Can a seller legally keep earnest money if there was an inspection contingency andthe buyerdecided to walk away?

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Can a seller legally keep earnest money if there was an inspection contingency andthe buyerdecided to walk away?

We put an offer down on a house, pending inspection, and provided earnest money. The inspection revealed flaws that we did not want to deal with trying to have the seller repair so we walked away. Our earnest money check was cashed on the basis of “un-negotiable grounds”. Is the seller legally able to keep this money? If not, what is the best method of obtaining the earnest money back?

Asked on July 22, 2011 Kansas

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

If there was an inspection contingency, it is enforceable as per its terms--that is, if you allowed you to walk away from the sale and retain yoiur earnest money or deposit if there were problems revealed during the inspection and you complied with the terms of the contingency, you should get your money back. The issue is (1) exactly what does the contingency in the sales contract say; and (2) what happened--were its terms or conditions fulfilled?

As for  how to get the money back, if the seller won't voluntarily repay it--there really is only one way: sue. You have to bring a lawsuit to regain the money. If it happened to be a small amount (e.g. $1k to $2k, or maybe even $3k), you *might* want to represent yourself in small claims court; but for anything over that, you should definitely retain an attoreny. Good luck.


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