When Can You Keep a Buyer’s Earnest Money Deposit?

If you’re like many sellers, you know that when a buyer gives over an earnest money deposit, they’re very serious about purchasing your home. That’s because if a buyer breaks their end of the deal, the seller typically gets to keep the earnest money deposit. Because earnest money deposits typically range between 2 and 5 percent of the home’s total sales price, you’re talking about a significant amount of money. Though it’s not always the case that the seller gets to keep the money, here are some instances in which it’s possible.

When Can You Keep a Buyer’s Earnest Money Deposit?

First things first: Why would a seller want to keep a buyer’s earnest money deposit? It’s primarily about inconvenience. When you accept an offer, you take your home off the market. That means other qualified buyers don’t even have a chance at it. After you’ve taken your home off the market in anticipation of one particular buyer purchasing it, if the deal falls through, you have to relist the home and start from scratch.

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Generally, real estate contracts are filled with contingencies. Contingencies are conditions that must be met in order for the deal to go through. If you fail to uphold your end of the bargain as the seller, the buyer can walk away from the deal with their earnest money intact. However, if it’s the buyer who fails to hold up their end of the bargain, you may be entitled to keep their earnest money deposit.

For example, if a buyer just gets cold feet and decides not to purchase your home after you’ve already accepted their offer, there’s a good chance that you can keep the earnest money deposit. Likewise, if your contract doesn’t include contingencies such as those related to the home’s condition, but the buyer wants to cancel the deal anyway, you may be entitled to keep their earnest money deposit.

Common Failed Contingencies

real estate agents build contingencies into purchase contracts to protect their own clients. Your agent will build contingencies into your contract that protect you, and your buyer’s agent will do the same. These are the four most common reasons that buyers can walk away with their earnest money deposits intact:

1. If a buyer’s financing falls through, provided that there is a financing contingency in the purchase contract, they can walk away with their earnest money. You can’t force them to purchase the home if they don’t have the money to do so.
2. Problems with the property. If there’s an inspection contingency built into your contract, and the home inspector that the buyer hires discovers problems, the buyer can usually walk away with their earnest money. However, many buyers simply use inspection reports to negotiate with sellers.
3. Title search problems. Usually, a buyer can get their earnest money back if a title search shows a lien or other issues with the ownership of a property.
4. Appraisal problems. If your home appraises for less than your asking price, buyers usually get to walk away with their earnest money intact. However, sometimes buyers negotiate instead.

Related: 3 quick fixes to make in your home office before you sell

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