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The Importance of Being Earnest: All About Earnest Money Deposits

Earnest Money Deposits for Sellers

Most sellers like to see an offer accompanied by an earnest money deposit.

It may seem strange to slip some cash to the seller along with your offer to buy a home.

But including an earnest money deposit with your offer is practically mandatory these days, and serves to protect both parties in a real estate transaction.

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Buyer Protection

Including earnest money shows that you’re a serious contender and helps your offer get the attention it deserves.

While competing offers aren’t as common as they were a few years ago, your offer still needs to command a seller’s attention. A solid contract supplemented with a sizable earnest money deposit shows a seller that you have both the resources and the desire to seal the deal. Including a considerable deposit could even help your offer be selected over others.

Keep in mind that as a buyer, you want to gain as many concessions as possible from the seller. The best way to start any relationship is with a showing of good will. An ample deposit serves this purpose, and places buyers in a great position to negotiate more favorable contract terms.

Seller Protection

Buyers stand to lose their earnest money if they jump ship on a real estate transaction. Earnest money gives sellers monetary assurance that a buyer won’t back out of the contract without valid cause. Most contracts do have contingencies that allow buyers to walk away from a home (for example, if the house can’t pass inspection or the buyer can’t qualify for financing). But if a buyer decides not to go through with the sale for a reason that is not written into the contract, earnest money is generally forfeited to the seller.

How much is standard?

The amount of earnest money will vary according to your area, seller and price of home you are considering. The best way to determine local customs is to talk to an experienced real estate agent. Some agents suggest including a percentage of the sales price, while others recommend a flat fee ranging from $500-$2,000.

Most agents agree that buyers should include an amount that will be taken seriously, but not so much that a buyer’s finances are at risk. It’s rare that a buyer should have to forfeit their earnest money deposit, but it can happen.

Protect your earnest money with a good contract

The terms of the contract decide where earnest money lands if the contract is broken. Let’s say that a buyer’s contract has made the final purchase contingent on the results of an inspection. If the inspection reveals problems that are unacceptable to the buyer, the buyer can walk away from the home with his earnest money in tow. If the buyer backs out just due to a change of heart, the earnest money will be transferred to the seller.

A good contract with proper contingencies is essential in protecting your earnest money deposit. Make sure to work with a reputable, experienced real estate agent when crafting your offer.

How earnest money is used

Earnest money is paid by check at the time of your offer. Each state has very strict rules on how this deposit is managed until the transaction closes. Generally, these funds are held in an escrow account managed by the buyer’s real estate agent. The deposit is then applied to the sale of the property at closing.

Earnest money funds are usually applied to a loan’s closing costs or to the down payment. Since VA loans don’t require a down payment and closing costs are normally paid by the seller, many VA loan recipients end up getting their earnest money back.

Photo courtesy quaziefoto


Posted by Jessi Hall
| jhall@veteransunited.com


168 Comments

  1. Jeff
    Posted June 20, 2012 at 12:56 pm | Permalink

    I will not recommend a large earnest money deposit to my clients. No matter the contract provisions, just as a buyer can opt out for any reason during due diligence, the seller can dispute the earnest money for no reason. That dispute automatically ties up the earnest money for months. The buyers offer is either strong in itself or it isn’t.

    • Posted June 20, 2012 at 1:07 pm | Permalink

      Thanks for sharing, Jeff. Always good to hear feedback from our readers. Do your buyers typically include a smaller earnest money deposit, or none at all?

    • Mike Smith
      Posted January 12, 2014 at 12:16 pm | Permalink

      I couldn’t agree with Jeff more. If your offer is fair and agreeable to the seller, you should be prequalified prior to the realtor taking any offers to her client. There is no need for earnest money deposits. I just submitted a written offer with 1$ as an earnest money deposit, only because the realtor suggested that I had to offer something. So in as long as the seller isn’t hiding anything that will come up during my due diligence (home inspection, pest inspection, tax assessment, etc). The deal should go through as planned as far as I am concerned. Not to say earnest money isn’t a good idea in a competitive market, but I think we are all still waiting for the markets to properly rebound, I am in a buyers market where I am looking and have been the only person to look at her property this year, and if she passes on my 1$ earnest money, she can wait another year without anyone looking at her property. I am an honest person, and I wont do business with someone who isn’t, and earnest money seems to me at least, to be a form of monetary trust or leverage to extort people. Either way, I am not interested.

  2. Robert Rodrigues
    Posted May 18, 2013 at 2:09 pm | Permalink

    During the buyers inspection, the A/C is not functioning. The inspector determines that the A/C is too small, i.e. 3 ton rather than 4 ton. The seller repairs the A/C and the A/C functions and cools the house. Can the buyer demands that the A/C be replaced with a 4 ton A/C or he will not close. What if seller refuses to change the A/C? Can the seller cancel the contract and retain the earnest money?

    • Posted May 20, 2013 at 8:52 am | Permalink

      Hi Robert – Thanks for the question. The buyer can demand anything he/she wants. But it’s always the seller’s right to refuse. As to the return of the earnest money, check your contract. If the contract was made contingent on the A/C being replaced, earnest money should go back to the buyer. If the contract was contingent on repair, the buyer is probably not entitled to a return of earnest money. Check with a real estate attorney should you need additional advice. Thanks again!

  3. Jim
    Posted June 28, 2013 at 6:13 am | Permalink

    Her is situation, I am seller, people liked house gave $1000 to escrow upon inspection with 14 days to get out, inspection went quick and buyer gave me list and requested these items to be fixed and I agreed all within 14 days upon this I began fixing and told agent of items I had fixed and was waiting on window people and all was good and agent said great, two days later I get a request of buyer wanting out of contract after requesting items and me the seller having fixed 90% so far all withing the 14 days of inspection time period. I now have refused to release buyer and ask for $1000 deposit plus $850 in repairs not counting windows. Agent says they get money back I say no because they requested and I have fixed upon agreeing from request of buyers, who wins ?

    • Posted July 1, 2013 at 6:45 am | Permalink

      Hi Jim – Thanks for reaching out. This is a tricky situation, and is based on a few factors: Why are the buyers requesting to be freed from the contract? Did you break one of the conditions of the contract? Have they simply had a “change of heart”? What does your contract say about return of the earnest money? If your real estate agent isn’t able to advocate for your interests, hire a real estate attorney.

  4. Heath
    Posted July 21, 2013 at 9:37 am | Permalink

    My wife and I are the buyers and I have question about the originally agreed upon price compared to the appraisal value when using a VA home loan. Let’s say that we and the sellers agree upon $165K for a house but the appraisal value comes in at $160K. Now the VA loan will only approve the loan amount for the $160K so that means either the seller would have to come down to a ‘new agreed price’ of $160K, or my wife and I would have the to pay the $5K difference between the original agreed price ($165K) and the appraised value ($160K) at closing. But lets say neither party can come to a new agreement: the sellers don’t want to come down on the price and my wife and I don’t want to pay the full $5K difference. What happens to our earnest money? Is this considered a ‘change of heart.’

    • Posted July 22, 2013 at 8:24 am | Permalink

      Hi Heath – Thanks for reaching out. This is a question best fielded by your agent and/or real estate attorney. But generally speaking, if the home doesn’t appraise for the loan amount and the sellers refuse to negotiate, the earnest money goes back to the buyer. Best of luck to you!

      • nadine
        Posted February 26, 2014 at 10:19 am | Permalink

        I guess I must not understand how all this works. Don’t most appraisals come in lower than the agreed upon sale price? In the situation above, if the sales price was already agreed upon…wouldn’t the buyer expect to increase the down payment? I am currently the seller and the buyer agreed to pay a high price due to the fact it is a one of a kind home. The independent appraisal has not come in yet. I would like an earnest deposit due to the fact that I am turning down bookings for the summer. It is currently a vacation rental. I don’t think it is right to have to give him his money back if he doesn’t qualify for the amount of financing he would like.

        • nadine
          Posted February 26, 2014 at 10:24 am | Permalink

          To add to this….we are not using any realtors. My home was not even on the market. I don’t know what is an appropriate time to give a buyer to obtain financing. He said he was pre-approved but I can’t just keep turning away bookings in case something happens.

        • Samantha Reeves
          Posted February 27, 2014 at 8:10 am | Permalink

          Nadine,
          This is a tough one and will be somewhat dependent on your contract. Who drafted the contract? There should be provisions for earnest money and dates for contingencies. Once the financing contingency is up you have a right to pull the contract if the buyer is unable to provide you with a statement from the lender.
          - Samantha

  5. Jill J
    Posted July 22, 2013 at 2:26 am | Permalink

    Thank you for helping me to sort out this very complex issue. I am the Seller. My home has been under contract since 6/14/13. The closing date is 7/23/13. The Buyer put down $10,000 earnest money. The Buyer had pre-approval for financing at the time the house went under contract. On 6/21/13, the Buyer’s loan originating officer informs my agent (ie, Seller’s Agent)agent that the underwriter has approved the Buyer’s financing. On 7/17/13, I was notified by my agent and the Buyer’s loan originating officer that the Buyer does not qualify for financing – there has been a “glitch”. According the Buyer’s loan originating officer “The reason the Buyer is unable to qualify presently but was pre-approved is due to an error with a W-2 that was filed with the IRS mistakenly using the name of another company the buyer owns. We used this W-2 income for qualifying purposes. When we received the W-2 and tax transcripts back from the IRS the W-2 was mistakenly printed with the wrong companies name on it but with the correct companies tax ID number. That business does not qualify to be used for the purpose of using income to obtain a mortgage at this time, therefore the reason we need the other businesses 2012 return to be filed. The buyer, through no fault of his own, is going to be required to file a 2012 business tax return with the IRS prior to his being able to qualify to purchase the home he has under contract to close 7/23/13. I have been told it takes about 30 days to receive the transcript back from the IRS which we are required to have and review before we can close the mortgage.” In my opinion, if the Buyer does not secure financing by closing date as scheduled on 7/23/13, it seems to me he (the Buyer) would be in breach of contract and forfeit his earnest money to me the Seller. Am I correct to think this? I am being told by my agent that the disposition of the earnest money will go to arbitration. Why is arbitration necessary? It seems clear to me that the Buyer is in breach of contract. Also, another interesting fact….the Buyer’s agent and my agent (Seller’s agent) are both agents at the same real estate agency and have the same Managing Broker, hence a dual agency situation. I never signed a dual agency agreement as one was never presented to me. Also, the Buyer’s lender is THE in house lender at the same real estate agency, where the Buyer’s agent and my agent (Seller’s agent) work. Sounds incestual! I’m concerned about who is looking out for my interests as there appears to be a big conflict of interest. Also, the earnest money is is being held by the Managing Broker (vs an independent third party) who manages both the Buyer’s Agent and Seller’s agent. I appreciate your expertise and suggestions. Thank you.

