. He had offer and signed contract for 1.7 million. He said the property Mls listing was incorrect and the city would not allowed him to build as to what was listed on the listing. He than threatened to sued the owners of the property(not the realtor) Escrow is still opened and being deal was never signed by all owners and buyer refuses to close escrow what options are available to sellers. Escrow is still open and realtor has property on MLS listings as ACTIVE.

    • Hi Janet,

      I’m sorry to have just now gotten to your comment. Apparently, this message was in my spam folder.

      I also can’t understand your situation as you have written it.

      Are the 2 sisters sellers or buyers?

      What relevance is the 3rd sister? I will say that anyone who has an ownership interest on the deed must sign the contract unless it is court-ordered. That court-order is basically a forced approval, and to change the directive usually means appealing the decision in another lawsuit.

      Was there an approved contract agreed to by all parties with the price of $1.7M?

      What reason did the buyer give to back out of the contract? Was he protected by any contingencies (financing, review period, appraisal, home inspection, etc.).

      If the home was misrepresented in the MLS (and he can prove it), it sounds like he has the right to cancel the contract and get his earnest money back.

      The buyer, instead of completely voiding the contract, might try to keep the deal alive by renegotiating. But it sounds like no one is obligated to accept it, nor is the buyer obligated to the original price.

      If the contract has not been officially released, and the earnest money is still being held, then the seller may have the right to have it listed in the MLS as Active Pending Release.

      This has lawyer written all over it. You definitely want to consult a real estate lawyer on this one. Also, this home is in southern California and there are probably different contract laws there than here in the Washington DC area.

      Good luck!

      Dawn

  16. Hello Dawn,

    What are the rules regarding full EMD Reimbursement? I am a buyer in DC and the check I wrote was deposited an entire month after I wrote it. Also because we have not closed yet the buyer wants to request over half of my EMD in order to extend the contract. Would I have to sign something before they can act on such a request? Do they have a right to make such a request? Also, if the appraiser lowered the house price and the inspector noted a few details to be done –what rights do I have if both areas are not modified or some work is not completed?

    • Hi Nec,

      Essentially, if the buyer is protected by one or more of their contingencies (home inspection, financing, appraisal, home owner association or condo association document review period, etc.) the chances of getting your earnest money back in full are good. Nothing is absolute here, because there are rules to each one, and to write them all out would take too long to get into here.

      However, let me try to figure out what’s going on in your situation.

      Why have you not closed yet? Is it because your scheduled settlement date is in the future, or is it because settlement has been delayed due to financing, etc.?

      If your settlement date is in the future (or if a date has not yet been set, like it might be in a short sale), then the seller has no right to demand your earnest money deposit.

      If the settlement date in your contract has passed, you may be in breach of contract if you have removed the financing contingency. The seller does not have to agree to extend settlement past the date you originally wrote in the contract. He may want some money in order to agree to extend it, and that is his right. If you have not removed your financing contingency, you may have the option of walking away and getting your earnest money deposit back.

      Whenever the earnest money deposit is involved, an addendum must be signed to state how the money is to be released. No one can touch the EMD without something signed by BOTH the seller and the buyer. If you agree to give a portion of your EMD to the seller to extend the contract, that needs to be in writing.

      Ok, now on to the appraisal. The appraiser’s job is to assign a value to a home, and that’s it. The only one who has authority to lower the price is the seller. If the appraiser determined the value of the house was lower than your contract price, then you have several options:

      1. the buyer can void the contract and get their earnest money back.

      2. negotiate with the seller to lower the price to match the appraised value.

      3. the buyer can come up with more down payment to cover the difference.

      4. get another appraisal (if the lender will allow it).

      Ok, on to the home inspection issues. If you and the seller have agreed that the seller will make repairs before you take possession of the home, and those repairs are not done by the day of settlement, you have the right not to go to settlement.

      However, there are ways to work it out. You can still go to settlement if you collect an escrow from the seller (talk to your lender/settlement attorney about what is allowed) for the estimated cost of repairs.

      You can agree, in writing, that you will delay settlement.

      You can agree to settle, and rent back to the seller.

      Do you have a realtor? Your realtor or their managing broker should be able to help explain your options. If you are unrepresented, talk to your settlement attorney. They should be able to provide free information about your contract.

      Good luck (and write me back with specifics and I’ll do my best to answer your questions).

      Dawn

  17. Hello Dawn,

    My wife and I live in Alabama. We have been working with a local builder since October to build our dream home. In October, we put a deposit on a lot within the new sub-division that the builder purchased. We never signed a contract for the lot; however, on the check we stated the lot # and sub-division. He assured us that the check would not be cashed until the house plans were final; he cashed the check within a week. Last night we received notification that the builder sold the lot to someone else. Obviously, we have no plans on continuing any business relationship with this builder and our deposit should be returned. Do you think this is worth seeing a Realty Lawyer or should we just cut our loses and find another builder?

    Tim

    • Definitely consult a lawyer! I don’t know what the customs are for new construction in Alabama, but it doesn’t sound right that the builder cashed your deposit, and then sold the lot to someone else. In the future, before you give anyone money, get something in writing. Good luck!

  18. I am a buyer and signed a residential purchase agreement here in California. A week before the closing date of escrow I back out because I got financial difficulty, it happened 2 days after I was verbally informed by my agent that I am approved for loan. Prior to that, I already informed my agent I still do not have the full money for the closing cost. We are not yet in escrow and I am still in my contigency period. I asked my agent for some refunds but the seller wants all my earnest money and was even sent me a letter from lawyer to litigate me if i will not sign it that day i received it.I did not sign because I believed I am entitled to full or some of that money but the seller said I am already approved by the bank. But yes, its true but I could no longer able to sustain my mortgage if i continue with the purchase and it is a foreseable that i will end up losing the house to foreclosure. I am really distress because of the threat. My agent is the broker too and I felt that she is not besides me since she is still insisting me to buy it by lowering the monthly payment estimate (placing me in APR instead of fixed ) in the release of funds , it goes to seller because it says I do not want the house afterall which is not my real reason.Please enlighten me what steps i will do.

    • Hi LU,

      Can you consult the settlement attorney for the facts? Since I’m not a lawyer, and I am not familiar with California contracts and customs, I really can’t give you an answer other than when you break a contract, you should always consult your agent and attorney to know what your options are.

      Good luck!

      Dawn

  19. This is my situation. I put a deposit down on a short sale home with an offer to the seller and bank. The purchase agreement stated I have 10 days to have inspection completed and to inform realtor if the inspection failed I would have my money earnest money returned. The bank counter offered and I resubmitted an offer but decided to have house inspected while waiting to get a response back from the bank. The inspection happened on the 7th day from the original purchase agreement. The inspection report came back on a Saturday (which would of been the 9th day) and was a disaster! Too many costly repairs were needed and we informed the realtor on Monday (11th day) that we were backing out of the deal. He said no problem and that he would return the check to us. After waiting a few days the realtor responded that the seller refuses to sign off on the deposit. Are we entitiled to have our deposit returned or will the first purchase agreement of 10 days effect us? Or would it go by the counter agreement?

    • Hi Shelley,

      Short sales can be kind of tricky, so you absolutely want to consult with a lawyer in your jurisdiction.

      Did the seller sign the offer (thereby making it a contract contingent upon the bank’s approval) before sending it to the bank? If so, you will want to thoroughly read what your contract says about when the contingency periods begin. I make sure the offers I submit on short sales state that all contingencies (home inspection, financing, appraisal, etc.) begin when the buyer receives a written approval from the third party, the bank. Furthermore, depending on the laws of the jurisdiction I’m working in, I write into the offer that the earnest money deposit shall not be cashed until the third party approval is received.

      So if I translated your circumstance to the way I do things, your earnest money would not be cashed and until the bank delivers you a written approval of your contract acceptance, you would be able to void the contract based on your early home inspection (and since the bank countered, your home inspection period hasn’t even started yet).

      If your contract doesn’t have that wording, then you may have gone beyond your 10-day home inspection contingency period and therefore, may not be able to void the contract based on that.

      But you still may be able to cancel the contract on something else. The easiest one I can think of is the bank countered your offer, and you don’t have to agree to their counter.

      If the community has an HOA or condo association, you may have the ability to cancel the contract based on the review of those documents.

      If the seller simply forwarded your offer to the bank without signing it, then there is no contract and you should be able to walk away with your earnest money at any time.

      I hope it works out for you!

      Dawn

  20. I was purchasing a house and gave a earnest check of $5000 the sale did not go through. The lawyer who reviewed the contract called and said he sent my check back to my real estate agent and my agent said that she mailed it to me. I call her and she says its in the mail for the past month. I dont know what to do she has started to avoid my calls and when she does answer she is rude by telling me she does work at the post office just to wait. Please tell me what should I do? I live in chicago Il and thats where I was to purchase the building

  21. Hi Silvia,

    It’s possible that the check was lost in the mail. I’d ask the lawyer to put a stop-payment on the original check, and issue another one. Can the lawyer send it directly to you, or can you pick it up from the office?

    If that doesn’t work, get in touch with your realtor’s manager/broker. If she is the broker, then tell your realtor if she does not produce your earnest money deposit that you will file a complaint with the local real estate board.

    Good luck!

