One of the most misunderstood parts of buying a property is the process of offering the seller earnest money. Earnest money is essentially a deposit you put on the home for sale. Irvine home buyers should be aware that if they back out of the negotiations before closing on the home, the seller gets to keep the earnest money to compensate for the wasted time. However, earnest money isn’t always as straightforward as it seems, and you may be able to get it back if you change your mind.
Who Gets the Earnest Money if Someone Backs Out for No Reason?
Earnest money can get more complicated with special contracts and specific reasons for parties to back out. However, if the seller or buyer reconsiders even though there are no issues, it’s normally straightforward. If the seller backs out and decides not to sell the home, you can get a refund. However, if you decide to pull your offer randomly, the seller normally gets to keep the earnest money.
What Factors Might Entitle You to a Refund?
There are many things that can make a sale fall through even if the buyer and seller want to make the deal work. The home may be appraised too low for your bank to loan you money, or your financing might fall through. Other potential reasons that might allow you to back out and keep the earnest money include an inspection that reveals a major flaw, your previous home not selling, or a newly constructed property that isn’t actually finished. Keep in mind these reasons to get your earnest money back apply only if the offer clearly states the sale was contingent on one of these things.
What Happens if You Ignore the Contract’s Timeline?
Most contracts for putting in an offer on a home involve time frames for scheduling home inspections, getting financing, and gathering important documents. If you cannot meet the time frame, some sellers may allow you an extension. However, they do have the right to quit working with you and accept other offers if you’re dragging your feet while they’re in a hurry. Not meeting the requirements of the contract on time can count as a breach of contract, which will mean you don’t get your earnest money back.
What Happens if You Don’t Read Your Contract Carefully?
Figuring out who gets the earnest money if a sale falls through is all about paying attention to your contract. You need to be informed about every aspect of the contract because many have rules about how you can back out of the sale. You may need to provide written notice of your intent to not purchase the home by a certain date if you want to make sure you get your earnest money back.
If you’re preparing to make an offer on a home, the above information can keep you from losing your earnest money if you reconsider. Working with experienced Irvine real estate agents who know the details of home finance can also help you save money when you’re ready to buy. Trust the experts at Irvine Residential Living to help you find your perfect home. Call one of our friendly agents today at 714-454-6304.