    • Posted July 23, 2013 at 9:29 am | Permalink

      Hi Jill – Thanks so much for reaching out. Unfortunately, this question is a legal matter that falls outside my range of expertise, so you’re best to talk with a real estate attorney at this point. The return of earnest money isn’t always a “cut and dry”, “black and white” issue, and you have a complex situation on your hands. Talk to an attorney, and best of luck to you!

  6. joe b
    Posted August 11, 2013 at 11:19 pm | Permalink

    I entered into a contract signed 7/23/13 as a seller.
    I am now in escrow with a scheduled closing on 8/13.my question is the buyer has yet to deposit he 6k earnest money within 3 days specified in the contract.do i have the legal right to cancel escrow.escrow officer told me without a deposit there is no contract.is this true .please advise.thank you

    • Posted August 14, 2013 at 7:37 am | Permalink

      Hi Joe – Thanks for reaching out. Your best bet in this situation is to consult with your real estate agent and a real estate attorney. Generally, if the buyer doesn’t abide by the terms of the contract, the contract is void. But again, please consult with your agent and an attorney for the best advice.

  7. Ruth Gillihan
    Posted August 15, 2013 at 9:02 am | Permalink

    Selling my house myself, have offer that I accepted. Should I have a Lawyer draw up contract for earnest money or can I draw one up myself ?

    • Posted August 20, 2013 at 1:58 pm | Permalink

      Hi Ruth – It’s my opinion that you should ALWAYS either use a real estate attorney or transaction agent (real estate agent) draw up a contract. Best to you!

  8. john
    Posted August 19, 2013 at 11:24 pm | Permalink

    was buying hud home in pa,made offer gave $1000 deposit,home inspection +termite also in contract within 15 days,had home inspection failed mold and water all over finished basement,host of other problems health hazzard inspector told me we had to leave, that bad, broker had my deposit sent it to hud who said they do no repairs my problem. they just keep doing what ever they want,please help i wrote the two letters so far with nothing

    • Posted August 21, 2013 at 6:52 am | Permalink

      Hi John – Thanks for reaching out. HUD homes are generally sold “as is”, meaning they won’t do any repairs. Check your contract and talk with your agent, but you might not be entitled to a return of your earnest money in this case.

    • john
      Posted September 9, 2013 at 10:36 am | Permalink

      the agent is working on both sides,so that is out .

  9. Lisa Walker
    Posted August 29, 2013 at 1:45 pm | Permalink

    we signed a contract to purchase a home in TN. The inability to get financing was the only out. However, after waiting several weeks, we found out the house had a possible Tenncare lien from a previous owner (not the current owner who paid cash and was given a clean title). We were asked to sign an extension on the real estate contract…we debated but we were assured by all parties that the lien would not come through and that all would be fine. However, a week before the end of the extension, a $39000 lien was discovered. We also discovered that our insurance company won’t insure this type of home (mobile home with add ons). So our bank said no loan and sent a letter to the real estate company. At the time we discovered we couldn’t get the house insured we put earnest money on another home to avoid more wasted time. Now the TN agent is trying to claim we committed fraud and will not return our earnest money and is threatening to sue for their commissions. Is this legal or are they just stalling and trying to make our lives miserable just because they didn’t get the sale?

    • Posted September 3, 2013 at 9:30 am | Permalink

      Hi Lisa – Thanks for reaching out. This is a pretty complex issue, and you should definitely contact a real estate attorney to advocate for your interests. Best of luck to you, and thanks again for reaching out.

  10. Sue
    Posted August 30, 2013 at 9:53 am | Permalink

    John, You did not say if your offer was made
    as an owner/occupant or investor. Ir you are
    an owner/occupant and your HUD contract was contingent upon inspections and your inspector discovered issues, especially environmental such as mold,lead paint, etc. you are entitled to a refund of your earnest money. While HUD properties are sold “AS IS” they do encourage home inspections and must disclose any obvious or reported defects. And while they will not make any repairs to the property they will agree to a repair allowance in most cases. They may reduce the price of the property to compensate for needed repairs or if you were applying for a new FHA mortgage, they can escrow the funds to make the necessary repairs. Please check with your real estate agent to see if your situation would qualify you for any of these scenarios. Also, HUD does require that the earnest money be sent to them along with the signed contracts but they will refund the deposit if you are within the terms of your contract. If you made the offer as an
    investor (non owner/occupant) HUD will return the earnest money in rare circumstances. It does
    take a while and you have to direct your correspondence to the proper authority along with any written documentation to support your
    request. Again, your agent or an attorney
    should be able to help you with that.

    • john
      Posted September 30, 2013 at 1:48 pm | Permalink

      he was a duel agent

  11. Debbie
    Posted September 15, 2013 at 4:15 pm | Permalink

    This is a complex situation. We had our vacation home listed at the lake of the Ozarks. We bought a larger house there so on 8/18, we had our realtor reduce the price of our house by $10k to try for a quick sale before winter approached. A neighbor there informed me his son-in-law’s father was interested in the house but hoped to get it cheaper and I negotiated a reduced commission with our realtor to close the deal so it was workable for all of us. My husband met the buyer on 8/23 and he loved the house. rHe gave my husband a personal check made payable to my husband for $5k. He wanted to make sure we didn’t sell the house out from under him since we had just reduced our price. Our realtor did a contract on 8/24. They were given 10 days to do inspections, but didn’t have it done until 9/5. The septic inspection was 9/6. Turns out the septic tank we had installed 2 yrs ago was only 500 gal and state requirements are 1000 gal. We were unaware of this and our neighbors had the same tank installed on the same day and we both depended upon the installer to get the permits. He had told us our houses were small and we had limited space so 500 was all we needed. We had no clue it wasn’t up to code. So I contacted Camden County and found out he didn’t do a permit for our house or the neighbors. We contacted the installer and he met us after Camden County contacted him directly telling him he had to make this right because our buyers were talking about backing out due to the smaller septic tank and it wasn’t up to code. We are getting new 1000 gal concrete tank installed next week (week of 9/16). Closing was supposed to be 9/24 (buyer had said he wanted it as soon as possible). The title company said their financing was contingent upon the septic inspection. Buyer has now decided to back out without giving us a list of things they expect fixed outside of the septic tank. We would NEVER have had something done on our house that wasn’t up to code. Are we entitled to the earnest money? The buyer submitted a term notice 9/13 to our agent. The title company said legally we shouldn’t have to return the $ because he didn’t give it to a title company or real estate company. He cost us 3 valuable weekends of potential buyers during peak summer time and labor day weekend too when there were a lot of people at the lake. He has now told our agent he will settle for giving us $2k out of the $5k to end the contract, but if we didn’t return $3k, he was turning this over to his lawyer. Any advise is appreciated. Thank you!

    • Posted September 17, 2013 at 2:10 pm | Permalink

      Hi Debbie – You’re certainly right – this IS a complex situation! You should definitely contact a local real estate attorney regarding the earnest money. The attorney needs to review your contract and determine who is entitled to a return of the earnest money. Best of luck to you!

  12. J. Howard
    Posted September 20, 2013 at 12:06 pm | Permalink

    Cash offer on a house, includes 2% earnest per contract w/i 72-hours. Potential purchaser backs out for change of mind about 2-3 weeks later after inspection, etc. are ok. Earnest check never made it to the escrow account, realtor knew about this and did not press. How is seller made whole on the earnest, realtor negligence or buyers?

    • Posted September 25, 2013 at 7:42 am | Permalink

      Hi there – Thanks for contacting us. When you say “earnest check never made it to the escrow account,” what exactly happened there? Was an earnest deposit made? Who was the check made out to, and what happened to it? Let me know the details and I’ll advise you as best I can! Thanks!

  13. Vivian
    Posted October 4, 2013 at 8:20 pm | Permalink

    My husband and I sent a check for $20,000 to the Title Co. for a condo we are interested in purchasing. The check has been cashed. We have found out through 2 appraisals by the same person that the condo is valued at $45,000 less than what we contracted for. The real estate agent wants to get a third opinion (third appraisal). If we decide to walk away from this deal will we get out $20,000 back because the bank won’t finance the condo for the contracted amount?

    • Samantha Reeves
      Posted October 7, 2013 at 8:11 am | Permalink

      Hi Vivian,
      I think this is a question for your agent, title company and loan officer, but based on the info provided it sounds like you should get your money back. The caveat here is its gonna be dependent on your contract language, so talk with your agent about this.
      Samantha

  14. james
    Posted October 15, 2013 at 9:19 pm | Permalink

    We made a big mistake. We looked at a home for sale by owner and gave him a $2,000 check. We did not sign a contract because we said we would go to our banker and Title company and bring back paper work for the seller and us to sign. The next day my wife said she would not buy the house. Now the seller will not give us back our 2k. Without a contract to buy the home isn’t it our money. He cashed the check and refuses to even give us back a cent. He said it is for wasting his time. The total situation lasted 24 hrs. We told him 24 hours after we gave him the check that we would not buy the house. What do we do.

    • Samantha Reeves
      Posted October 16, 2013 at 5:48 pm | Permalink

      Hi James,
      I would talk with an attorney or law enforcement in your area and give them all the details. Every state has different laws but they should be able to direct you to any resources or options for solving the situation.
      I wish you the best!
      Samantha

  15. A
    Posted October 21, 2013 at 3:25 pm | Permalink

    We have been trying to sell our house for almost three months now. Put house on the market end of July and two weeks later got two offers. The day after one offer pulled out, and we took the second offer and had contract. Inspection showed ac wasn’t working and heat wasn’t working. We were asked for it to be fixed. Ac unit was working, and heat works and we had it notated by an ac guy that it was not original ac unit but both heat and ac worked. Then the buyers needed more time on their financing contingency, so we asked that we be resolved of any repairs to unit for if they wanted to extend, we still paid an ac guy to come out and document everything for them. We just wanted to make sure we were covered. Last minute they signed it so they could extend. Then they missed the first closing date, and asked for more time and extended to a new close date.
    As they were going through a new bank for their financing, we made the small repairs, and moved the rest of our stuff out to storage, and the second close date came and went with their bank still stating they had a conditional approval. They requested a close date of two more weeks later, we have them one week. They still couldn’t close. We went back up on the market the day after. We are still waiting for earnest money to us, and we are under the impression that they are not signing the release for it? What exactly will happen? I was told by a different realtor that it will go to the state?