    Dawn

  22. Hello, I have a couple questions regarding EMD.
    Here are a couple bullet points to get you up to speed:
    (1) I am the seller
    (2) House was off the market for 31 days
    (3) Original PA had EMD of $500
    (4) In first conteroffer, we increased EMD to $1k
    (5) Buyer/her agent signed counteroffer
    (6) Apparently, buyers agent never collected add’tl $500 to make it the $1k that we countered.
    (7) Buyers agent and lending company share the same business address.
    (8) Preapproval letter never stated EMD contingent of financing
    (9) Can not find anywhere in the PA that EMD contingent on RD 100% financing approval.
    (10) Buyer signed Mutual release and I have it in my possession.
    (11) Buyer wants her $500 (amount stated in Mutual release letter) returned and her agent claims that it is due to her because offer was contingent on purchaser obtaining a RD mortgage and “Purchaser was unable to obtain said mortgage therefore offer is null and void and EMD shall be returned to purchaser forth wit.”

    My questions are: (1) why are they only requesting $500, shouldn’t it be $1k?
    (2) Is the agent in trouble for not collecting the additional $500? Buyers agent also claims: “seller’s agent was notified prior to additional deposit being due that purchaser could not perform due to financing therefore additional deposit was never given to purchaser’s agent or company.” They signed the first conteroffer we presented with $1k as the EMD amount. We were not notified that she was unable to obtain financing until 28 days after they signed our conteroffer.

    I have additional holding costs that I have since incurred and feel that my EMD is due to me.

    Any suggestions/legal references would be greatly appreciated.
    Thanks in advance!

    • Hi Ryan,

      I’m not aware of what the laws in your jurisdiction may be, so you definitely want to consult a real estate attorney. It sounds like you are owed the full amount of the EMD. If the contract was not contingent upon financing, then financing cannot be a reason to void the contract and get the EMD back. Furthermore, if the counter offer for additional EMD funds was signed, the buyer has agreed to those terms. The other agent should have collected the additional $500 at that time and deposited it into escrow. Even if the contract had been contingent upon financing, the other realtor needed to deposit it unless otherwise expressed in writing and signed by both you and the buyer. In my area, realtors who do not deposit an earnest money check within a certain period of time may be fined by the state Board of Realtors.

      The first thing I would do is to contact the buyer’s agent’s managing broker and explain the situation. That could be all it takes to remedy the situation. If not, your settlement company may have a real estate attorney on hand to discuss your contract for free. The settlement attorney might contact the buyer to set them straight on the issue. You may also want to file a claim against the other realtor with your state’s Board of Realtors. Finally, I’d involve a lawyer to represent you on your behalf. You should take into consideration that the cost of an attorney may be greater than the amount you are owed by the buyer.

      Good luck!

      Dawn

      • Thanks Dawn for the prompt reply.
        Does there have to be a written contingency in the EMD section calling out the approval of financing?

        Is the PA 100% null and void (and the EMD returned to the buyer and no EMD to me) if the buyer cannot obtain financing if in the “Terms of Purchase” section of the PA contains the verbage: “Contingent on property appraising for a minimum of sales price, if required and Buyer’s ability to obtain an RD mortgage at no cost to the seller unless agreed to in writing, amortized for no less than 30 years, in the amount of 100% of the purchase price”

        Thanks again for the prompt response…

      • Thanks again and I will seek legal counsel for sure. I am in Michigan by the way. I didn’t want to go that route if I didn’t have a leg to stand on. Your input has been greatly appreciated and I cannot thank you enough.

        Come to find out, the potential buyer had walked away from her house less than 24 months ago and was trying to purchase my house. Somewhere along the line, the buyers agent or the lending company that did the preapproval (which also shares the same physical business address as the buyers agents real estate company) failed to discover this huge fact. I am upset that it got 30 some days into the purchase before this was discovered. I cannot get the 30+ days back on the market nor obviously my holding costs.

  23. In October 2010 I made a offer on a townhome and I gave 1,000 for the earnest amount. The townhouse had title issues and it’s now May 2011 and the title is still in somebody else name. I asked for my earnest money back. I was able to sign the paper work and get my money back. They said it will be mailed to me in 7 to 10 business days. My question is who has the check my realtor broker?

    • Hi Shemekia,

      I believe it would be released to your broker, who then should mail you a check. But if you handed the earnest money deposit to someone other than your agent, a settlement company for instance, then I’d check with them to make sure that they mail it directly to you.

      Good luck!

      Dawn

  24. I made an offer on a house that caught fire for 10,000, I put down 5,000 and gave another 5,000 before closing, 24 hours before closing I recieved a letter from the title company stating ( house was to be pushed down for safety reasons) dated before any transactions was started on this property. I stopped the buying process and demanderd a refund of my 10,000 dollars and the realtor send me a form that stated this- “Due to condition issues, buyer to be released with 100% of the EMD returned to purchaser” Do that mean that I get back the entire amount or just the EMD?

    • Hi Larry,

      I’m sorry to hear the house burned down! In the DC area contracts, it states that the liability of damage to the home remains with the seller until settlement. Therefore, a buyer is not required to buy a home that is in any other condition than what was agreed upon when the contract was written. In your circumstance, it seems like you will be reimbursed the full $10,000 you gave as your earnest money deposit…even if the $5,000 increments were submitted at different times. If you get any less than that back, check with a real estate attorney.

      Dawn

  25. I placed an offer on a “as is” short sale back in nov 2010 which was accepted by the bank back in March. Upon the inspection and trying to get the homeowners insurance we discovered the homeowner placed a claim against his insurance company for a new roof . We requested that the roof be completed prior to closing since he received the money to replace the roof back in Jan . The roof did not get completed in time but we did not pull our offer. The roof has been put on now and we our waiting for the roofers to be payed and a new acceptance letter from the bank. Question: Should the tital company still be holding on to our earnest and close cost funds.

    • Hi Lorie,

      I’m not sure about the laws in your area, but in the DC metro area, if you still have a current contract that has not been voided, then yes, your earnest money deposit should still be held by the title company. You can use that towards your closing costs at settlement.

      Dawn

  26. My husband and I are putting in an offer on a home in Maryland. The seller has countered that they want a 21 day financing contingency and an extra 4k down. We don’t have a problem with the EMD of 5k, but had a few questions before doing so. Our settlement date is supposed to be 8/15, so if our financing doesn’t go through before 21 days, what happens to our EMD? Another question is, if our financing goes through and then for some reason falls through, what happens to our EMD? And lastly, if by chance we needed to extend our settlement date, can the seller take our EMD? We don’t forsee any problems with settling or financing, but 5k is a lot of money that we don’t feel comfortable risking. Our realtor has been absolutely no help in answering these questions.

    • Hi Erin,

      The contingencies put into the contract help protect you, so that you aren’t forced into buying a home if the conditions aren’t right. 21 days for financing is the standard now (it used to be 14 days). You need to pick the lender as soon as possible, and you must make a formal application with one lender within 7 days after going under contract. That way, your lender can order the appraisal and begin to underwrite your loan before the 21 day contingency period ends. Once your lender has issued a loan commitment, you can feel comfortable removing the financing contingency. At that point, if there are no other contingencies left in place, your earnest money deposit will be at risk should you decide you want to void the contract. But at that point, you’ve had your inspections, the home has appraised, you got the financing, and you’ve reviewed the HOA/condo resale package (if applicable) and you should be very solid, with about a week or two to go until settlement.

      If you don’t get the financing after the loan commitment is issued, that would be a very rare circumstance. Just be sure not to rack up any unusual large debt on your credit cards prior to settlement. For instance, don’t buy a car or a household full of furniture, since that could change your credit score and affect your loan. When in doubt, always ask your lender if a purchase is safe to make.

      If you don’t qualify for the financing and you haven’t removed the financing contingency, then you will be able to get your earnest money deposit back. Before they can release your deposit back to you, the seller must sign off on the release of funds. You must have tried to get the financing and complied with your lender’s requests for paperwork. But if you cooperated with your lender and they say you don’t qualify, then you don’t have to buy the home and you can walk away with your $5,000.

      Finally, if you don’t make your settlement date and need to extend it, then your earnest money deposit could be at risk if the seller does not agree to extend and voids the contract. However, most sellers just want to sell their home. Most likely, they’ve already made plans to live in their next home and need the money from the sale. So, while they might not be happy about rescheduling their settlement, most will agree to the delay. Sometimes, the seller will ask you to pay their carrying costs for the extra time (the prorated HOA/condo dues, their per diem mortgage) between the date you were supposed to settle and the day you actually do. If the seller balks, that means they’d have to start all over again by putting their home on the market and trying to find a new buyer who may or may not give them the contract price you did. That will take more time than waiting the one or two days that you’d need in order to finally settle. So in order to avoid delays in settlement, pick a responsive lender ASAP so they have time to get everything finished, submit the paperwork the lender asks for in a timely manner. If you incur any costs because of a delay of settlement and the loan officer issued you a loan commitment, then make him pay those fees.

      Overall, don’t be too afraid about losing your earnest money deposit. In 10 years in real estate, I’ve never had one client lose it.

      Good luck with your offer!

