Ernest money down - can I get it back?

August 19, 2024 3:59 PM

I put a $3K deposit on a house and had to back out due to financing. Purchase agreement says that it has be released by both parties and the seller isn't budging. They've since sold the house for more than my asking price. Can I wait them out or do I need to lawyer up to get it back? Sale was in Michigan if that helps.
posted by BobtheThief to Law & Government (8 answers total)

Did you make the offer through a real estate agent? If so, they should be chasing this for you.
posted by NotMyselfRightNow at 4:46 PM on August 19

Does your agreement contain a clause allowing you to recover in the event of failed financing? This would have been if, for example, you formally made the offer "contingent upon financing". If you did not include any contingencies in your offer it is possible that the sellers can legally keep your money.

Talk to your agent.
posted by aramaic at 6:26 PM on August 19

... and we hope you had an agent, like a buyer's agent. If only the seller's agent was involved, you were not properly represented.
posted by intermod at 7:52 PM on August 19

Earnest money is non refundable if the buyer backs out for any reason not specifically stated in the contract. Loss of financing is generally not a standard exception.
posted by ananci at 5:00 AM on August 20

Did the new buyers close on the house yet? Sellers may be waiting to see if they suffered any loss before issuing a refund.
posted by coldhotel at 5:09 AM on August 20

You need to read your contract or get someone with a legal background or experience in reading legal documents to help you. As anaci said, the point of the earnest money is to give the seller compensation if the buyer backs out for any reason other than the ones outlined in the contract.If the contact said that it would be returned if you failed to get financing, then it needs to be returned. However, if the contract says that it will only be returned if both parities agree, then it sounds like the seller doesn't agree and you won't get it back.

The earnest money is often considered liquidated damages - in other words it is a set amount that considered fair compensation for backing out regardless of the actual harm done to the seller. So the fact that they were able to sell the property quickly for a better deal is irrelevant unless it says otherwise in your contract.

You or your agent could argue that it is fair to return the money, given how things turned out. However, if the seller is not required by the contract do to so, then it is completely up to them to decide if they want to do the fair thing or not.
posted by metahawk at 6:14 AM on August 20

I'm sure this varies by state. I had to back out of an offer in Ohio after I had earnest money down. I thought for sure that money would be gone. But my agent said they had to return it to me. That the sellers couldn't accept another offer without returning the earnest money to me. I did indeed get it back.

Nthing - talk to your agent. This is their job and they should be helping you. Barring that, review your contract. If you are indeed owed the money, then take the sellers to small claims court.
posted by hydra77 at 7:40 AM on August 20

I backed out of a contract with a financing contingency (seems pretty standard to have one).

I didn’t hear from seller for some time about receiving it back and was disturbed. So I went around the agent, called directly the person and left a message “hey I’m really sorry our financing didn’t work out, per contract will need the deposit back. If I don’t hear from you in two days will have to involve a lawyer.”

Got it back the same day. I think sometimes our concerns get lost in agent squabbles.
posted by cacao at 3:34 PM on August 20