    • Samantha Reeves
      Posted October 21, 2013 at 3:41 pm | Permalink

      Hello,
      It’s really going to depend on the laws in your area. I would suggest talking with your agent or an attorney in your area to see what legal recourse or options you have available.
      Samantha

  16. Bill
    Posted October 21, 2013 at 7:21 pm | Permalink

    I have a cash buyer and in the offer says will provide source of funds within 3 days and it has been 6 days and they wanted closing in two weeks and now is not happy with the inspection which is minor and wont negotiate are they in jeporady of the legality with the contract ? the seeller has packed, spent money for moving etc.. to move in two weeks to help with the need of the buyer and now they are backing out is there legal advise ?

    • Samantha Reeves
      Posted October 22, 2013 at 9:15 am | Permalink

      Hi Bill,
      I can’t really give legal advice, so I’d suggest you consult with an attorney in your area as laws can differ from one place to the next.
      Samantha

  17. Katrina Ingram
    Posted October 28, 2013 at 6:19 pm | Permalink

    Hi, OUr Home Inspection Yielded Very Few things That Needed Repair. We Asked The Seller Two Fix The Roof Which They Agreed To. The Inspection Was About Four Weeks Ago. We Didn’t Ask Them To fix The cracked Bedroom Doorframe But Now We Want To Ask Them To Do It. Is It Too Late Now?

    • Samantha Reeves
      Posted October 29, 2013 at 7:49 am | Permalink

      Hi Katrina,
      No, I don’t think it’s too late to ask if you haven’t closed on your loan yet. The likelihood of them fixing will be dependent on how motivated they are to sell the home and the cost.
      Good luck!
      Samantha

  18. shnay
    Posted November 3, 2013 at 11:04 am | Permalink

    I put an offer on a house in which I had an accepted offer. The sellers agent did not deposit my earnest money check until about two and half weeks after the original acceptance. At the time of the offer I had a preapproval from a bank for 100% conventional financing. I have since been denied for that mortgage product. I have also called two other area banks and have been told that I would also not be eligible for their 100% conventional financing for the same reason as the first. The sellers agent is refusing to return my earnest stating that I can get financing elsewhere. Would this be a valid reason as to not returning my earnest money?

    • Samantha Reeves
      Posted November 4, 2013 at 8:15 am | Permalink

      Hello,
      It really depends on the contract language. If you are working with a real estate agent, have them review the contract with you to see what clauses were included regarding earnest money. If you aren’t working with an agent, you may want to consider a consultation with an attorney so that they can review the contract and explain the legal ramifications.
      -Samantha

  19. Sue
    Posted November 12, 2013 at 8:46 pm | Permalink

    I signed a contract on a home. Gave $1,000 ernest money down. Now, I am stressing really bad about it..to the point i have not slept, eaten right, breathing, & trouble focusing at work. I have gone to the Dr. & received prescription for nerve meds. I have been on them before. The last date for closing is 11/15/13. I texted the realtor early on 11/6/13. She repeatedly text me saying she hadn’t heard back from the seller. On 11/9/13 she said she would fax the release on the 12th if I didn’t want the house. I said…so, we do this, it’s all free & clear? & ernest money??? she didn’t respond to the free & clear part but text she believed they would give back the money. She was supposed to fax the release today & didn’t…I tried texting her but haven’t heard from her.

    • Samantha Reeves
      Posted November 13, 2013 at 2:51 pm | Permalink

      Hi Sue,
      I’m sorry to hear you are having difficulty with closing. If you want to ensure you receive your earnest money back, you can ask for it in writing. I’m a little confused as to why the sale isn’t going through though – you should read your contract regarding the earnest money provisions to see if your specific situation is covered. Also call your agent and ask her to explain it to you until you fully understand.
      I wish you the best!
      Samantha

  20. Justin D
    Posted November 17, 2013 at 11:37 am | Permalink

    Hi. I am selling my property and recieved deposit contingent on inspections. The inspection revealed radon in the water. I aggreed to have licensed vender install mitigation system. The buyer aggreed to terms. They then requested in writting that they want the water retrsted after system installed. We aggreed and signed contract that I would have licenced vender install system and I would have water retested. They signed and aggreed. They are now requesting that a seperate vender and lab test water as they believe me and installer and lab may conspire to falsify test. I have offered that they can watch instilation and personally mail results to lab for testing. They are still insisting on seperate company take and test water. I have no issues with their request exept that the time delay this will cause will result in me loosing putchase on my new home and all expenses for inspections etc on new home. So they signed and aggreed to having me install system and me to have water retested. Now they are jepordizing both sales due to an unjustify parinoia. Also I did offer a credit to them for mitigation system and retest of water which they refused. Can I demand to close as I met their demands and if they refuse, can I keep their deposit?

    • Samantha Reeves
      Posted November 18, 2013 at 9:22 am | Permalink

      Hi Justin,
      What a tough situation. It’s really going to depend on interpretation of the contract and your local laws. I would suggest first talking with your agent and then if necessary having a consultation with an attorney so that you are aware of your full rights. I wish you the best of luck, I hope it all goes through for you.
      -Samantha

  21. JR
    Posted November 19, 2013 at 1:23 pm | Permalink

    we’re selling a town house in Texas and our real estate agent has repeatedly submitted net sheets that include or suggest its a VA loan however when we read the buyers contract and offer it reads conventional. We have repeatedly asked our agent to submit a proper net sheet for serious consideration.At this point we don’t know if the buyer is serious or if our agent is not doing his job. Also his commissions are always changing we signed /agreed on 5 percent and he keeps putting 6 percent. Are we obligated to stay with this agent/brokeR?

    • Samantha Reeves
      Posted November 19, 2013 at 2:58 pm | Permalink

      Hi JR,
      That sounds really confusing and frustrating. You need to take a look at your agent contract and see what options you have regarding choosing another agent and if needed consult with an attorney.
      -Samantha

  22. Michelle
    Posted November 20, 2013 at 7:08 pm | Permalink

    I am the seller and the buyer is approved for VA. We are 15 days into escrow and they want to cancel. I am being told that I am not entitled to their earnest money deposit because it is inside of the 17 day contingency (loan, appraisal and inspection). They want to cancel because the wife has had a “change of heart”. They have loan approval and a valid appraisal, bt the inspection hasn’t been done. Do I have any recourse? To make matters worse, escrow never received their deposit. If I am entitled to their deposit, how do I recover? Thanks

    • Samantha Reeves
      Posted November 21, 2013 at 7:57 am | Permalink

      Hi Michelle,
      I’d suggest consulting with your agent and an attorney. They should be able to identify the terms of the contract that apply to this particular situation and inform you of any legal action you can take.
      Sorry to hear you are having difficulties.
      -Samantha

  23. Steven E
    Posted December 5, 2013 at 3:11 am | Permalink

    I signed a purchase agreement with the builder back in July 2013 to build a home. Builder decides they “Just can’t build the house for that price.” Now I’m tick off and we want our earnest money back, what shall we do?

    • Samantha Reeves
      Posted December 5, 2013 at 4:05 pm | Permalink

      Hi Steven,
      I’d suggest talking with your agent about the terms of the contract. Did you request certain upgrades that would increase the price or are they just going back on the contract. If you don’t have an agent, you may consider consulting with an attorney in your area. Let me know if I can help further.
      -Samantha

      • Steven E
        Posted December 5, 2013 at 8:52 pm | Permalink

        Did not have an agent. The sales manager gave me a sob story about how the the cost of the building supplies went up and he just flat out told me he couldn’t build the home for what we signed for. I also notice they didn’t sign the purchase agreement.

        • Samantha Reeves
          Posted December 6, 2013 at 8:49 am | Permalink

          Hi Steven,
          I think your best bet then is to sit down with an attorney or agent in your area to see what they can suggest with regards to remedies. As contract law varies from state to state, it’s difficult for me to give you a specific answer, but I can say that your situation definitely appears to be one that should receive a second look by a professional.
          Samantha

  24. Sharon
    Posted December 10, 2013 at 5:32 pm | Permalink

    My husband and I are about to close on a double wide home set up in a park. Because our bank does not do loans on “leased land’ they sent us to a brokerage. We have been approved for the loan and meet all of the criteria. The closing is this Friday and we must bring with us a certified check made out to the sellers fathers “estate’ since the owner passed, for the total down payment, plus pay taxes etc. at the closing. However the loan company will not be actually issuing the seller the rest of his monies for aprox. 7-10 days. Since this is the case the seller will not let us physically move into the home until he receives his check from the loan company. Is this legal? If we are signing papers for the purchase and handing him monies and now have taken a legal loan on this property is it not now rightfully ours at the closing signing? As we have appointments made for appliances to be delivered, carpets cleaned etc….I am moving from out of state and my entire house is packed. Doesn’t he have to give us the keys and let us move in? He says he has his sister and lawyer to also consider in this matter. As it is we will be moving the weekend before Christmas and I am exhausted and devastated that I might not be able to put up a Christmas tree….

    • Samantha Reeves
      Posted December 11, 2013 at 8:56 am | Permalink

      Hi Sharon,
      It’s really dependent on how the contract is worded. Did you work with an agent? If so, ask them if there is any language in the contract that covers this situation. If you aren’t represented by an agent, you might try to do a conference call with an attorney in the state where the home is located so find out what legal rights you have in this situation. I can understand the desire to get in before Christmas, best of luck!
      -Samantha

  25. Chris
    Posted December 10, 2013 at 7:58 pm | Permalink

    I gave earnest money on a house to my realtor 15 days ago and it still hasnt been deposited i would like to keep my account balanced and up todate, but keep getting the run around on when it will be deposited. Is there some time limit that they must deposit it by in the state of missouri.

    • Samantha Reeves
      Posted December 11, 2013 at 8:59 am | Permalink

      Chris,
      Typically the broker is to deposit earnest money funds into an escrow account within 10 banking days. Try calling to talk to your realtor’s boss (if he/she has one) as you deserve a clear explanation of the situation so that it’s fully understood by all parties.
      -Samantha

  26. Anne
    Posted December 12, 2013 at 1:48 am | Permalink

    Hi!!! Quick question. Does the due diligence period include weekends and holidays? Or is it only business days? Ours was supposed to end on Tuesday when the buyer (a cash paying investor) changed his offer to a lower price. We countered halfway but when I talked to my agent’s assistant she said that they had counted the days wrong and that our due diligence period actually ends the dAy we close which is crazy !! Anyway we are supposed to close on Monday 12/16 (our contract was binding on 11/26 the Tuesday before thanksgiving) but now that we were told this we aren’t sure if we should even move tomorrow since we are still in limbo. The buyer is not answering to our counter offer (it’s been 3 days since we countered) and we are totally stressed because if the due diligence is until Monday, they can pretty much back out whenever they want. I read that the due diligence includes weekends but I’m not sure since we were told otherwise by our agent’s assistant. I also re-read the contract and it says nothing about business days it just says 14 days. The crazy thing is that not counting weekends and thanksgiving day, it really is 14 business days since binding and it literally ends on our closing date. Is that even normal? Sorry I’m freaking out because we just had gun shots tonight down the street and I’m willing to just take their offer now to get out of here ASAP but since they are not responding to our counter offer I’m nervous that they might back out. I’ve been packing for 2 weeks and we are renting a truck to move because it’s sunny tomorrow and raining all weekend. But I’m scared that we are jumping the gun since we haven’t heard. Still, at the same time we have no option since they want us out by Monday/closing. So stressful!