      Dawn

  27. hi me and my wife put an offer in a townhouse here in florida, we did give deposite to be held, the contract has passed and due so now we did put a offer in another townhouse, the bank accept and everything is ready and good to go but the only thing is missing to close is or deposite money, we already signed the papers to get the money back but the realtor says it will take a month, please help us

    • Hi Andre,

      Since you are in Florida and not in the DC area, I’m not familiar with the laws or customs of how the earnest money deposits work there. It sounds like the offer you submitted on the first home was a short-sale or foreclosure, where a third party approval was needed, and you never got it within the timeframe you specified. So I would assume that you could get that back, but again, I’m not familiar with the details. It’s amazing that it would take a month to get back! Who is holding that earnest money deposit? Ask the bank of the second property if they would accept an assignment of funds (like an I.O.U.) from the current holder of the deposit. I would consult your settlement attorney to see what the proper procedure is, and get some other solutions to your problem. Good luck!

      Dawn

  28. Hi Dawn, we offered for a new house in So California on 5-24-2011 (based on an pre approval), sellers counter offered and we accepted, escrow opened on 5-25, to be closed on 6-26. We submitted $11k as deposite to escrow. Contract includes contingencies 21 days re house inpection and loan. We paid for inspection and there were problems eg no gas line, electrical problems …etc on 6-5. On 6-17 we were informed we can’t get FHA loan by lender. We immediately looked to second lender to see if we qualify. Contingencies were not removed. We eventually requested extension to close escrow and sellers agrees until 7-11. We were informed on 7-5 that we can’t get loan. We signed cancellation of contract 7-6. There were no back up offer. The sellers then offered an all inclusive trust deed with 25K down. We declined and requested they signed cancellation of k to release deposit. We got an email today 7-16 from sellers’ agent that they want compensation for time wasted. We found out that the house was put back on market as 7-1. Will I have to pay sellers and lose my deposite?

    • Hi Ann,

      I’m sorry you’re going through this. I’m not familiar with California contracts or laws, so you should consult a real estate attorney. But to me, it sounds like if your contingency is in place, and you could not get financing, then you have the right to cancel the contract and get your earnest money deposit back.

      Dawn

  29. I gave an earnest money deposit of $1,000 to
    a For Sale by Owner over a month ago. She cashed
    my check and she never contracted with me.

    I have nothing in writing but a cashed check with her name on it and Earnest Money written on the Check

    What recource do I have if any?

  30. My husband and I are selling our house in Wisconsin. They interested party is someone being transfered to the area by his company who is handling the sale of their other house. Not sure how that works. They wanted our house, but said they couldn’t get financing until the sale of theirs went through. The people in their house were renting from them for a number of months and then closing end of August. They wanted the same arrangement with us, but to close in Oct., plus they wanted the house well below appraisal value.

    We said “No”. They came back and said they could close by July 29. We agreed to the low price if they closed on July 29. They said fine. All agents involved , theirs and ours, assured us they were approved for this. As we were loading our truck on the 28th, we are told that they couldn’t get the financing suddenly because their DTI ratio was too high with their current house still in their name. We were forced to make the decision to rent to them for 37 days and were assured that once the sale of their house went through, that the bank would lend to them and we would close on Sept 10.

    Now we are told as of yesterday, August 17th, that suddenly they can’t qualify because of their DTI ratio and the house they own in their name and they want to use that as a way to totally walk away from the sale and take their escrow money with them, which was contingent on financing.

    I think they are trying to use this loophole, as we all understood they did not qualify NOW, but would qualify after the sale of their own house. I am also concerned that it’s possible that they have gone to their buyers and colluded and said “Just rent from us for another month” or something like that – to delay the sale in order to not qualify.

    I don’t think they should be able to take their Earnest Money with them. That was the whole point. To protect us if they walked away. What recourse do we have to either get the money, or freeze it during an investigation. And who investigates? How do I file a formal complaint. Help! Thanks.

    • Hi Stacyann,

      I’m so sorry to hear that you are in this situation. I can understand your heartbreak, frustration and anger. Everyone started this with good intentions, and I don’t think the buyer had any incentive to tell their renters/buyers to not go to settlement. That would mean that they’d have to move yet again and look for another place to live. Which you know, which costs both time and money. Sometimes, good transactions go bad, through no fault of the buyer or seller.

      You should check with a real estate attorney in your jurisdiction to make sure the buyers followed the terms of the contract. In my opinion from how the contracts are written in the DC area, if the financing contingency was not removed, the buyers still had the right to void the contract if they could not obtain financing. Furthermore, if they had a home sale or coinciding settlements contingency, and their sale did not take place, then they had the right to cancel and get their EMD back.

      Sometimes, your settlement attorney will review the case and can help sort things out. If you found that either your agent, or the seller’s agent made a mistake in handling the transaction, you could complain to their managing broker, or even the Board of Realtors. But before going to the Board of Realtors, make sure you know if an agent made an error, because it sounds like both the agents were just trying to make it work.

      Good luck!

      Dawn

  31. My husband and I are currently under contract to buy a house. Before we’d made our initial offer, a friendly neighbor gave us a tip to make sure the septic system was okay – she said that she had spoken to a septic inspector who had been out to the property and had expressed his opinion that there was something wrong with the system, but she hadn’t seen the owners do anything about it. So we were sure to include a contingency that we would pay for our own septic inspection when we made our offer. The seller seemed surprised and offered us a copy of an inspection they’d paid for themselves back in October of last year that said everything was fine. We went ahead with our inspection, and our inspector found a crack in the tank. The situation felt a little shady but we loved the house and so decided to proceed. We asked for the seller to replace the tank. He asked for an extension to consider it, which we granted. Eventually he came back and agreed to replace the tank, and so we proceeded on to the whole house inspection.

    The whole house inspection revealed a number of issues that were in need of repair, many of which we knew would become an issue once we went to the lender (dry rot, lack of vapor barrier, a septic vent pipe that stopped right at the kitchen window, signs of moisture damage by the tub, and more), particularly since we’re using a USDA loan. Since the seller and their listing agent advertised the house as an “ideal candidate” for such a loan, we assumed that they would be on the same page with us in working toward getting the repairs done to make the house compliant.

    But when we turned in our repair request (before the deadline of the inspection period) the seller AND their agent became condescending, insulting and antagonistic. We thought that if they believed the requests were unreasonable that they would simply counter and we would negotiate. Instead they ignored our deadline for a response, and the listing agent had several phone conversations and email exchanges with our agent in which she accused us both of being ignorant to the differences between buying a house in the country and buying one in the city and that we were just trying to get out of the deal and had never really been serious about the house. (I don’t usually spend that kind of money on inspections for something I’m not serious about.)

    My husband and I were completely flummoxed by this sudden vitriol in our direction and more than a little alarmed. Still not receiving any official response in writing to our requests, we decided to make an appointment with our mortgage lender to see if she could clarify some of the repairs that were likely to come up. We had not elected to schedule an appraisal at that time simply because the deal seemed to be imploding and we didn’t want to lose even more money on a house we wouldn’t be able to buy if the loan couldn’t be approved, and we were still waiting to hear their official response to our repair request. It finally came 3 business days (5 days altogether) past deadline, and they only agreed to put in a vapor barrier. The rest of the document stated, essentially, that if we did not engage an appraiser by noon the next day we would be in violation of our inspection period and would lose our earnest money. At that point we felt that we had gotten ourselves into a very bad situation and the house was never going to be able to be brought up to a satisfactory level (we would have done what we could, but there is a reason we went through the USDA program for low income families, we don’t have a lot of cash to hand.) The sellers behaved in a shady manner throughout the interaction, the listing agent was overemotional and very unprofessional, by the end we felt bullied and our real estate broker said she’d never in all of her years seen a deal implode like this.

    We decided to terminate and our mortgage lender has said she will have her underwriters provide us with a letter stating all of the repairs that would have had to be done for the loan to go through to help back up our decision. And we stipulated in our contract that it had to meet the requirements of a USDA loan. But the seller, their agent, and the head broker over their agent are all claiming that they are going to “play hardball” and keep our earnest money for backing out of the deal. Our agent says that the deal was effectively dead in the water when they missed that last deadline and that they’re just posturing now. How worried should I be that we won’t get our earnest money back? And is it worth pursuing into mediation and/or court? Sorry this is so long, I’m pretty freaked out – we have a limited time to find another house and we’ve already put a lot of money into this one. Thanks for any insight.

  32. We got involved in a lease-purchase agreement in Alabama in April 2009. We decided not to purchase the home at the end of the contract which ended officially July 31, 2011. We paid a 2K down payment and paid 1500.00 into an escrow account. The owner told us that we forfeited our 2k down payment and she would return the money in the escrow account once a walk-through of the property was done. Can the owner really keep the down payment and we want our escrow money returned to us as soon as possible. What should we do? Can you point us in the right direction?
    Thanks in advance

    • The contract expired on April 30, 2011, but we had 90 days following the 30th of April to buy the property which was July 31, 2011. We are moving next weekend and we gave her notice last week on August 28, 2011. We are under NO agreement at this time. Not even a month to month.

      • Hi April,

        My advice would be to go back and re-read the wording of the lease-purchase agreement to see what it says about the earnest money deposit. You may even want to call up a well-known real estate office and ask to speak to the managing broker, or call a settlement company and ask to speak to the attorney to see if they can answer your question. Unfortunately, I’m no help since each jurisdiction has their own rules about how lease-purchases work.

        Good luck!

