What to do if a seller will not return your deposit?

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What to do if a seller will not return your deposit?

My husband and I were denied a mortgage, three days before the closing of a home. The seller and their agent are refusing to return our earnest money. What recourse should we take in this matter. Our Realtor has been handling the situation up to this point.

Asked on June 9, 2011 under Real Estate Law, Michigan

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

Unfortunately, you may not have any recourse in this case. IF you contract of sale had a finance contingency--that is, a clause stating that if you could not get financing, the contract would be terminated without fault and you'd get your money back--and if you complied with all the terms and conditions thereof (e.g. relating to when you'd have to notify the other party of your right to cancel), then you could enforce that contingency. However, without an actual finance contingency, if you can cannot honor your obligations under the contract, even due to the inability to get a mortgage, the seller may keep your deposit. This is why buyers put in finance contingencies; to protect themselves in case they are denied financing.


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