    • Samantha Reeves
      Posted December 12, 2013 at 8:33 am | Permalink

      Hi Anne,
      I don’t have a copy of the contract in front of me, and I’m not sure what the contract laws in your state define as “days” but the plain language reading would be 14 calendar days. If they meant business days you’d think that would’ve been included. But, there could be contract laws or language in the contract that says otherwise, so I would consult with you agent (not just their assistant). If it is causing you this much concern I think you have every right to get a straight answer from all parties.
      -Samantha

  27. Evan
    Posted December 13, 2013 at 10:37 am | Permalink

    Hi. Quick question. Does ‘Earnest Money Deposit” have the same meaning as a down payment and, thus, the two terms are used interchangeably? Or, are they two separate matters?

    • Samantha Reeves
      Posted December 13, 2013 at 11:29 am | Permalink

      Hi Evan,
      No, earnest money and down payment are separate items. Earnest money is a dollar amount you place in escrow during the contract process to show the buyer you are serious. A pretty average amount would be $500 – $2,000. That money can then either be given back to you at closing or put towards the closing costs.
      A down payment is paid at closing and is typically a sum equal to 5% ore more of the purchase price.
      Let me know if you’ve got additional questions!
      -Samantha

  28. Sharon
    Posted December 19, 2013 at 9:21 pm | Permalink

    After our seller had the home inspection, We agreed on a contingency that we were to secure and show written proof of a town permit for work we had done in our basement. It also said that if an egress window was required we would pay for it to be installed. We got the permit closed ( no egress window was required) and now the buyer is demanding we install one. If we refuse and he backs out, should we be entitled to the earnest money? ($15k). Your thoughts on this would be greatly appreciated!

    • Samantha Reeves
      Posted December 20, 2013 at 10:22 am | Permalink

      Hi Sharon,
      Without seeing your entire contract it’s difficult to say, and state laws may vary slightly on this. But, what I’d suggest you do if you haven’t already is request whether the window installation is required by the lender in order to close the loan or if it’s just something the buyer is attempting to tag on. I think that will likely be a pretty important factor here. Also chat with your agent, they will be able to guide you through the contract as a whole and let you know what provisions are included for keeping the earnest money. And don’t forget you always have the option of consulting with an attorney. I hope this helps. Best of luck Sharon! – Samantha

  29. Huma
    Posted December 20, 2013 at 4:05 pm | Permalink

    About a month ago we signed a new to be built home buying contract. We saw the model home and liked it and visioned our home will be similar. We paid 25000 earnest money. Soon afterwards we realized that because of our particular lot, we will not be getting the views of the back yard and pool from the main window of our master bedroom which is very important to us as we liked this view in the model home. After we realized this we asked for moving the main window to face the yard and pool area but the builder refuses to do that as they are not custom builders. They do not have a different lot for us either. We wanted our earnest money back but they won’t do that. We are going for a legal help. Do we have a case?

    • Samantha Reeves
      Posted December 22, 2013 at 4:51 pm | Permalink

      Hi Huma,
      I can’t really say whether you have a legal case as I am not sure which state you are in and I can’t give you legal advice. That being said – moving a window in the scheme of building an entire home really doesn’t seem like that big of a deal to me and I’m not sure why they would be causing you such a ruckus over this. Definitely talk with an attorney and with your real estate agent because I would think something this simple could be worked out. Best of luck. -Samantha

  30. Michele
    Posted December 20, 2013 at 8:18 pm | Permalink

    I was going to purchase a home with VA financing. One of the conditions of the loan was that the seller and I agreed to the split of property and we both were to sign an addendum stating we were satisfied with the survey results. My agent consistently stated a section of the land was to be included in the purchase and I quesioned it many times (in front of a variety of people as well) as it was the only clear area of the property and I have a horse that I need to house on the land. The results of the survey showed that the land was not divided as the agent had represented – leaving me no room for my horse, but rather an orchard full of trees. As such, and due to the fact that a condition of my loan (as required by the VA underwriter) was that both the seller and I were to sign a statement indicating we were OK with the survey. Obviously, I wasn’t so I signed a cancellation and sent it over to the buyers agent. He refused to sign it. Then, since a condition of the loan wasn’t met (the signed addendum), the bank refused to finance the loan and a letter of denial was issued by the bank. That was then sent to the buyer, yet he still refuses to release my earnest money. So, we now have two conditions of the loan not being met – one with the survey, the other with the refusal of financing. The contract specifically states that my purchasing the home is contingent upon receiving VA financing – which isn’t going to happen – and again, the bank has issued a formal letter of denial which. The seller is refusing to return my money. My agent is just sitting back stating we can do nothing more than check in every once in awhile. We are into week 2 of this. Apparently the buyers has contacted an attorney to explore his options. A couple question please – is it not the Real Estate Agent’s responsibility to ensure that the property she states is included in the sale is actually what is included in the survey results (I was the one to physically go to the property and find the survey pegs, to then realize the property had been split the wrong way). Second question – is it not her responsiblity to follow up on getting this in front of the Board/Commission of Real Estate for review? It is my understanding that when there is a dispute such as this, it should immediately go for a formal review, rather than having to wait for him to decide if he wants to take legal action (that would be a civil action outside of the Commission’s review). And finally, in your opinion, shouldn’t he return my earnest money? Thank you in advance for your guidance!

    • Michele
      Posted December 20, 2013 at 8:20 pm | Permalink

      Wow – please forgive all the typos. I should have read my question before hitting send.

    • Samantha Reeves
      Posted December 22, 2013 at 4:55 pm | Permalink

      Hi Michelle,
      You should defiantly do two things: consult with an attorney and consult with another real estate agent or your agents boss (if applicable). The attorney should tell you what legal recourse you have available and the second agent can give you a clear idea of the state boards requirements for a dispute. Since these can vary some by state it’s best to consult with someone licensed in your state.
      I’m sorry to hear about your situation and I do hope it can get worked out for you.
      -Samantha

  31. Candice
    Posted December 21, 2013 at 9:26 am | Permalink

    Hi. Recently I put an offer on a house. Midway through the inspection, the inspector announces the water will not turn in. The seller’s agent arrives and concludes there is a leak in the main which brings water to the house. The next day, my agent informs me that the leak involves the ‘city’ side and the city will send a technician to resolve the issue. The next evening, my agent calls to say that there was no water on the day of inspection because the seller, in the six months he has owned the house and did updates, never transferred water into his name, previous owners had racked up a bill, and city turned water off.How can a kitchen and bath be redone without someone turning on a faucet?? My contract clearly states that seller must have utilities on prior to inspection and if not, contract is null and void. Am I able to secure my earnest deposit? Thanks

    • Samantha Reeves
      Posted December 22, 2013 at 5:05 pm | Permalink

      Hi Candice,
      It sounds like you should have an out to get your deposit back if they failed to meet a specific provision of the contract. I think the main question would be this though – do you still want the house or do you want to move on? If you still want the home you may want to see about adding a provision to the contract that gives the seller X amount of time to resolve the utility issue and provide a clean water test. Otherwise, if you are ready to move on, talk with you agent about what next steps you need to take to cancel the contract.
      Good luck!
      Samantha

  32. Gary
    Posted January 2, 2014 at 6:16 pm | Permalink

    We paid the earnest money to builder to reserve the lot. The home would take 6-7 months to build. After a week we want to reconsider our decision since the schools in the area have wait lists and alternate school ratings are not good. As per our contract we will not get 2000$ (earnest) money back. We are good with that but will there be any other implementations (legal and financial) ? We have realtor who was supposed to get 3% from builder upon closing. Do we need to pay him?

    • Samantha Reeves
      Posted January 3, 2014 at 8:52 am | Permalink

      Hi Gary,
      That will be dependent on your contract with the builder and with the agent. Take a close look at the contract and see what language there is regarding these issues. If in doubt see about talking with an attorney.
      -Samantha

  33. Darlene
    Posted January 2, 2014 at 10:57 pm | Permalink

    We live in California and we had an offer on our home. We accepted the offer, the buyer put 3% down for earnest money to escrow which was released to us once the buyer signed off on the contingencies. The contract stated the earnest money was non-refundable once all contingencies were removed. Ten days later we received notification from our agent the buyer sent an e-mail to the escrow company requesting cancellation of the contract and requesting her earnest money to be returned she had changed her mind. We have signed the acceptance agreement for cancellation which the buyer hasn’t physically signed and we want to move forward with the next offer. The agent is telling us she can’t move forward with the back up offer until the buyer signs the cancellation even though she sent the e-mail for the request to the escrow company. Today we were informed she still wants the house. Since we are unsure she will follow through on the sale can we accept the back up offer which is a all cash offer.

    • Samantha Reeves
      Posted January 3, 2014 at 8:58 am | Permalink

      Hi Darlene,
      It appears there are a lot of variables here. With the history of the transaction I would suggest that you talk with your agent or an attorney about your options as they will be aware of your state’s specific laws dealing with contracting and the terms of your agreement.
      I wish you the best!
      Samantha

  34. Sean
    Posted January 4, 2014 at 6:52 am | Permalink

    You should mention that a seller has to agree to give you the money back. I am technically under contract for a home that failed inspection horribly, there was a contingency in there that said I could walk if the inspection was that bad. I tried walking, the sellers said that we had to provide a list of things they wanted us to fix, we did that. They refused to fix some of them. I told them again I wanted to walk away, it’s now almost a month later and they have not responded. The contract stipulates that all communication must happen within 24 hours, it’s been weeks. There’s no way I could get the mortgage with what was wrong with that house. There’s no way my cosigner would cosign for that house. After knowing what is wrong with it, I don’t want that house, but they aren’t allowing me out of the contract. Now I have to get a lawyer and do that hassle if they don’t sign the paper to let me out of contract.

  35. Diana
    Posted January 8, 2014 at 8:14 am | Permalink

    My husband and I made an offer on a For Sale by Owner house that was accepted by the seller (there were no agents involved). Seller went to attorney to get contract started and we delivered $5000 cashier’s check for earnest money which was also accepted. That night, seller received new offer from investor who plans to rent out the property. We met seller’s asking price but new offer is for $7000 over asking price. Can the sale be forced since all was done in good faith and now seller is just trying to get more money and void our verbal agreement?