        Dawn

  33. I made a EMP of Rs 1 lakh to a bank for purchase a property. at the time of auction , i came to know that reserve price is more than market price. I quoted lesser price than reserve price since no competetor availabe in the auction. Banker got angry and refuse to give back the EMD amount . Banker stated that , he will deduct all the expenses of paper adverrisement , legal charges in my EMD amount. Pleas advice , how to go about on this.+

    • Hi Chandrashekar,

      You need to speak to a real estate attorney, since real estate sold at auction plays by different rules than your traditional new construction or resale transaction. Back in my days of purchasing foreclosure properties on the courthouse steps, I remember the EMD was non-refundable. If you overbid, and got the home for more than market price, you were out of luck. The only time I remember getting my EMD back was when the trustee could not produce title. Each state has their own ways of doing foreclosures, so the only way for you to see if you have any recourse is to contact an attorney.

      Good luck!

      Dawn

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  35. I have been pushing through a difficult mortage process and was faced with several other personal issues throughout the timeframe. My debt-to-income ratio I found out was already high; however, with two weeks lefts before close my wife’s transmission quit on her car. I had no other choice, but to co-sign with her on a new car note. Because of this transaction, I am no longer approved for the loan with the further increase in the debt-to-income ratio. I place $2000 EMD and signed a finance contingentency clause. Even though I added the debt, will I still be entitled for the return of the EMD?
    Thanks

    • Hi Kevin,

      Since I don’t know how your contract was written, I can’t say for sure what is covered under your financing contingency. In the DC area, ours lists ways that a buyer can default and not be protected by the financing contingency, so you should check with a lawyer in your jurisdiction to confirm. Sometimes, the office conducting the settlement has an in-house attorney and can answer your question free of charge. Good luck!

      Dawn

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  37. I am a broker/buyer of a residential property in Florida. A cash offer.
    Offer was accepted along with $3000. deposit money
    held by sellers brokers title company.

    Closng date did not occur due to cloudy title.

    I sent a signed release of purchase & sales contract to all parties.
    The seller refuses to sign, it has been 8 days with no response.
    What are my options?

    Thank you

    Mary

    • Hi Mary,

      I’m not sure how your contract is worded, so I’d check with the attorney who is involved in your settlement. I would assume that if the seller cannot produce clear title, then you don’t have to purchase the home and can get 100% of your earnest money deposit back. However, I’m not sure if your contract states that the settlement automatically extends for a period of time while the seller tries to correct the defect in title. Best to check with someone in your jurisdiction!

      Good luck,

      Dawn

  38. Hi,

    I gave $1,000 earnest money to a for sale by owner whom is also a mortgage lender. She cashed the check before my husband and
    I had a signed contract. After 20 days of NO contract, I told
    the seller we did not feel comfortable moving forward as she
    had cashed out check and kept putting us off in terms of
    writing a legal contract and letting our lawyers review it.

    She will not return out money.

    What actions can I take to dispute this?

    D. IN ohio

    • Hi Dacia,

      I’m sorry you’re going through this. Unless the FSBO seller is a realtor, a lawyer should be involved to facilitate the paperwork and make sure the transaction is done properly. It doesn’t sound like the seller knows the process at all. I would talk to the owner again and tell her that if she does not refund your deposit, that you will bring legal action against her. If that doesn’t work, I’d contact a lawyer.

      Good luck!

      Dawn

  39. Hi Dawn,

    We are selling our condo in DC by owner and accepted an offer from a buyer who put down a 2.5% deposit, ensuring that he was a safe bet. Less than 24 hours before the settlement date, the buyer’s agent informed us that there was a last minute loan problem and that the closing would not be happening the next day. He said that the issue was that the buyer’s lender (Fannie Mae) does not grant loans to buildings with “more than 50% investor ownership” and that our building has a much higher rate than that. He told us they were endeavoring to transition the loan to Freddie Mac or another lender with looser restrictions, but it has now been 10 days since our settlement date, and we’ve had very little word from him.

    The contract we signed with the buyer had a financing contingency of “21 Days after Date of Ratification (Financing Deadline)”, which, if the date of ratification is the contract signing, has long since past. In addition, it also has a Default clause that states: “Purchaser will be in Default even if the Financing Contingency has not been removed if Settlement does not occur on the Settlement Date for any reason other than Default by Seller.” Obviously, we are not at fault; the fault is with the buyer’s lender. We want this deal to go through, but are now worried that it won’t, and we are losing money to mortgage interest, taxes, HOA dues, and utilities every day (we have moved out and are renting elsewhere). We wrote the buyer asking for an extension of the escrow period and a flat month’s worth of these costs covered while we await their new loan approval (if it ever comes through).

    My question is, are we within rights to demand the buyer’s earnest money deposit if it comes to that? How long should we give them to agree to our new escrow terms before we request it? We don’t want to do this, but if we keep waiting, we will lose thousands. Additionally, if we do demand the escrow money, can we reasonably expect to receive all of it, or will it be held up with arbitration or depleted by legal costs, should the buyer refuse to release it?

    Thank you very much for taking the time to read this.

    • Hi Katie,

      I’m sorry you’re going through this. It’s something that happens quite frequently, though. Since you didn’t use a realtor, you probably did not know that your condo had to be on the FHA approved list in order for the buyer to get an FHA loan. It’s a good sign that the buyer is trying to obtain alternate financing. It actually may cost them more to do that, since a conventional loan generally requires a higher down payment percentage than FHA loans.

      Also, the financing contingency keeps on going if you do not give them notice to remove it or void. If they void, they would get their earnest money deposit back. The paragraph that you quoted me in the contract has more to it than you wrote. It continues to say, “Buyer will be in default even if the Financing Contingency has not been removed if Settlement does not occur on the Settlement Date for any reason other than Default by Seller, *if the buyer does not have the down payment, closing fees, and any other required funds, including without limitation, and additional funds required to be tendered by Buyer if the Appraisal is lower than the Sales Price, provide the Contract is not contingent on an appraisal or the appraisal contingency has been removed.”*

      So if the Buyer didn’t close on time because they didn’t have the money (outside of the loan) to close, then they’d be in violation. But your situation, as I understand it, the buyer is not in default and therefore the right to the earnest money deposit should still be theirs. I am not a lawyer, so you should double check what I’ve said with a real estate attorney (check with the settlement company, as they usually have one and usually won’t charge you to answer a question about your contract).

      Good luck! I hope it all ends up working out for you!

      Dawn

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  41. I put earnest money on a condo. closing date shall be on before the Oct 31st. On Oct. 28 or 29 I was denied the loan. The guy who did my loan asked it he could give it to another company to look at. On Nov 4 I got word the the other company could fund the loan but at a higher interest rate. I declined the loan. I did not sign anything with the other company pertaining to the loan. Now the seller wants to keep the money because they said I quailifed for a loan.

    • Hi Ken,

      You should probably contact a lawyer, because your contract could be different than mine. In my opinion, if you did not remove the financing contingency and were denied the loan you initially applied for, then you may be able to void the contract and get your earnest money deposit back. That said, there is a lot that goes into the default/financing contingency, so double check your contract!

      Good luck!

      Dawn

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  43. Can I get my earnest money back if the Seller was not up front about a second name on deed. It has been two years and the property has already been sold but the seller would not sign for me to get my earnest money back beccause she was upset that I didnt buy house. I wanted to buy house but she said she was the own in fact it was another person on deed and she knew that from start. So now shew want sign papers for me to recieve my earnest money back. What can I do. Its not much its the princpal for her lack of honesty.

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  45. Hello! Quick question. My husband and I signed a contract to sell our home and the buyer listed on the contract a closing date of October 28 2011. It was a very basic contract and *all* of the contingencies were crossed out/waived. He called us that week and said there would be a “delay” and he would “call us in a month.” That month passed and when we finally got back in touch with him he verbally backed out of the sale, saying something about things not working out with the sale of his home. Now mind you, this was NOT a contingency listed or even verbally mentioned and now he wants his earnest money back. I shoudl not that it was not given to a third party, they wired us the funds after we signed the contract. We also had two other people show interest in the property while waiting AFTER the projected closing date and now we are left “holding the bag” so to speak. Do they really have a right to their earnest money back? It doesn’t seem fair, or legal, either. Thanks…

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  47. I purchased property for 500,000$ however upon closing we discovered the sellers didnt have clear title to mobile home on the property at which time we split the the property and made another puchase and sell agreement for 445,000 and the home 55,000$ so we could close on the property. On the mobile home purchase and sell they had 6months to come up with title . They didn’t but won’t give me my earnest money of the 55,000$ back.cause I dont want the home now can they do this? Because they say it’s supposed to be part of the first agreed price .

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  50. I have a question – I have put an offer on a short sale and the seller accepted and now I have the ‘ratified contract’ to sign. Can I retract my offer now (a week into the offer) and have my EM fully refunded? I have not signed the ratified contract, and my check is still in the hands of the ‘title company’ and I was told will not be cashed until this ratified contract is returned signed. Please help. Thank you!

    • Hi Joey,

      You really need to speak to an agent or a lawyer in your jurisdiction as the contract and customs are different for each area. I can only say that in the Washington DC area, it is not “ratified” until both parties have signed and delivered the entire contract documents. And your earnest money is yours until it is officially ratified. But with 3rd party approvals, you need to be careful and consult an attorney. Maybe call up the title company you were going to use and ask the lawyer they have on staff?

