What to do about the return of my earnest money deposit?

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What to do about the return of my earnest money deposit?

I canceled a deal with the seller and sited the loan contingency as the cause. My issue was more my personal finances and some unexpected curves that life gave me. The bank would have funded the loan. But I would not have been able to make the down payment or monthly payments so I cancelled the deal. The seller has not agreed to return my deposit and won’t sign the cancellation. Can they sell the property to another buyer and keep my deposit? They have another offer. Can they close that while this is still open and they have my money? Should I agree to give them half the deposit to avoid further problems and compensate them for all the delay and issues this may case them?

Asked on December 26, 2012 under Real Estate Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

If the bank would have funded you but you did not want to go through with the deal, even if for a good reason (e.g. those unexpected curves or problems with your personal finances), then you breached the agreement of sale; a financing contingency only allows you out of the contract if no lender will give you a mortgage. Since you breached the agreement, the seller is entitled to keep your earnest money or deposit as damages--all of it--and to go ahead and sell to another person.


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