    • Diana
      Posted January 8, 2014 at 9:10 am | Permalink

      This is in NC. Also, the attorney was preparing documents for us to sign today. Intent by both parties can definitely be shown.

    • Samantha Reeves
      Posted January 8, 2014 at 11:15 am | Permalink

      Hi Diana,
      This is a tough one. Contract law can vary from state to state so your best option would be to consult with your own attorney. My thought though is if there is not a signed contract you’ll have an uphill climb to argue for specific performance.
      -Samantha

  36. George
    Posted January 12, 2014 at 12:30 pm | Permalink

    Real Estate agent in the state of Florida has a customer asking to see properties which are agents listings and informs agent that they have a Realtor but they are unable to accompany customer that particular day. Can the agent show the properties as well as offer to send any new listings to the customer with the intent of sharing the commission with the other Realtor?

    • Samantha Reeves
      Posted January 13, 2014 at 8:04 am | Permalink

      Hi George,
      I’d suggest notifying the current agent of the situation and have them reach out to the listing agent so that they can get on the same page prior to the listing agent showing any homes.
      -Samantha

  37. SANDRA HUTZEL
    Posted January 12, 2014 at 6:56 pm | Permalink

    WE WERE PRE APPROVED 2 MONTHS AGO (TENNEESSEE) WE FOUND OUR HOME AND MADE OUR OFFER, THEY ACCEPTED AND WE PUT $500 EARNEST DOWN, WE WERE SUPPOSED TO CLOSE DEC 30TH,2013 AT 2PM, WELL WE DIDNT, WE HAD ALREADY PACKED AND MOVED HERE FROM TEXAS, AS CRAZY AS IT IS I HAPPEN TO RECIEVE AN EMAIL MONDAY MORNING THAT MY MORTGAGE BROKER HAD SENT TO MY LENDER STATING THAT THEY (THE LENDER) NEEDED TO RE EVALUATE TO DENIED STATUS OF MY LOAN, I THEN CALLED MY REALTOR AND STATED THAT IF WE IN FACT DID NOT CLOSE ON THE 30TH THAT WE NO LONGER WANTED TO PROCEED WITH THE PURCHASE, OUR CONTRACT EXPIRED AT 11:59 PM THE 30TH, WE HAVE REQUESTED AND DEMANDED OUR EARNEST MONEY BACK YET THEY HAVE STILL FAILED TO RELEASE US THOSE FUNDS. WHAT CAN I DO? THIS ALSO PUT ME IN A HARDSHIP FOR 2 WEEKS BECAUSE I WAS UNABLE TO OPERATE MY BUSINESS BECAUSE WE WERE LIVING AT THIS POINT OUT OF A SUIT CASE, NOT TO MENTION THE CLOSE TO $3000 I LOST DUE TO NOT BEING ABLE TO WORK. PLEASE ADVISE IF YOU CAN……SOMEONE?

    • Samantha Reeves
      Posted January 13, 2014 at 8:12 am | Permalink

      Hi Sandra,
      It sounds like you should talk with an attorney. If you are looking to receive damages an attorney can advise you on the merits of your case.
      -Samantha

  38. Sherrie
    Posted January 14, 2014 at 1:45 pm | Permalink

    My sister is buying a home. The home inspection was done and the seller is going to fix the problems. Now after talking to the load person she found out that the house is in a high flood zone. This was not told to her. Can, if she chooses, back out on the deal. The seller said that there was a previous paper that was from 2003 that said the house was not in a high risk flood zone but that is not the case now. She is un sure of what to do. The house is in Arizona.

    • Samantha Reeves
      Posted January 14, 2014 at 3:13 pm | Permalink

      Hi Sherrie,
      Your sister can back out of the contract. The question will be whether she paid earnest money and if so whether she’ll get it back. The answer to whether she’ll get it back will depend on how the contract is structured with regards to the earnest money. I’d suggest she talk with her agent about the contracts provisions and any opportunities to back out without loosing her deposit.
      -Samantha

  39. Clare
    Posted January 21, 2014 at 1:02 pm | Permalink

    Hi – Is it permissable to have escrow from one buyer still in negotiation (but coming to an end), and then enter into a contract with another buyer? Or does the first escrow have to be cleared?

    • Samantha Reeves
      Posted January 22, 2014 at 8:03 am | Permalink

      Hi Clare,
      I think it will be dependent on the contract. You should talk with your agent about what terms if any are included that deal with exiting the contract and terms thereof. Is the current buyer aware of your desire to not move forward?
      -Samantha

  40. Jim
    Posted January 24, 2014 at 2:53 pm | Permalink

    If you back out of a standard Florida Real Estate contract for sale after the 15 day property inspection right to cancel period what else besides the escrow funds is the buyer responsible for?

    • Samantha Reeves
      Posted January 26, 2014 at 1:44 pm | Permalink

      Hi Jim,
      As I focus more on national trends and the VA loan specifically, I can’t say I’m the expert on Florida Real Estate Law. I’d suggest talking with an attorney in Florida to get state specific legal advice.
      - Samantha

  41. Ronald Andrews
    Posted January 26, 2014 at 8:02 am | Permalink

    Decided i did not want to purchase a home in
    Florida. Willing to give up earnest money
    since that is only fair. How do i protect
    myself from further legal responsibility.

    • Samantha Reeves
      Posted January 26, 2014 at 1:45 pm | Permalink

      Hi Ronald,
      It’s really going to be dependent on your contract. Look it over and consult with an attorney. I am not a licensed FL attorney so I will defer to the experts.
      - Samantha

  42. Christine
    Posted January 27, 2014 at 11:58 am | Permalink

    Hi Samantha,

    We put down a 5k EM deposit on a home contingent upon inspection. Inspection is scheduled for a week from today, but in the meantime we have received the property disclosures sheet that lists both moisture issues in the basement and a lack of insulation in the walls. Once the inspection has been completed, can we cite these issues as a way to get refunded EM and back out of the deal? Or will we have to instead request that seller fixes the issues and credits us this $ amount towards closing?
    Thanks for your help!
    -Christine

    • Samantha Reeves
      Posted January 27, 2014 at 12:57 pm | Permalink

      Hi Christine,
      You should be able to cite those issues as a way to get out of the contract, but before spending the money on the inspection talk with your agent to see if the sellers would be willing to let you out early without the added cost, if you’re certain you don’t want to move forward.
      - Samantha

      • Christine
        Posted January 27, 2014 at 5:50 pm | Permalink

        Great, thanks so much Samantha!

  43. arvind chauhan
    Posted January 31, 2014 at 6:20 pm | Permalink

    i have agreement for buying a house and waived financing condition. recently i am terminated from the job, but i have pre approval of bank for finance. i afraid wehter i can pay home mortagage once deal is closed. pl.advisse
    can i get my deposit back on above contogencies . can party sue me as this is not my fault. pl.advise on above point

    • Samantha Reeves
      Posted February 1, 2014 at 12:57 pm | Permalink

      Hi Arvind,
      It sounds like you need to have a discussion with your real estate agent, if you have one. They should be able to communicate with the sellers and see what options are available for getting out of the contract. IF you don’t have an agent, I’d talk with an attorney who can advise you on the contract laws in your state.
      - Samantha

      • arvind chauhan
        Posted February 6, 2014 at 9:49 pm | Permalink

        hi, samantha,

        i discussed with my agent, he said that now no turn back, once agreement
        is done, you will lose your deposit and party may sue for the loss. you may pl. consult your atterney and reply me. i am laid off from the job after i signed the agreement and put to embarrassing position. pl. help me , thank you

  44. NJ
    Posted February 3, 2014 at 9:48 am | Permalink

    We are selling our church to another church thru a commercial realtor. They put down $2000 in earnest money. We have met all the requirements, inspections, etc. They are saying they are still raising funds for the 20%down payment the bank is requiring. If they do not end up raising the funds by the time of closing (one month from now), do we get to keep the earnest money if the contract falls through?

    • Samantha Reeves
      Posted February 3, 2014 at 10:11 am | Permalink

      Hi NJ,
      Commercial contracts are a little out of my wheelhouse. I’d suggest talking with the agent or an attorney about the language in the contract regarding earnest money. Some contracts will have a provision stating that the buyer gets earnest money back if they are denied financing. In this case it sounds like the bank is requiring the 20% down, so it may fall under that category, but without seeing your contract it’s difficult to say with certainty.
      Best of luck!
      Samantha

    • JMD
      Posted February 19, 2014 at 5:28 pm | Permalink

      If a contract has a liquidated damages provision, then the Seller can retain the earnest money and deposit if the buyer defaults. Without liquidated damages, the seller must prove actual damages in court in order to be compensated for buyer’s default.
      If there is a failure of contingency, on the other hand, meaning that buyer cancels the contract during the due diligence period or if the buyer does not obtain a loan commitment during the financing contingency period, then the earnest money and deposit are usually returned to buyer.

  45. Darryl
    Posted February 5, 2014 at 6:22 pm | Permalink

    Put in offer on a house and it was accepted. Made $1,000 deposit . I was pre approved for loan. After going through mortgage process the underwrite found an error on income tax return. Had to file an amended income tax return. After waiting for 12 weeks for IRS to get back to me for the amended return I got a letter from mortgage company saying I am not qualified for loan. Decided to cancel contract because of Mortgage Decline letter along with wait for IRS to finish amended return. Sent in cancelled contract form to my agent on January 22. Still no word as far as seller signing cancellation of contract. What is a reasonable amount of time to receive signed paper back along with deposit?

    • Samantha Reeves
      Posted February 5, 2014 at 7:32 pm | Permalink

      Hi Darryl,
      I think this is something you should follow up on every few days.
      - Samantha

  46. Deb
    Posted February 7, 2014 at 6:44 am | Permalink

    Hi, my husband put a deposit on a home of 1k for a home. We had a pre-approval letter to buy a home with the VA. He also had a letter with title 10 information from his department of personnel saying he has been active military for more than 90 days and that he is entitle to benefits. Atlanta regional office still declined him. The seller was frustrated and did not want to extend while we are trying to resolve the issue with the VA and basically said no more extension. Only 7 days was given which was not enough time. Now, the seller said he his entitle to our deposit because the closing did not go. How can he keep our deposit if he is not wanting to extend and we are still dealing with the VA. We had to even pay a VA inspector. Please help. We are desperate and nobody wants to help us.

