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


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).

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.