Is earnest money refundable?
- Home inspection. If a home inspection reveals condition issues that are unsatisfactory to the buyer, they have the right to get out of the deal with their deposit money.
- Appraisal. If a third-party appraiser deems the property overvalued, the buyer can choose to negate the contract and get their earnest money back.
- Financing. If the offer has a financing contingency and the buyer isn't approved for a mortgage, the buyer has the right to get out of the agreement and get their deposit back. Being pre-approved for a mortgage doesn't guarantee loan approval.
- Existing home sale. If the buyer has a contingency on the sale of an existing home and can't sell the property by the timeline stated in the offer, they can back out of the contract and get their earnest money back.
It's important to note that each of these contingencies has deadlines. If the buyer misses the deadline to back out of the deal due to a certain contingency, they may have to forfeit their earnest money. Of course, if the seller backs out of the contract for any reason, the escrow money will be refunded to the buyer.
Buying a home, especially when you're a first-time home buyer, is an exciting time. It's also a serious purchase. Earnest money helps ensure a smooth transaction that can help you secure the home of your dreams.