    • Samantha Reeves
      Posted February 10, 2014 at 9:39 am | Permalink

      Hi Deb,
      This is tricky. Was the pre-approval contingent on the receipt of the certificate of eligibility? If so, you may have an argument that you are unable to obtain financing because a contingent wasn’t met.
      Another option you have is to talk with your loan officer about other loan products like FHA or USDA loans to see if you’d qualify for either of those and if so if you could move forward by switching.
      - Samantha

  47. Marcelo
    Posted February 8, 2014 at 2:51 pm | Permalink

    My wife and I are purchasing a home in California. We are selfe employed and had the pre approval letter for a loan. Placed an offer on the home and gave a 3k ernest deposit. Now that we have to close, we don’t qualify due to some business writ offs that cant be added back into the qualifying figures. for 2013 we made enough to quaify instead of using 2011 and 2012 taxes we can use 2012 and 2013. We either need to pay 5k to get an audited P&L report to get financing today but we can do our taxes in March that will save us the money.

    We got a loan deniel letter stating we dont quality for the loan and the seller wants to keep our deposit. since we don’t currently qualify for the loan are we entitled to our deposit. We did not back out of the sale because we changed our minds, we cant at this time and it’s not ideal for us to pay 5k for something that is going to cost us 800 next month.

    • Samantha Reeves
      Posted February 10, 2014 at 9:24 am | Permalink

      Hi Marcelo,
      Whether you receive your earnest money back will be dependent on the contingency clause in your contract. If it specifically addresses inability to obtain financing as a reason to receive your EM deposit back, then that would be pretty clear. My guess is yours doesn’t specifically state this or you likely wouldn’t be asking. Unfortunately when this situation isn’t specifically addressed you have to look to other terms in the contract and apply them to the situation. I’d suggest sitting down with your agent and going through the contract again to see what options you have available as it may be somewhat dependent on your state’s real estate laws.
      - Samantha

  48. Michelle
    Posted February 9, 2014 at 12:13 pm | Permalink

    Hi, I’m looking for advice on a situation. We put ernst money down on a home and had the standard financing clause. After several weeks we had issues with financing and the loan was declined. We tried through two different lenders and can’t get the loan to go through. The sellers are now threatening to keep our ernst money. The sellers built a home through a custom home builder and were outside of their grace period long before we came into the picture. They are at risk of losing upwards of 15k on that home. They also rented a pod (portable on demand storage) to move. Now our realtor is saying that we will probably be sued for the money they are losing on their new home and the money they spent on this pod, IN ADDITION to losing our ernst money. I don’t see how this is legal and I’m not sure what to do.

    • Samantha Reeves
      Posted February 10, 2014 at 9:20 am | Permalink

      Hi Michelle,
      If there is a financing contingency that states you receive your earnest money back within a certain period of time if you are unable to obtain financing then you should get it back if all portions of the contingency are met.
      I’d suggest consulting with an attorney. I don’t know the full situation here but the threat of legal action when you are unable to obtain financing seems over the top.
      - Samantha

  49. Shela Cristi
    Posted February 12, 2014 at 10:38 pm | Permalink

    If anyone could help me, what is the time frame before an earnest money gets forfeited? Say it’s already been 6 months past the contract signing. Thank you!

    • Samantha Reeves
      Posted February 13, 2014 at 8:50 am | Permalink

      Hi Shela,
      It really depends on the provisions for earnest money in your contract.
      - Samantha

  50. Alex
    Posted February 13, 2014 at 4:57 pm | Permalink

    Hello,

    Our realtor told us that we would receiving our earnest money funds due to the fact that we did not qualify for a loan. The sellers realtor is saying that they are just waiting to get a signature on a cancellation notice they sent to the seller. Its been over a month and I keep getting the same answer “we are waiting for the seller’s signature in order to cut a check” what is the process? Does the agent usually send the paperwork via email? certified mail? This is getting very frustrating. What if the seller never signs the cancellation notice?

    • Samantha Reeves
      Posted February 14, 2014 at 9:45 am | Permalink

      Hi Alex,
      It really depends on the individual agent as to what method they use to deliver the paperwork. A month seems out of the ordinary though unless the sellers are overseas, on a trip, etc.
      I would suggest starting to follow up once a day to see if you can push it along. At some point the broker or holder of the funds will have to decide where the money should go.
      Keep a log of all your follow-ups and the responses you receive.
      - Samantha

  51. Tom
    Posted February 17, 2014 at 7:14 am | Permalink

    Hello,

    Our bid of a HUD home was accepted on Feb 3rd and the offer was accepted by Feb 6th. Our inspection has been postponed several times while waiting for the utilities to be turned on, namely the water. When the contractor commissioned by the property management company went out to dewinterize the facility and turn on the water, they found that they were unable to do so due to frozen pipes in the home. Upon further research, we found that the home was vacated end of November but was not winterized until January 13, during which time we in Michigan experienced temperatures as low as -30 for about 2 weeks. The dewinterizing contractor sent a report to the property management company/HUD explaining the frozen water system. We now want to back out of the offer due to the now known damage to the water system and mismanagement of the property by HUD/property management company. Is this grounds to receive our full $1,000 Earnest Money Deposit back?

  52. Tina
    Posted February 26, 2014 at 6:59 pm | Permalink

    I’m trying to figure out my rights. I went into a lease agreement with option to buy at the end of the agreement. The landlord was in need of selling the home and I was in need of renting a home. Landlord drew up an agreement and I signed paying an extra $50 a month if I decide to buy. The landlord assured me the money would be returned if I decided not to buy…I would just have first option. It’s been 6 years and I’ve recently purchased another home and have ask the landlord for my money back since I didn’t buy. He has informed me that it’s not custom to refund the money. However, there is nothing in our contract stating I would forfeit the money. The contract simply states that $50 of monthly rent money will go toward the purchase of the home if leaser decides to buy. I’m totally confused…do I have rights since landlord verbally stated he would return money and did not put anywhere in the contract that I would lose this money. This was a leases with option to by agreement not a lease to purchase. Please help need advise.

    • Samantha Reeves
      Posted February 27, 2014 at 8:12 am | Permalink

      Hi Tina,
      It sounds like you need to consult with an attorney. Typically written agreements will trump verbal agreements and there are various other legal issues regarding this type of contract. – Samantha

  53. feeling stressful
    Posted February 27, 2014 at 7:21 pm | Permalink

    I had a large deposit into my bank prior th closing and the lender did not ask for a verifty where I received the monies. A month after the closing, now lender is asking me for the verification. What would happened if I couldn’t provide the proof ? Can the lender take my condo away?

    • Samantha Reeves
      Posted February 28, 2014 at 12:48 pm | Permalink

      Hello,
      If you can provide the documentation, it’s probably best to provide it. Regarding whether they can take your condo: if you’ve closed and the loan has funded you have more protection then if you were still in the loan process, but I’d still suggest providing the lender with any information you are able to obtain as it could have an impact on a future refinance or the servicing of your loan.
      - Samantha

  54. frustrated
    Posted March 2, 2014 at 9:20 pm | Permalink

    We are purchasing a home and have put down earnest money, paid for an inspection and paid for the appraisal. We just found out he house has termites with extensive damage. The seller admitted he knew this before inspections were done and just disclosed this to us and the realator. If he is not willing to pay and repair all the damage is he responsible to repay us the earnest money, and money we paid for inspection and appraisal since he lied in the contract?

    • Samantha Reeves
      Posted March 3, 2014 at 11:08 am | Permalink

      Hello,
      I’m sorry to hear about your situation, that is extremely frustrating! It sounds like you have a very good argument for getting back your earnest money. The other funds you would likely have to take legal action to obtain. I’d suggest talking with an attorney to see if you have a good legal argument for damages, etc.
      Best of luck!

  55. Jessey Lee
    Posted March 5, 2014 at 2:07 pm | Permalink

    Hi
    Can you please help?

    I am a seller, have a contract with buyer, buyer was supposed to pay $2000 earnest money

    Buyer has been delaying settlement for 3 months and finally said that they are backing off.

    We wanted to claim the earnest money to cover for our losses but the attorney said that buyer has never delivered earnest money to them and told us that we can’t recover anything.

    This is very unfair to us as we have suffered months of losses keeping the property vacant for the buyer.

    What can we do in this case?

    Thanks
    Jessey

    • Samantha Reeves
      Posted March 5, 2014 at 2:28 pm | Permalink

      Hi Jessey,
      That sounds very frustrating. I’d suggest consulting with an attorney who has no connection to the transaction and get their opinion. It may be that you would have to take legal recourse to recoup losses.
      - Samantha

  56. Renee
    Posted March 9, 2014 at 2:32 pm | Permalink

    Hello, we have entered into a contract on a home and were advised the seller was involved in a class action lawsuit. Both agents verbally lied to us concerning the nature of the lawsuit. Upon discovering the true nature of the lawsuit (construction defect) we were then sent a letter from the seller that she joined “just as a precaution and there was really nothing wrong with home.” We called the firm representing her and they basically idicated nothing wrong and both agents assured us the house was in tip top condition and inspector couldnt dind any major issues although they specicy they dont specialize in those areas. Anyway the seller knew we were antsy and dismissed herself from suit. We then get all the paperwork that she claims she never has knowledge of signing/receiving. It lists all the defects that she previously says she never had. Is this enough to let us walk and get our EMD back? Our agent is dragging her feet on responding to me now. We need answers and we are week and a half from closing. Need help! Thanks!

    • Renee
      Posted March 9, 2014 at 2:33 pm | Permalink

      Sorry for typos – sent from phone.

    • Samantha Reeves
      Posted March 10, 2014 at 9:54 am | Permalink

      Hi Renee,
      This sounds very frustrating. If the seller didn’t disclose known defects then I do believe you have a good argument for receiving your EMD back.
      - Samantha

  57. christine ross
    Posted March 19, 2014 at 10:44 am | Permalink

    I was looking at a manufactured home 6 months ago.someone bought it, but thenmoved out because of some water damage.it then went back up for sale.I gave them an offer, which they denied, but said put 500 for a deposit, if Im still interested in it..@ days later they sold it.. can they do that.I was gonna offer more, I just wanted to make sure the water problem was taken care of…

    • Samantha Reeves
      Posted March 20, 2014 at 9:27 am | Permalink

      Christine,
      Until you have a valid contract they don’t have any obligation – they can take any offer they want to.
      Have you already found a lender that will offer you a VA loan on a manufactured home? Sometimes it’s difficult to find a bank that will lend on that type of property so if you don’t have one lined up already and you’re interested in searching out other manufactured homes, I’d suggest talking with some lenders in your area to see who offers this type of loan.
      - Samantha

  58. Anthony
    Posted March 19, 2014 at 9:26 pm | Permalink

    Hi,
    We are in a situation that I’m sure you’ve had questions on, but would like some insight. We have our home for sale by owner. A buyer looked at it and immediately wanted to write a contract. We did so with no contingency on their house selling. The only stipulation was their financing being approved. The buyer gave me a lender letter and there was no condition on their home selling to buy our home. I collected $500 in earnest money. Fast forward – Inspections are done and buyer requested that several repairs be made. In good faith we started having the repairs completed immediately. The buyer’s deal fell through on their house and now they are trying to get out of the contract and want their earnest money back. They are saying the lender won’t approve them now due to their debt to income being to high. I told them that I would release them from the contract, however I would not refund the earnest money because I have email communication from them requesting I make these repairs and to provide receipts. I am out more than $500 with the repairs plus my home was off of the market for two weeks. Am I in the right to keep the earnest money since they asked for repairs to be made? Also, I am pretty certain they can afford two mortgages but would rather not have two. Thanks

