If the buyer is not approved for a mortgage, must the seller return the earnest money?

Asked on July 14, 2015 under Real Estate Law, Pennsylvania

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

It depends: did the contract of sale have a mortgage or finance contingency clause of not? If there was such a clause, stating that the buyer would be released from the contract in the event he/she did not qualify for a mortgage, then the seller would have to return the money. However, if the contract did not contain such a clause, then the seller may retain the earnest money as damages for the buyer's breach (being unable to go through with the contract).


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