Buying a home is often one of the most exciting purchases a person can make, as well as one of the most expensive. But when a deal falls apart, that excitement can quickly give way to frustration and uncertainty.
One of the biggest concerns both buyers and sellers face in these situations is what happens to the deposit. Whether you’re walking away or watching a buyer back out, knowing your rights is the key to protecting your finances.
Understanding contingencies and default
Most real estate contracts include contingency clauses, conditions that must be met for the sale to move forward. Standard contracts contain several common contingencies. These may include:
- Securing a home loan or mortgage
- A clean home inspection
- Insurance contingency
- Title contingency
If the buyer cancels the contract due to an unmet contingency, they’re usually entitled to a refund of their earnest money deposit.
Trouble often arises when one party defaults or breaches the contract. If a buyer pulls out without a valid reason or misses a critical deadline, the seller may have the right to keep the deposit. On the other hand, if a seller backs out without a valid reason, such as refusing to make agreed-upon repairs, the buyer may demand the return of the deposit and even pursue additional remedies.
But sometimes, the situation isn’t so clear-cut. Emotions can run high, and both parties may feel they’re in the right. That’s when the fine print of the contract, and how it was handled, becomes crucial.
If your real estate deal has gone off track, and you’re unsure where you stand or how to proceed, consider speaking with an experienced legal professional who can help you sort through your options and protect what’s yours.