    • Samantha Reeves
      Posted March 20, 2014 at 9:33 am | Permalink

      Hi Anthony,
      If your contract only had a financing contingency and there was no mention of the sale of the other home then it would seem reasonable for you to want to keep the earnest money. What it sounds like is they are trying to fall back on the financing contingency claiming that they can’t obtain financing due to the failure of their home to sell. Had the financing contingency expired? I think your expectation to keep the earnest money is reasonable, but just to be sure, I’d check with a local attorney and have them review your contract for state specific rules and regulations.
      - Samantha

  59. brittany
    Posted April 1, 2014 at 11:49 am | Permalink

    hello. we are the sellers in this situation. We accpeted a contract, had our home inspection, they listed what they wanted fixed, we agreed to fix it. After everyone agreeing, they are having buyers remorse and want to back out. do they lose their EM since we agreed to fix what they asked?
    thanks,

    • Samantha Reeves
      Posted April 3, 2014 at 12:03 pm | Permalink

      Brittany,
      Did you already pay to have the repairs done? If so, and you have everything in writing, you may be able to collect for the amount expended on fixing everything. Consult with your listing agent or an attorney as they can advise you in more detail on your specific situation.
      – Samantha

  60. Ronnie
    Posted April 1, 2014 at 3:13 pm | Permalink

    Here’s the issue. I am the buyer. I have put a contingency on my sale that the septic system is to be pumped and certified with in 17 days. On day 25 they stated that the system failed. The seller now wants me to pay half of the fix. Which comes out to about $2700 I have gave them deposit of $2000. My realitor is stating I need to do it or I don’t get my money back. How do I go about it. They never got the septic certified because it failed and it was out of the 17 days. Any help is welcome.

    • Samantha Reeves
      Posted April 3, 2014 at 12:01 pm | Permalink

      Hi Ronnie,
      It sounds like you have the option to back out if the contingency was not fulfilled or extended within the 17 days. But now that it’s been conducted and repairs are necessary, you are in a new situation. Did the contingency specifically state who would pay repairs if any were required? If it did, you should go by those terms. If it didn’t, and the lender requires that it be fixed, and you don’t want to pay for it, then you may still have the opportunity to use the lending contingency clause (assuming you’ve got one and it’s not expired). I’d listen to your agent’s advice as they are much more familiar with the situation, but if you are in doubt you can always contact an attorney to look over the contract and give you advice as well. – Samantha

  61. Dave
    Posted April 5, 2014 at 1:50 pm | Permalink

    What happens to the earnest money if the seller is denied financing by lender?

    See below:

    What does this mean?

    If Buyer cannot obtain Credit Approval, Buyer may give written notice to Seller within 14 days after the effective date of this contract and this contract will terminate and the earnest money will be refunded to Buyer. If Buyer does not give such notice within the time required, this contract will no longer be subject to Credit Approval. Time is of the essence for this paragraph and strict compliance with the time for performance is required.

    • Samantha Reeves
      Posted April 7, 2014 at 11:53 am | Permalink

      Hi Dave,
      The sale of the sellers property is not likely going to be contingent on them obtaining financing for another home. This could be included in the contract, but I doubt many buyers would agree to it.

      The last paragraph means that if the buyer is denied financing then they can receive their earnest money back, so long as the notice of denied financing is provided within 14 days after all parties sign the contract (effective date). If they do not provide this notice and find out later that they are denied financing they could possibly loose all or a portion of their earnest money.

      - Samantha

  62. Mark
    Posted April 8, 2014 at 7:12 pm | Permalink

    I made an offer and it was accepted. I put up $1000 earnest money against a cash sale. The Day before closing, the agent tells me that the seller’s ex, won’t sign and we wouldn’t be closing. At that time I had contractors ready to start with renovations and I had to cancel all and pay for some estimates. The closing never occurred on the specified date. Issues were worked out on the sellers end. I had the contract rewritten for a lesser amount to compensate my losses and extended the closing date for a week. Seller rejected my lesser offer on revised contract and now refuses to return my earnest money.
    I have since found another property and am due to close soon, but cannot until this issue is resolved. What are my options?

    • Samantha Reeves
      Posted April 9, 2014 at 1:01 pm | Permalink

      Mark,
      Why is your current closing being stalled by your receipt of the earnest money back from the first contract? I would think you have two options: drop the issue of the earnest money or move forward by taking action legally or otherwise. Your best bet is to consult with an attorney on options for return of the EM.
      - Samantha

  63. Mark
    Posted April 9, 2014 at 5:18 pm | Permalink

    Thanks for the response, it has not been stalled yet. The realtor informed me that it would. Now that I think of it, the realtor and the title company have a partnership. I remember signing a disclosure acknowledging that. It is possible that the realtor is just telling me that to get me to give it up. I can persue the EM and legal fees later if that is the case.

  64. mary
    Posted May 10, 2014 at 4:43 pm | Permalink

    If the purchase contract was written to the terms of the final offer and now the buyer wants to back out( title search has been done as well) because they don’t agree don’t to the contract, does the seller get to keep the earnest money?

    • Samantha Reeves
      Posted May 19, 2014 at 10:52 am | Permalink

      Hi Mary,
      It will be dependent on the contract, if it’s fully executed and what terms are provided for the buyer to get out. Talk with your real estate agent and they should be able to advise you on the earnest money.
      - Samantha

  65. Lora
    Posted May 15, 2014 at 5:59 pm | Permalink

    I have an issue where I am in the process of purchasing a townhome and I have been pre-approved, gave them my earnest money as well as the due diligence money paid for all my inspections and have my loan sitting with the underwriters. I received a call from my mortgage guy who tells me along with his manager that I entered a 1099misc income on the wrong line. In the software the only place indicate was other misc and they informed me that was for gambling and winning things like that. So to make a long story short they told me I have to make an amended return before they will approve the mortgage. My lease and my apartment is already rented out as of the 15th of June. I’m about to be homeless unless I can get this amended return thru FAST and from what I have been told there is no other way but to mail the amended return and it can take any where from 12 week to 6 mos. Now since all I am doing is changing the line I entered it on and it’s not causing any changes in the dollars and as a matter fact the accountant I had do it said there really is no change as far as the form is considered because there is no change in money and he asked why am I even doing this; what can I possibly do to satisfy the mortgage underwriters or IRS to push this thru. Please don’t leave me homeless…

    • Samantha Reeves
      Posted May 19, 2014 at 11:05 am | Permalink

      Lora,
      It may be possible to obtain proof of amended return receipt – talk with your local IRS office and see what info they can provide you on this and then discuss with your lender if they will accept it in lieu of the other documentation.
      - Samantha

  66. Tim
    Posted May 16, 2014 at 11:17 pm | Permalink

    Hello,

    I went under a contract for a home. The inspection showed the roof, chimney/flashing/ box gutters to be in poor condition. I requested it be entirely replaced. Seller countered with an offer to put new layer of shingles on, replace the box gutter with standard aluminum gutters, do the flashing and tuck pointing. We agreed to this in an addendum and the seller had the work performed.

    I had the work inspected post completion and basically, three roofers stated that the work was done in a very patchwork style, not completing the flashing, installed many items that are “not to code.” In addition to this, they stated there is rot indicating that the roof before “work” was rotting underneath.

    At this point I just want out of the deal, this job was done poorly and there are clearly issues that will need to be addressed in the near future with huge monetary impact.

    I am willing to fore-fit my earnest money and just walk away. Do I have the right to do so?

    -Tim

    • Samantha Reeves
      Posted May 19, 2014 at 11:07 am | Permalink

      Hi Tim,
      If they haven’t sufficiently fulfilled their obligations it sounds like you may have that opportunity but be sure to consult with your agent first to ensure there are no legal repercussions at this point.
      - Samantha

  67. Donna
    Posted May 19, 2014 at 5:02 pm | Permalink

    QUESTION?.. Can a buyer get out of a contract though the VA CLAUSE if the house does NOT appraise for contract price even if the seller agrees to lower the price down to the appraised value? According to the contract buyer can’t, but what about the VA Clause addition to the contract?

    • Samantha Reeves
      Posted May 20, 2014 at 10:44 am | Permalink

      Hi Donna,
      This is a grey area and I think there is room for argument either way. That being said, when looking at the language of the amendment it doesn’t specifically state that the contract price can be dropped as a way to bind the purchaser.
      Samantha

  68. Odette Cobourn
    Posted May 30, 2014 at 7:25 pm | Permalink

    Hey Fellas! I’ve by no means been part of a message board before, I hope that I’ll be able to provide as effectively as receive suggestions in at this point.Thanks in advance!

  69. Christopher Allan
    Posted June 14, 2014 at 12:13 am | Permalink

    My wife and I are having a home built. We gave the sellers agent a check for 1,500 dollars as earnest money. After 60 days into the building process the builders agent calls and explains that the title company lost the check and wants us to write another. Seems a little frustrating, but simple enough right? I call the bank and stop payment on the previous check and then as I explain to the bank what happened they recommend I close my checking account and reopen another as my account information could now be compromised with an unaccounted for check that has my routing and account number, full name and current address. Everything is tied to this account… direct deposit from my job, savings, bill payments, a book of checks, debit cards… not so easy now as simply stopping payment. We still want to buy the house, but not write another check for earnest money. The builders agent is hounding us and continues to remind us that we contracted. Do I have to write another check?

    • Samantha Reeves
      Posted June 16, 2014 at 11:16 am | Permalink

      Christopher,
      That’s tough. Did they provide proof of receipt of the first check? Maybe you can request that if they want another check that they will pay for the costs of the stop payment and any other fees for the loss. If you are wanting to back out, I’d suggest talking with an attorney about your contract.
      Best of luck,
      Samantha

  70. Stanton
    Posted June 16, 2014 at 5:46 pm | Permalink

    Hello there! I know this is kinda off topic but I’d figured I’d ask. Would you be interested in exchanging links or maybe guest writing a blog post or vice-versa? My site goes over a lot of the same subjects as yours and I believe we could greatly benefit from each other. If you are interested feel free to shoot me an e-mail. I look forward to hearing from you! Wonderful blog by the way!