      Good luck!

      Dawn

      • Realtor Dawn,
        Here is what has happened so far to date –
        I made an offer on a Short Sale house in Northern, VA. My agent had me offer a little more than the asking price and up my EMD a little higher so that my offer would be chosen over several others. The seller did choose my offer, and after a few days my real estate agent sent a PDF file via email which was the ‘ratified contract’ signed by the seller. I was to sign and send back to my agent. Then I was told that my check would be deposited by a Title Company until the house is sold. That after the ratified contract is sent back to the listing agent, then the check is cashed, and the wait for the seller’s bank to approve begins. So that is where I sit, with a ‘ratified contract’ only signed by the seller, and unsigned by me. This has been just a big headache, and I would not have even put a contract on the house had my agent not persuaded me to go for it, telling me that I could always ‘back out’ of my contract at the ‘home inspection’ and have my earnest money fully refunded after a period of about 10 days. But I would lose the ‘home inspection’ fees of course. Thank you for your help, I appreciate it. A friend told me that as long as I have not signed the ‘ratified contract’ I can retract my offer and have my earnest money fully refunded. But she is not a real estate agent or a lawyer. I assume she read it on the internet somewhere. I just stumbled upon this site and have hoped someone here would help. Thank you.

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  52. I live in Florida and have now had two deals go bad. The first one the people gave no reason for backing out of the deal. We split the escrow with them. This time we thought we had a solid no contingency cash contract non-dependent on any finanacing. Three days before closing, they decided that it would “put them in an uncomfortable position” to now come up with that much cash without selling their home first. They put their house on the market that week. In Florida, it’s all about timing your marketing around “snowbird” season, and we have now lost the majority of the season because we thought we had a deal. They offered a proposal to rent our home with an option to buy, with an “if and when” they decide to buy. Needless to say we declined their offer. They are not asking for their escrow money back, but since we lost our season and are afraind we will get stuck with low-ball offers, we are planning to hold them liable for any costs over the escrow amount. However, and here is my question, is my house able to be put back in an “active” status while this is being worked out. I only have about three to four weeks of season left. I am terribly upset about all of this. When is a contract a contract in real estate?

  53. I put up 11,000 earnest $ which went into title co. Escrow. The purchase price was 98,000. My dumb attorney wrote the mortgage saying I owed 98,000.
    I was never credited or refunded the earnest $ & now the attorney can’t find the file nor can the title co. The HUD statement stated I gave 11,000 in earnest $ now it’s gone. I don’t know what to do. Help.

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  55. In a short sale tn want my earnest money back. Bank wont give us an approval letter.being jerked around we back out of contract.Is the contract complete without approval.

  56. I have a an accepted offer on a property and have made a deposit but seller has now sold to someone else before the closing date what can we do

  57. Hi:

    I was in the process of buying a home in DC. Unfortunately, the seller is unable to provide warranty of title. Which makes the house unsellable. I am trying to get my earnest money deposit back and my realtor is not being responsive. How long can it be kept in escrow, even when the purchase has fallen through?

    • Hi Tess,

      Have you tried calling your agent’s managing broker? If your realtor is the broker, then I’d call the settlement company who did the title search for you and have their lawyer call the broker. Sometimes, all that’s needed is getting someone else involved. If that doesn’t work, I’d ask the lawyer about your options. You can always file a complaint with the real estate board, but I’d leave that as a last resort.

      Good luck!

      Dawn

  58. I have a contract on a home that I am selling with a contingent that the buyer has to sell their home in order to purchase ours and closing is set for July 9th. The buyers can not follow through with the purchase since they have not had any offers on their home. They put up $500 escrow. Do I as seller have to give them their earnest money back or is it mine to keep since they tied up my home sell for 75 days????
    Kelli in Oklahoma

  59. We made an offer on a bank-owned house (in Oregon), they accepted, and we proceeded with the inspection, with the 10-day contingency period. The inspection turned up a leaking underground oil tank and since we were on day 9 of the 10 days and it takes 1-2 weeks for the bank to respond to anything we do, we terminated the offer rather than countering (which is what we wanted to do). Our realtor has tried many times to speak to the bank’s realtor, who simply doesn’t return messages, except once in email to say she’s working on getting our earnest money back. We still haven’t heard anything or received our money back, but see that the house is relisted for less money. It’s only been 1.5 weeks, but the fact that it’s relisted means they are acting, just not acknowledging us.

    My questions are:

    1) Can they relist without responding to our termination and without giving us back our earnest money?
    2) I know banks don’t have to disclose the usual stuff, but do they have to disclose an environmental hazard like a leaking oil tank? It has been reported to DEQ by the soil sample folks, but I can’t find any evidence anywhere online that there is a problem. How are potential buyers supposed to know?
    3) With this history, would it be unwise to make an offer with the contingency that they fix the problem?

    Thanks for your great advice and opinions.

    PS. This is Bank of America.

  60. Here’s my situation: my husband and I put our home on the market for sale by owner. We were called by a man claiming to be a loan officer who asked us if we would consider owner financing (which we said no) or lease option. We considered it and the next day he called us and asked us if a woman could come out and look at our house. We said sure! So she looks, she likes it, and she tells him she wants a lease option. He tells her he needs a $200 earnest money check from her and that I need to draw up a contract! (huh?) I tell him I’ll have to talk to our lawyer. Well the next day, she calls me (we exchanged numbers) and asks me if I got her $200. I said no. She said the ‘loan officer’ deposited her check. We haven’t agreed to anything. We have no paperwork, with him or with the potential buyer/leaser or whatever. She says she needs me to give her a contract somehow because he cashed her earnest money. I’m so confused. The lawyer says he will draw up any paperwork we want, but I’m pretty certain I don’t want to work with this ‘loan officer’ so what should I do? And what should I tell her as a potential buyer? Any advice for us? Is what he did lawful? (we are in Texas) and if it is illegal or fraudulent in anyway, should I and how would I report him?

    • Hi Amanda,

      This sounds like a scam. I would report this “loan officer”. You are under no obligation to go under contract with this woman, and encourage her to demand her earnest money deposit back from the loan officer. If she can’t reach him, then have her file a police report. Good luck!

      Dawn

    • That sounds like a scam. When we made an offer to a seller they had to sign papers accepting the offer- which included the earnest money account. Then the money was given to the title company. It was NOT cashed by a “person”.
      They need to try to get their money back and get a realtor. If they can’t get their money, they need to report his scam.

      Note: that’s a personal, non-legal opinion.

  61. I was in the process of buying a home (short sale). I agreed to the sellers price. It went as far as the banks counter offer that i agreed on. I paid for inspection of the home and at the final hour the seller said “im not selling the home and will let it go into forecloser if needed. What rights do i have and also about my ernest money?

    • Hi Robert,

      Please seek legal counsel. This sounds like the seller may have breached the contract, however, short sales are a little more tricky. I do believe that you have the right to get your earnest money deposit back, but you’ll need to check with someone who deals with real estate law in your jurisdiction. Good luck!

      Dawn

  62. Hi Dawn,
    My husband and I are in a crazy home selling drama! We listed our house in May and received a good offer one week after listing. We accepted and pulled our house off the market. We had a preaproval letter and recieved a $4,000 deposit. Everything seemed to progress nicely until the appraisal came in at $12,000 less than the agreed price. The buyers were getting a VA loan and were not putting any money down, we decided to lower the price for them because we had already put in an offer on a new house. We again thought things were back on track and were waiting for their mortgage commitment letter which was originally due 6/29. That first date came and went and we kept getting asked to push back the commitment date. We were told that they were in underwriting and things were looking great and that they needed an additional week. It was now mid July and our closing date was scheduled for 8/3. We gave them more time as we were told to by lawyers and realitors. July 27 and still not commitment we were informed that the buyers had a car loan go into collections but they paid it off and the mortgage company was still working on it. They asked for three more days which brought us to two days left before closing. We waited and finally one day before closing were told that they could not get the mortgage. We had our house in storage, had been committed to buying the other house and were just devastated that it fell apart. The buyers realitor said they felt awful and that they wanted us to keep the deposit. Now here we are one week later, and our realitor received a letter from them asking for the money back and to sign that we will not take any legal action. We spent at least $4000 on this process (legal fees, mortgage application, septic pumping and inspection, furniture storage and inspection on the property we now lost) and want to keep that deposit we were told we could. Is there anything we can do? Thanks!

    • Hi Laura,

      I feel for you and your situation. It’s a terrible thing to have to go through, and I’ve been there. The lender strung you, your realtor, the buyers and their realtor along. It sounded like everyone wanted for this to settle (the buyer had money invested too, with their inspections and appraisal). It’s devastating for everyone, but especially for you since you had the most at stake. You should check with your settlement attorney in your jurisdiction to make sure the contract was followed and that no breach occurred. Unfortunately, though, it sounds like the buyer was still protected by their financing contingency and therefore does not owe you the earnest money.

      Best of luck!

