Buyers Sellers

Ways a Buyer Can Lose Their Earnest Money

When a buyer makes an offer, they typically make an earnest money deposit to demonstrate that they are serious, and these funds are held in an escrow account until closing.

When making an offer, it is in the buyer’s best interest to include basic contingencies to protect themselves. Financing and home inspection contingencies are the most common. If these contingencies can’t be met, in most cases, the buyers’ earnest money is returned.

However, there are certain circumstances where a buyer’s earnest money could be forfeited to the seller. For example: If the buyer waives the contingencies but the transaction doesn’t close… if the buyer ignores deadlines stated in the contract and the seller refuses to give them an extension… or, if the buyer simply decides they no longer want to buy the property.

In addition to the buyer losing their earnest money, most real estate contracts also provide provisions that allow the seller to sue the buyer for breach of contract if the buyer backs out for the reasons we just mentioned.

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