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Who Gets Earnest Money When Buyer Backs Out?


When a buyer submits an offer on a home, they usually place earnest money into an escrow account with a real estate broker or title company. This deposit demonstrates good faith and gives the seller peace of mind to move forward.

How Earnest Money is Protected

Once a house goes under contract, buyers typically have several contingencies that make it possible to withdraw. These contingencies can include financing, inspections, and defects. These can be very important and if they aren’t met, it can mean a lot of wasted time for both sides.

The best way to protect your earnest money deposit is to ensure that all of the contingencies you’ve set up are enforceable in the contract. This will help ensure that if the deal falls through, you have a strong chance of getting it back. For more info https://www.sellmyhousefasthoustontx.com/we-buy-houses-grapevine-tx/


If you’re a seller, you can put contingencies in your contract that give you the opportunity to keep your earnest money if your buyer breaks the terms of the contract. This will help you keep the momentum of your sale and get your property off the market sooner, especially in competitive markets.

Let’s say you’re selling a home and your buyer, Charlie, decides that she does not want to purchase the home. In this case, you can keep the earnest money that she has put into escrow.

In this situation, you have the option of putting your money into another home that you might be more interested in buying. This is a risk you can take, but it’s one that is worth taking.

You can also add a “time is of the essence” clause to your contract that states that the purchase agreement is void if you don’t close within a certain period of time. This will prevent you from losing the earnest money if your buyer gets cold feet or makes assumptions outside of the contract that don’t materialize before the deadline.

Aside from these contingencies, you can also choose to have some of your earnest money refunded at the due diligence and appraisal dates. This will give you a chance to get your property off the market before the contract expires, which is helpful in a competitive real estate market.


The biggest issue with earnest money is that there are a number of things that can go wrong during the closing process that can result in a buyer backing out of a deal without their deposit being returned. This can include a change in heart, problems with the financing, or a serious defect found during the inspection that isn’t covered under your contract.

In most cases, these contingencies are enforceable in the contract and will result in your earnest money being returned. You can also have parts of your earnest money refunded at each deadline so that you still receive a portion of it if your buyer pulls out during the financing deadline.

If you’re a buyer, you should always ask your real estate agent to review the contract before signing it so that you know what your options are should something unexpected happen. This will help you to make an informed decision about whether you should buy a home or not.


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