      Dawn

  63. I placed an offer on a property and the listing agent for the property text my realtor saying she had received a verbal acceptance from the seller and the only thing we were waiting to receive was the signed agreement back from the seller. In the mean time the listing agent text my realtor the name of the title company to take the EMD and stated the seller was requesting 1% of the sales price for the deposit instead of the $1000. that I offered. I gave the title company the money and 4 days later. The listing agent text my realtor saying she received other offers now the seller is requesting everyone to submit their highest and best offer, i refused to offer more. The title company cashed my check and 2 days after the title company cashed my check the listing agent sent my realtor an email saying the seller went with another offer. Can they do that? I thought they could not accept payment from more than one person for a single property.

      • We were under contract to buy a home in California, however after inspection I cancelled the contract due to the condition of the property. I never removed the inspection contingency and I cancelled before the inspection contingency expires which was 17 days. Now the sellers won’t sign off on the cancellation and want to keep the earnest money deposit. My agent told the sellers we have the right to back out within 17 days and she even confirmed it with CAR legal attorney.

        The sellers have a back up offer and is going to accept the back up offer. Can they accept another offer when they have not signed off on my cancellation, how can I get them to release my earnest money deposit?

      • Hi George,

        I’m sorry you’re dealing with this. I wish I could be of more help, but I’m not familiar with your contract laws. If talking to the agents don’t work, I think your next step would be hiring a lawyer to get your EMD back.

        Good luck!

        Dawn

  64. I have a question. We are under contract to buy a home and paid $1000 earnest money. Our original NC due diligence period ended on 8/31/12, however our lender is saying that they have not received the appraisal yet. (appraisal ordered on 8/6) We asked the sellers for a 1 week extension and they agreed, so we have until 9/7/12. If the lender has not received the appraisal by then, and then for some reason our loan is denied, we would not be able to get our earnest money back. Would the lender be responsible for this? What would our options be, since we would not have been given the chance to find other financing options or let the seller know that we could not buy the house before the due diligence period expired. Why should we be held responsible for that?

  65. I have a question I’m pretty sure I know the answer too but my husband is arguing with me about the expiration of a contingency. If we cannot sell our house in the allotted time the money comes back to us, is this correct?
    Thanks for helping settle this.
    Stephanie.

    • Hi Stephanie,

      I’m guessing you are referring to a home sale contingency on a contract of a home you are intending to buy. I’m not sure where you are located, as each state and jurisdiction has their own rules regarding contracts and contingencies. In the DC area, if you have a home sale contingency and you do not satisfy or remove the home sale contingency by the deadline, the contract either automatically voids (in the Northern VA contracts) or is extended until either party voids (DC and MD contracts). In the case of a void contract, the earnest money deposit would go back to the buyer. Please consult with a real estate lawyer and good luck!

      Dawn

  66. I made a $10,000 offer on a foreclose home that was listed for $15,000. Along with that I put a $2,000 earnest deposit. The bank rejected my offer and ask me for $12,000. I dont have $12,000, so I rejected the offer. So, now whats going to happen to my $2,000 earnest money deposit? Am I going to get it back?

  67. Hi. I just recently put a offer on a townhouse in round hill va, it was for 248,000. We put 8000 for earnest money and offered to pay all closing cost. We also offered 251,000 and esclaution clause of 255,000. We had the best offer but the buyer went with the lower offer but more down payment. We were crushed of course. On the next attempt to purchase should we put more down. We have aboout 15,000 to put down. Should that go towards our earnest money.

    • Hi Troyi,

      $8,000 on a $248,000 home is an extremely strong earnest money deposit. It’s over 3%! I doubt in this circumstance that putting $15,000 would have made the seller change their mind. The more you put down for *down payment*, the more likely you will be to get the loan approved, which is less risky than a higher earnest money deposit since you can get that back should you void the contract based on your contingencies. Also, going over list price is not always the best thing because the home needs to appraise. Too high of an offer price might put the seller at risk for having the contract voided if the appraiser doesn’t agree that the home is worth the contract price. So it looks like the seller just wanted a sure thing, and wasn’t focused on price or EMD.

      All that said, though, a large earnest money deposit does make your offer more attractive! Just be sure that you can live without that amount in your bank account during the time it takes to go to settlement.

      Good luck on your next offer!

      Dawn

  68. I negotiated a price with the seller and they verbally agreed, I send escrow of $3000 and signed the offer – now the buyer is dragging their feet and not signing the contract but my escrow check has been cashed – I didn’t think the escrow would be cashed until the contract was signed.

    • Hi Nancy,

      I’m going to assume that you’re the buyer and that you meant to say “the * seller* is dragging their feet”. In my neck of the woods, being the DC/MD/VA metropolitan area, the buyer’s earnest money isn’t cashed until there is a ratified contract — meaning, everyone has signed off on all of the terms. So in my opinion, if the seller hasn’t signed a written contract and is not returning your earnest money to you, then they seem to be in the wrong. Are there real estate agents involved? If the seller has an agent, I would have your agent call them and follow up. If there is no response, call the seller’s agent’s manager or broker. If they don’t respond, or there are no agents, talk to a real estate lawyer.

      Good luck!

      Dawn

  69. I found this article to be very informative, but do have a question. I purchased a foreclosed home for cash back in March 2012. I gave my realtor a $500 deposit. After closing on this home my realtor still had my original check in my file. Can she legally now cash this check? It has been 8 months since closing on the house.

    • Typically, an earnest money deposit is held in escrow until you go to settlement, and then it is credited to you to use towards your closing costs or down payment. So if she didn’t cash it, did you get it back on the settlement statement? If yes, then the amount probably went towards her commission and you should remind her to cash it since you need to balance your checking account. If it did not get credited back to you on your settlement statement, call the settlement company and ask to speak to their attorney to fix the situation.

      Good luck!

      Dawn

  70. I am just wondering about something. I just recently closed on a house and moved in. I was not at the signing because I work out of state. My mother was there on my behalf. The only people at the signing was my mother, my real estate agent, and a traveling closer. The original closer from title company was in the office two doors down that handled the contract all the way through. No mention of earnest money ever came up. This was a short sale and they rewrote the contract a day before the first closing because they realized the amount payed for the first note totally off and wanted to short sale the second note. No amount or form was ever discussed during this whole process.

    On their end is where the delays came from at all times. No communication with my real estate agent was ever made. They finally finished the contract and settled on a date. I flew home for the first signing and they postponed it to rewrite the contract. Stated it was unfortunate that I did this when I work 5000 miles away. So now that all are said and done, docs signed down payment transferred and moved in they are asking for earnest money. Why should I send them money when I own the house now and they are the ones who dropped the ball and went through with the sale and signing without checking for earnest money in Escrow.? To many people not doing their job should not be a burden to me. That’s their mistake I would think. Do I owe them anything because that’s the money that would come to me anyways now that I closed and any delays came from them not me. All my paperwork and finances were in order from day one. So the question is can they come after me on this earnest money thing and what difference would it make because the deal is done and I own the home and down payment is done.

    That’s it so far. Title company wants earnest money when they didn’t show up at signing and never checked or stated what, where or when this money should be collected. They went through and wrote the contract so they are the ones who missed it. Never stated how much or ever brought up Earnest money at all until 4 days deal was done and moved into house. Shady title company and unprofessional.

    Thanks
    New home owner

    • Hi Stephen,

      It sounds like a crazy mess! If I were you, I’d consult with a real estate lawyer in your jurisdiction to figure it out. Typically, earnest money is deposited into escrow right after the contract is signed. With a short sale, depending on how your contract is written, the EMD could be cashed when the bank delivers approval. It’s held and credited back to you at the time of settlement. If you were credited that money on your settlement statement, and they never took the funds from your account, it sounds like you would owe them that money. However, if you want to pursue damages, you would definitely need a lawyer and make the proper filings against the closing company and/or selling bank. You always want to be sure to cover your assets with the required paperwork so that you don’t get in trouble. Good luck!

      Dawn

  71. Hello Dawn,
    I found a home that I wanted to purchase and signed a SA and put in EDM, contingent upon an inspection and water/sewage testing. The inspection report come back with a few minor repairs that the seller absolutely would not correct, they weren’t huge expenses so I agreed to soak up the cost of the repairs that were required by our lender.
    The seller finally agreed to grant us access to address the repairs and when we went into the house 2 of the bedrooms were full of water. I called my real estate agent to inform her and sent her pictures. She called the broker, who in turn called the seller who, who claims to have no knowledge of past water leaks. They aren’t from the roof, it’s surface water that is seeping into the foundation and through the walls. We informed the broker that we were not paying to fix the water damage and if the seller did not want to correct the issue we were going to walk away from the house. The seller agreed to fix the damage, however when the contractors were working at the house, I stopped to see how things were going and was told that they were only repairing the cosmetic damages, that they claim have been repaired several times in the past, but the whole back of the house needed to be rebuilt. The structure of the house had been so severely damaged by years of water seepage and the way the home was defectively built. In addition to replacing the 2 back bedrooms, extensive excavation work, drain fields and diversion ditches needed to be done. The seller said that she would “consider” fixing the issue properly, but so far we have not heard a definite yes/no from her in over 2 weeks. I told my agent that I wanted to back out of the deal, quite simply I believe the issue should have been listed on the property disclosure and that the new found problem greatly affects the value of the home and it barely appraised for the asking price.
    Now the seller believes that she is entitled to keep my EDM, but I feel I have lost enough money on this deal, the cost of appraisal, water and sewage test, the home inspection (who reported that the walls and structure of the home, foundation and drainage were all in good condition, I’m also looking into recovering the inspection cost through the company with the claim that their inspector didn’t do his job properly)

    While I am glad this was all discovered prior to closing, Though the expenses I have paid out to purchase this property are not huge by most standards, as a single parent it’s not something I am easily going to recoup from. Any thoughts or ideas of what I should do?