    • Samantha Reeves
      Posted June 17, 2014 at 8:42 am | Permalink

      Can you provide me the name of your blog please?
      - Samantha

  71. Chris C
    Posted June 17, 2014 at 11:18 am | Permalink

    I’m a VA borrower in the process of buying a home. We got a home inspection from a company that also does termite inspections and they were both performed at the same time. I forgot about the requirement that seller pays for termite inspection with VA loans and the invoice is shown as being paid by myself and my wife. Now, the loan company is having a problem because the VA wants to see a termite inspection invoice that is paid by the seller. Is there any way that the seller can reimburse us and we can use the same termite inspection or did we throw our money away and now the seller still has to get an inspection which they will pay for?

    • Samantha Reeves
      Posted June 17, 2014 at 1:23 pm | Permalink

      Chris,
      Yeah, see if you can get the invoice itemized showing that the pest inspection was part of the home inspection and that the buyer didn’t pay an additional fee for it. This should work for the underwriters.
      Samantha

  72. C Grimes
    Posted June 18, 2014 at 9:07 pm | Permalink

    I have recently put an offer in on a Michigan home which was accepted and $3000 dollars earnest money was provided to my realtor. Thee home was found to be on an AE designated 100 year FEMA flood plane zone. I was told that FEMA can provide an amendment letter so I would not have to pay flood insurance, but the map is not planned to be revised. This amendment process is lengthy and subject to future concerns regarding having to pay for the insurance down the road, should legislation deem it be required again, or if the map is revised. Also, future potential buyers will see this as a red flag and may not want to purchase the home when I go to sell for the same concerns. I have decided to back out of the deal as a result and am hoping that the earnest money be returned as my realtor had stated would be the case. My question is: should I be entitled to get my earnest money back?

    • Samantha Reeves
      Posted June 19, 2014 at 8:44 am | Permalink

      Hello,
      It would depend on the circumstances of your contract. But many contracts include provisions for title issues, so it’s likely. Your agent will be the best person to ask and if they are saying yes, then I’d go with that answer.
      Samantha

  73. Tim
    Posted July 22, 2014 at 9:24 pm | Permalink

    We put down $9K earnest on a foreclosure that evidently had bad title work. End result, the seller bank could not clean up the title and our contract expired on 7/17/14. It is 7/22/14 and the seller refuses to sign the release from our realtor thus blocking the refund of our earnest $$ We turned in notice on our current housing based on the targeted closing and are now in the need of another option, but we are limited until we get our earnest $$ back. What can we do? We’re in Alabama? Do they have to sign a mutual release agreement in order for our funds to be returned even after the contract expired? Thanks

    • Samantha Reeves
      Posted July 24, 2014 at 9:16 am | Permalink

      Tim,
      I can’t speak to state specific info, as I’m not licensed in Alabama. But, based on the basic info, I think it will partially depend on who is holding the earnest money – the seller’s agent, the title company or someone else. Depending on who it is, they may have some discretion when determining when to release the funds. Talk with your agent and make sure that they outline all the options you have available.
      Samantha

  74. Rob
    Posted July 26, 2014 at 8:07 am | Permalink

    Here’s our situation. We are the buyers. We went into contract on a condo almost 2 months ago and were preamp proved for a loan with great terms. We put down $5k in earnest money because we were assured by all parties that everything would run smoothly. Fasts forward to about 2.5 weeks ago, and we are informed that the condo we are in contract for is a non-warrantable condo and the financing that we were wanting with a very reputable lender that we have worked with before has fallen through.

    We are past our loan contingency date, which was actually skipped over during our signing of the contract and was emailed to is in a barrage of amendments (we didn’t have any explanation of what it was) and we were not informed that this unit was non-warrantable from the beginning. Because it’s non-warrantable, the only other option of financing is to apply for a stricter loan that significantly increases our rate and that we may not even qualify for. Now, both (selling and buyers) agents have threatened us with a lawsuit if we decide to back out of this purchase. It’s been a horrible experience and, although we are willing to forfeit our earnest money to get out of this deal, we are wondering if there is anyway we can expect to get the earnest back and if the threat of a lawsuit is probably just posturing by the agents. We believe we should be able to use the lender of our choosing.

    • Samantha Reeves
      Posted July 28, 2014 at 9:43 am | Permalink

      Rob,
      I’m sorry to hear about your situation.
      Has the property been appraised yet? One way you are able to back out is if the appraisal comes in low. All VA loans must have a VA amendment to contract which allows the buyer to back out and receive their earnest money back if the appraisal comes in low. If it’s not warrantable it’s possible that it would appraise low. But obviously if you haven’t had it appraised, that would be an additional cost with no guarantee of the value that would come back.
      I’d definitely suggest talking with an attorney on this one. If you are being threatened with a lawsuit you need to know your legal rights, of which I can’t advise you, but a licensed attorney in your state can.
      Samantha

  75. Devin S
    Posted August 1, 2014 at 4:44 pm | Permalink

    We were serious about buying a house, so we put $1000 down for earnest money. We also paid for an inspection which was $175. About a week later my orders came back that they did not have the medical facilities at this location for us so they were to be canceled. Now the seller does not think that we deserve the earnest money back because of this. What should I do next or what will happen???

    • Samantha Reeves
      Posted August 4, 2014 at 10:12 am | Permalink

      Hi Devin,
      I’m sorry to hear about your situation. Talk with your real estate agent about the contingencies. Has the inspection contingency passed? Was there anything wrong with the inspection? This may be a way to get your earnest money back.
      Samantha

  76. Leah
    Posted August 7, 2014 at 8:53 am | Permalink

    I currently own a home that I am wanting to sell. I originally put it up for sale two and a half years ago. The couple that wanted to buy my home needed to wait until their house sold and then they were going to buy mine. I agreed to let them lease it until their house was sold. The problem was that they did not make any money on their house and are trying to come up with the 20% down payment to purchase mine. Right now where the house is the home values have tremendously increased. I spoke to them last night and they still want to buy the home but are probably not going to have the down payment until December. If I wait for them to come up with the down payment, should I ask them for earnest money? I’m just afraid that if I wait too long the housing market will not be doing as well and I’ve heard December is a not so great time to put a house on the market. Advice?

    • Samantha Reeves
      Posted August 7, 2014 at 9:53 am | Permalink

      Hi Leah,
      I’m not aware of the entire situation here – why do they have to come up with 20% down? If they’re using their VA loan, no down payment is required. If they’re pursuing conventional financing, they’d only need 5% in some situations. Is the 20% down a requirement they’ve set for themselves so that they can avoid paying mortgage insurance, or is it something their lender said was required?
      I’d suggest talking with an agent in your area and establishing an estimated market value on the property right now. Then ask the agent if they think that value will increase or decrease by December. From there you can determine if you want to enter into a contract now or later. Earnest money isn’t required in all transactions, it’s usually there to protect the seller if the deal falls through. It’s your choice if you want to ask for it.
      Samantha

  77. Leah
    Posted August 7, 2014 at 10:00 am | Permalink

    Hi Samantha,

    For some reason they were denied approval on an FHA loan so they had to go through a conventional loan and their loan company told them they would have to pay 20% down. When I originally put my house up for sale it was valued at $169,900 and the values have gone up to where right now the asking price would be $180,000. I’ve informed them of this and they were kind of taken aback but understand if I can’t wait until then because now they would have to come up with more money for the down payment. I’m trying to not pay a realtor a 6% commission fee but I’m not sure how much a real estate attorney would be either.

  78. Stephanie
    Posted August 7, 2014 at 10:33 am | Permalink

    Hello,

    I was buying a house through FHA loan which I was pre-approved for and put $250 earnest money down. Someone did the house inspection which everything passed excepted the well which they needed to fix. 3 days before closing, my loan officer called to inform me that the underwriter would not approve of the loan due to not being at my job for a year (which was 3 months away at the time.) The loan officer tried another lender but they did not approve due to the out-buildings. This was completely out of my control and had no choice but to cancel since I had not enough money to put money down. I offered to rent the home for the price of their mortgage payments until the loan would go through, but they did not want to do that.

    Now the sellers refuse to return the earnest money back even though I did not back out by choice. Can I get advice on what to do?

    • Samantha Reeves
      Posted August 7, 2014 at 11:05 am | Permalink

      Stephanie,
      Check to see if you have a financing contingency in your contract. There may (or may not) be language there that would cover return of your earnest money.
      Samantha

  79. John Pelfrey
    Posted August 7, 2014 at 10:40 pm | Permalink

    Hi,
    Three weeks ago my lender promised I’d get my earnest money back at closing. Now i found out that the person i was dealing with has a different position and they are telling me since it took three extra weeks for the va to audit the loan that to” zero” me out, the earnest money goes to them. Should i go through with this? I feel like my lender is full of it.
    Thanks
    John

    • Samantha Reeves
      Posted August 8, 2014 at 9:15 am | Permalink

      John,
      That sounds extremely unusual. Is it your lender or the seller that’s claiming they get to keep the money. I’d ask for an accounting and for them to point out the contract language that states they get to keep those funds due to a delay in closing.
      Now, if the earnest money is going towards your closing costs, that would be understandable as closing costs can’t be rolled into the loan amount and it’s common for EM to be put towards those funds if necessary. But that’s something that should be explained to you very clearly.
      Ask questions, and don’t sign until you are comfortable and understand the answers.
      Samantha

  80. Martina
    Posted August 13, 2014 at 11:26 am | Permalink

    I am a buyer. We put an offer of 138.5k in on a house that was selling for 145k. The seller came back with 142K and they would pay closing. We are coming down to the wire for closing and the bank came back with the closing costs and fees due at closing of 6k. The seller thought that closing was going to be 2k and they are willing to give an additional 2k (total of 4) but want to raise the sell price to 144k so we are basically paying part of the closing fees. If we are holding our ground that we are not paying any closing cost and the price agreed upon is 142k would we be entilted to our earnest money back and canceling the contract?

    • Samantha Reeves
      Posted August 13, 2014 at 3:26 pm | Permalink

      Hi Martina,
      Did the contract say that they’d pay all closing costs with no cap, or did it say closing costs up to X amount? If it said they’d pay all closing costs with no cap then they should be responsible to pay all closing costs and not be able to now say they’d only cover $2K. If they are the ones defaulting on the contract then yes, you should get your earnest money back.
      Samantha

One Trackback

  1. […] up front include (but aren’t limited to) a home inspection, well water testing, appraisal, and earnest money. Talk with a real estate agent in your area to get a ball park on these figures, as they can vary […]

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Samantha Reeves

Samantha Reeves maintains the Veterans United Realty blog for Veterans United Home Loans, the nation's leading VA-approved lender. As a prior loan officer, Samantha brings her vast experience dealing with the VA home loan all the way from initial application, to loan funding. She knows how the system works and brings you information and tips on how to make your VA home loan transaction go as smoothly as possible.


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