Earnest money
What is an Earnest Money Deposit?
When a buyer signs a purchase and sale agreement, the buyer is typically required to deposit a specific sum of earnest money with the escrow. This money helps to ensure that the buyer will either complete the transaction or have a legal excuse for failing to do so. Thus, if the property fails the inspection and the agreement includes an inspection contingency, then the buyer has a legal right to abandon the purchase and is entitled to a return of the earnest money.
In contrast, if the buyer develops a horrific case of buyer’s remorse the day before closing and decides to not purchase the property, the buyer has no legal excuse for failing to complete the purchase. In that instance, the contract will either limit the seller to retention of the earnest money based on buyer’s breach of contract (by far most common), or the seller will have the option of doing so in addition to any other potential claims against the buyer for breach of contract.
How to protect your interests?
If you are a buyer and are thinking about walking away from a contract, an attorney can assist you in analyzing the contract to determine your best chance for getting back the earnest money and otherwise avoiding liability. The terms of the contract, plus requirements imposed by state and federal law, may be of use in identifying a basis for rescinding the contract.
Alternatively, if you have already rescinded the contract and the seller refuses to return the earnest money, an attorney may be able to identify one or more reasons why the seller should do so. There are no guarantees, of course, but an attorney may be able to craft an argument such that the seller is at least willing to compromise by returning some of the money.
We can assist you in these matters. Please give us a call to discuss at 360.630.3635.