    Thanks for your time!
    Amanda

    • Hi Amanda,

      I’m sorry that you’re going through all of this! The silver lining is that you discovered this prior to closing on the house. The money invested for your inspections and appraisal pale in comparison to the amount of money you would have had to pay to fix all the damage. I’m not sure which jurisdiction you’re in, which makes all the difference because all contracts are written differently. Are you currently protected by any contingencies? I would contact a real estate lawyer to determine the proper procedure in which to void the contract and get your earnest money deposit back. It seems like the seller didn’t disclose a material fact of past water damage, which may be the key to getting your EMD back and maybe damages…but you want to make sure that you go through the correct process! Good luck!

      Dawn

  72. i put an offer on a forclosure fannie mae homepath. i also put 1500 as an ernist deposit that the title company is holding i had asked my lender in many occasions how much i would need to close and he always told me down payment only which was over 5 grand FHA.. and just 2 weeks before closing he showed me the conditions one of them was showing 2500 more in my bank account as liquid assets so i told him i couldnt come up with that . i asked him to let me out of my contract its been 4 days and he still has not gave me my termination of contract . am i entitled to recieve my deposit back .?? and what should be the explanation on the termination of contract so the seller can see it was because of something that was out of my hands and i wasnt just walking away.. and should i maybe contact the listing agent directly .. i almost forgot to mention the lenders wife is the realtor so there both tag teaming me and pressuring me to not terminate the contract

  73. I put a bid in on the Hubzu.com website on a house by clicking the “own it now” button. They “accepted” the offer (they being the web site) and I returned the signed buyers agreement along with all the necessary documents including an earnest money check for 5% as requested. I have signed everything two days ago but still haven’t heard back that the seller has signed the agreement. This bothers me because there is an unusual exclusion in this buyers agreement that “the seller reserves the right to review backup bids and accept one over mine. They already have my earnest money check in the form of a cashiers check (as requested) at the title company of their choice. Why even put an “own it now” button on the auction web site if your not going to honor the traditional terms of a buyers agreement? Why even tell me my bid was “accepted”?!?! How many bidders are kept in limbo on deals like these and how long am I going to have to wait before I find out I either have the house or am refunded my earnest money? Also, I am a cash buyer, so I really don’t understand what the hold up is here… Any help is appreciated.

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  75. I put $500 in escrow with a title company of my realtors chose. She put $5000 in the contract. The reason I don’t like her is because she is careless like that. Anyway. This was a short sale and I signed this contract in October 16, 2012. It expired 90 days later and went over the 120 days. I asked to renew but it was never done so I moved on found a place not listed by an agent so now the seller and my ex relator are mad at me. Hey they should have got it right. Am I entitled to my deposit back from the title company? The title company said they have to sign off, why. The contract is expired because of them not me.

  76. Hi Dawn,
    Would you please help me to see if I will be reliable for anything at all of the situation that I am in right now?
    We are in escrow and ready to close on the house that we put a $4600 EMD in.
    Our settlement date as stated in the contract was 05/07/13. Financing Contingency as of 04/30/13.
    We have not signed to remove the Financing Contingency yet as of today (05/11/13).
    My loan was ready to close on the date of settlement except for one condition of the proof of my current home sales HUD.
    My buyer won’t be able to close until 05/10/13.
    I asked for an extension to 05/10/13 and got granted by the sellers.
    Now come 05/10/13, I found out that my buyer’s lender have some more conditions need to clear before closing so they asked to extend to 05/17/13.
    I turned around and asked my sellers to give me until 05/17/13 and they refused and only agreed to until 04/15/13.
    I agreed to that with the hope that my buyer will be closing by then.
    I found out that the listing agent has relisted the house as ACTIVE even though the 05/15/13 extension has been approved.
    1. First question – is this allowed? I am confused because this is going against what I thought the laws are. Can you help me to understand this? What action should I take?
    2. Second question – if come 05/15/13, my buyer still cannot close then, I will request for another (3rd) extension, and if worst case the sellers refused to extend, what can I do? I already plan to offer to pay them penalty – but worst case that they don’t care and just want to be difficult. What can I do about my EMD?

    I am so confused and worried now. We really want the house and willing to get it. It’s just that my sales and purchase was at the same time and it’s kinda causing the mess that I am in right now. I just need some lights shed into me so I know what are the right actions to take to make all parties happy and get the deals closed.

    Thank you in advance for your advises.

    • Hi Thuy,

      Sorry to hear about your circumstance! What stress you must be dealing with. I’m not sure which jurisdiction you are in. You really should consult a real estate attorney to tell you what the laws are and what your options are. Within my 3 jurisdictions, the laws are different. One says that if you do not make settlement for any reason, the buyer is in default and the earnest money deposit is at risk. Another says that if you aren’t approved for financing by the settlement date (and you are still under the protection of the financing contingency), and the seller refuses to extend the date, then the contract is void and you’d get your deposit back.

      If you are so close to settlement, it would be foolish for the seller not to extend the settlement, unless they have a back up offer that is significantly more than your contract price and their carrying costs. The agent shouldn’t have re-listed the property on the MLS, but there could be a statement in the MLS listing that it is “pending release” which means that it’s currently under contract and that it just hasn’t officially died yet, but that it’s heading in that direction. The seller is probably scared that everything will fall apart, and wants to get under contract ASAP.

      I would say to the seller, as nice as possible…since you want them to extend your settlement date, should you need another extension, that you will agree to pay their carrying costs for the delay in settlement, but that you’d like to extend settlement and that you did not give them the option to keep marketing it.

      Good luck! Hope everything works out for the best.

      Dawn

      • Thank you Dawn. I am in Virginia. I already got approved for financing and everything but one of my funding condition is that I need to have my sales’ final Hud-1. And my buyer is currently getting his clear to close status. That is the only thing holding us up. I will definitely reach out to the sellers and let them know that we are willing to pay penalty to get the extension. Hopefully they are okay. Thanks again for your help.

    • Hi Robert,

      It depends on the circumstances. Yes, a seller’s broker could be entitled to keep a portion of the EMD as a payment for services rendered in case of a default by the buyer. You should consult with a real estate attorney in your jurisdiction, as contracts vary from county to county and state to state. Good luck!

      Dawn

  77. If a buyer requests a loan amount higher than what was agreed to in the purchase contract, and cannot get the loan they prefer because the appraisal was not high enough, can they get their money back? I was told by the lender that the loan could be approved, with the current appraisal, had they applied for the loan amount that was agreed upon in the contract. Btw – appraisal contingency was removed from the purchase contract.

    • Hi Susan,

      I’m going to assume that you don’t mean that your loan amount was actually higher than the original contract price of the house, which is not allowed. What I think you mean is that you went under contract on a home and that it did not appraise for the original contract price. The lender will only give you a loan up to a certain percentage of the home’s value. So if the appraised value came back lower than your contract price, that means that the lender would have to reduce the amount of the loan. In that circumstance, I would ask the seller to reduce the price of the home to match the appraised value. They do not have to agree to that, and then your option would be to either void the contract or to come up with extra down payment to make up the difference (if you and the seller could not negotiate some other agreement). However, if you had removed the appraisal contingency, you are essentially telling the seller that you don’t care what the home appraises for; you’ll buy it anyways. A lot of times, the financing contingency covers the appraisal…afterall, a lender won’t give you a loan for more than the home is worth. I think that if you haven’t removed the financing contingency, and you get a rejection letter from your original lender, then you may be able to void the contract and get your earnest money deposit back. You’ll need to consult with a real estate attorney in your jurisdiction to accurately advise you on the contract law and give you your options, because I’m not a lawyer and contracts and customs vary from state-to-state, and even county-to-county.

      Good luck!

      Dawn

  78. I gave KB homes a thousand dollars and start a contract for my house i was hoping to get. My credit kept me from being able to qualify for the home i wanted. The contract fell through and KB HOME promised that i would get my money back. its been over 4 months now and I still havent recieved a refund. They said 4-6 weeks. I called the sales person and the regional sales person. I keep getting the Runaround. WHAT SHOULD I DO? PLEASE HELP!!!!

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  81. Dawn,
    I was under contract to purchase a bank owned property in Maryland. The property had a large addition that still needed finish work on the interior. A week before closing we discovered that the addition was build without a permit & outside of the permissible building limits. The contract states that the seller has 30 days to remedy any title defects, if the seller is unable to remedy, the buyer can terminate the contract . We immediately informed the sellers agent of our intent to terminate the contract (per the title defect section of the contract), then issued an addendum at the end of the 30 day period terminating the contract & requested the EMD refund. The seller agent responded after several days stating that the addendum needs to include the deposit amount. We sent a new termination addendum including the deposit amount ( although the amount is clearly stated in the purchase & sales agreement- sounded like a delay tactic to me). It has been several weeks & my agent has been contacting the sellers agent every other day. He keeps replying that he has not heard anything back yet & does not want to receive any more calls. when asked if he has contacted the seller, he does not answer. he will not return the $22k EMD until directed by the seller. Is there any time period that the seller has to respond & return the deposit? I will be speaking to a real estate attorney, but concerned about the cost as well, since we are already out almost $1000 for inspections, title search, etc.

    • Hi DD,

      Sorry that you are going through this! I would read the bank addendum very closely, as each bank has their own and may contain different terms. It might have the instructions for the dispersement of the EMD. It may be hard to deal with a third party bank, since it may have to go through many channels to get approved. If the listing agent is unresponsive, try calling their manager. If that doesn’t help, you would need to get a lawyer involved. Good luck!

      Dawn

      Sent from my iPhone

  82. Hi Dawn –

    I am in Northern VA and am doing a FSBO on a condo in Reston. The buyer has $5k in escrow as EMD. The buyers original lender backed out because of the % of non-owners occupying the building. They have been struggling to get financing but claim they have secured financing with a local bank. It is now 2 weeks from settlement and we don’t even have the appraisal ordered. I am not at all confident the alternative lender will do what they need to do in time for an on-schedule settlement. If they miss the date am I entitled to the escrow money or at least able to void the contract and walk away? The market is quite hot right now so im confident I could get another offer, but i also feel like the buyer owes me something for wasting 2 months of my time. Thanks for the advice.

    Chad

    • Hi Chad,

      It sounds like the buyer is still covered under their financing contingency, so their EMD would not belong to you. However, if their financing contingency deadline has passed and you want the buyer to remove it, then you can give them official notice. If, by the end of the notice period, they do not remove the contingency, then the contract automatically voids and the buyers get their EMD back. You could re-list it, but must get the release signed. If you decide to let it ride and the buyer doesn’t make settlement, but they have removed the financing contingency, then they are on the hook for the EMD. Consult a realtor and a lawyer next time, for contract advice and the proper procedures and forms. Good luck!

      Dawn

      Sent from my iPhone

  83. Hello Dawn,

    I am in DC and want to put a $230,000 offer on a condo. My agent suggests that I give a $5,000 EMD, which I think is too high. A friend of mine put down a $1,000 EMD on a place that was over $300,000 and won the offer. I don’t know whether to trust my agent’s suggestion. I feel like a $2,500 EMD is better, because it is enough to show that I am serious. What are your thoughts? Thanks in advance or your help.

    • Hi Alicia,

      Do what you are comfortable with, but do think about what your agent is suggesting. Realtors write many contracts a year and know what works and what doesn’t. The current market is competitive, so you want to make your offer as attractive to the seller as possible. There is no set amount for an EMD, but the higher it is, the better it looks to the seller. I actually recommend close to 3% of the offer price if you can swing it. And, for the past 2 listings I’ve had, the seller has countered back with a higher amount. There you have it! Good luck!

      Dawn

  84. Hello Dawn,

    I’m a buyer in VA and signed a contract on 06/25/2013 with the deposit amount of $5K. I went through all the process such as design center, security installation. Sellers lender approved my mortgage for $475K, however my lender didn’t give me an approval due to insufficient funds for closing. After 28 days, I had to cancel my contract due to weak financial condition. When I request seller to return my 5K deposit, he is talking about negotiations but not ready to return my deposit. What should I do now?

    • When you talk about a design center, it leads me to believe you are under contract with a builder/new construction. Is it a spec home or a development? If it’s a builder, they usually have their own version of the contract, which typically has different language that the Regional Contract. It may be that at this point, your earnest money deposit may not be refundable. Re-read your contract, and talk to a real estate lawyer. Good luck!

      • You are correct. I have signed a contract with a new builder. They mentioned in the contract that I have only 3 days to blackout. The contract has not even ratified. Is that deposit held by builder or escrow? Is there any way, I could get my deposit. Thank you very much for your quick turnaround.

      • I’m sorry, but I can’t answer your question because I’m unfamiliar with your builder’s contract. If I were you, I’d ask a real estate attorney. Good luck!

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  86. I’ve been under contract on a home for 4 months. The original contract was contingent upon FHA (203K) financing. We extended the contract 2 times. And, in the amendment we put that we would deposit additional, non-refundable Earnest Money. The contract extension has not expired yet. However, we have to terminate the contract because the appraisal on the property said the home is a tear down and our lender will not finance. We were approved and everything for financing, but the lender will not take the house.

    My question is re: the EMD’s. I understand we have to pay the seller the non-refundable deposits that we signed on the amendment. However, is the seller entitled to the original EMD that was on the original contract? My agent is saying since we extended- the original contract financing was cancelled and the extensions only dealt with the contract deadline- not our financing.

    I am confused bc the termination is based on the appraisal, not our financing. Shouldn’t I get my initial EMD back?

    Thanks for any guidance. I am in Texas but I think this is a normal occurrence for any state.

  87. Hi there!
    I am hoping that you could help. We put an offer on a piece of vacant land. It also included an addendum that gave us 30 days due diligence to rescind. During the back and forth negotiating price, the seller put in several handwritten changes to the PA as well as the vacant land addendum. As buyers, we never initialed the changes- one of which included a change from 30 day due diligence to 15 days. My husband had signed the PA in its entirety EXCEPT for the “Bottom Line” – where it has BUYER ACKNOWLEDGMENT OF ACCEPTANCE (“Buyer by signing below acknowledges receipt of Seller’s signed acceptance of agreement or shall constitute a final acceptance of Seller’s counteroffer) and the vacant land addendum in its entirety BEFORE the seller made those changes. BUT – we both bottom lined the PA on MARCH 6- even though we NEVER initialed ANY handwritten changes. On the addendum, I added my signature to the bottom part after Seller had snuck in her change to 15 days. Mind you – the copies that we were sent via email for us to sign were practically illegible – and we were not informed of this change – but there were three stamps on this addendum for initials. Neither me or my husband or the seller signed on the stamps. As I said before – you couldn’t even tell what she had changed. I actually thought that those were for my initials on each of the lines that my husband had first signed – but when my real estate agent told me to sign – he just had me sign the bottom only.

    Fast forward to us now deciding to rescind our offer – and we are working under the asuption that we have until April 4th – and it is 3/25 that we let the seller know – that based on the soil survey( and some discussion with some builders (that we would not be purchasing the property). She will not release the EMD – and wanted it all for herself due to her 15 day change. Also – she did offer up to split the $3K – but I don’t feel that she should keep any.

    She has since sold the property (can she do that while EMD is being disputed?) We would like to resolve w/o having to pay arbitration/mediation fee of $500 – but if we have to – we will move forward. The PA also contained a clause two paragraphs above the bottom line that stated that any handwritten changes by seller shall constitute a counter offer and that those changes shall require acceptance by the buyer by initialing EACH AND EVERY CHANGE, failing which this offer is null and void and buyer’s earnest money shall be returned. SO — what trumps what — we NEVER initialed any changes – some of the changes didn’t even have the required “stamps” to indicate that we needed to acknowledge. The changes that she did make to the addendum did have stamps – but you could not read what the change was. And it was never brought to our attention by our agent – nor did their agent let us know in writing that the change had occurred. Hope this makes sense. Is it worth it to pursue? Thanks for your thoughts.

    THANKS!

  88. I am currently selling my home to a couple. I asked for 87000 but they put in paper work 94000 beacause they said I was going to pay closing cots. In all actuality they wanted a larger loan to pay 4000 for closing cost and 3000 for realtor. The appraisal came in at 87000 which is what I was asking for. Now they want to back out because they cant get the loan for 94000. I feel like they are still obligted to buy since I am only asking 87000. Can I push through with contract because they can get the loan for what I asked for I would just hae to pay the closing costs like it states? They keep saying they don’t have the money for the realtor…but I don’t see that as my problem.

  89. I am the seller of a home in Iowa. It was on an as-is basis. The seller has backed out for no reason. When I am asking for the realtor to refund give me the earnest money deposit he says that since the buyer is not responding to the call he has to wait for 1 year before the EMD can be released to me. If it was other way around the buyer can get it back in 30 days. Is it possible to have different wait time periods for which the EMD can be held

  90. My realtor asked for $5000 earnest money and $3000 for all permits. The city denied the sell and now my realtor says he can’t return my money for a month!??? He says he has to cancel all the bids he took before he can return my money. I believe he spent my money to finance his own personal project. Please help

  91. I cancelled within the 15 day period on an as-is contract, and the seller won’t sign off on the cancellation and return of escrow form. Just now I discovered the home has been relisted. Is this legal in Florida? Is the seller allowed to go under another contract when she didn’t sign off to cancel the current one?

    • Hi Randpm,

      I recommend asking a real estate attorney in your jurisdiction (perhaps your settlement company has one), since contracts vary state-to-state and even county-to-county. In the DC/MD/VA area, we don’t even have a 15-day right to void, but we have contingency periods. I know that if you have the right to void within your contingency window, then the earnest money deposit should be returned to you after both buyer and seller sign the notice to void and the release documents. I’ve seen agents re-list a property before it has been officially released, when they put in language in the listing along the lines of “Pending Release”. So essentially, the seller is seeking a back-up contract, but technically, a property can’t be under contract with more than 1 buyer at a time. Good luck!

      On Sat, Feb 22, 2014 at 10:51 PM, DC Metropolitan Real Estate wrote:

      >

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