During the process of buying a home, the seller might require that you offer an earnest money deposit. However, if the sale of the home does not go through, it is possible that this money could be returned to you. If the purchase contract has been canceled, here is what you need to know about the deposited money.
What Is Earnest Money?
When you agree to purchase a home, the seller might require you to deposit a certain amount of money in a trust. The money is a sign of good faith. There is no set rule to how much the seller can ask for. The seller can ask for a percentage of the final purchase price or another amount.
What If the Seller Backs Out?
Depending on the terms of your contract with the seller, you should be entitled to receive the money back. Ideally, your real estate attorney ensured that the money would be refundable through the entire process in the event that the seller backed out of the deal. If not, you will have to refer to your contract to determine what the deadline is for receiving a refund of the deposit money.
If you have not reached the deadline, the seller is supposed to return the money to you. If the money is being held in trust by a third party, such as a lawyer or title company, you can contact it and request a refund of your money. The refund should be issued within a relatively short period of time.
However, if the seller refuses to return the money, you have legal options available to you to secure a refund.
What Can You Do?
One option for negotiating the return of your deposit is arbitration. In arbitration, a third party would hear from both you and the seller and make a determination as to whether all, some, or none of the deposit should be returned. Arbitration is an option if the seller feels that he or she is justified in not returning the money.
If arbitration fails to resolve the issue, you can also file a lawsuit against the seller. Depending on your local court system, it could possibly take months for a hearing to be scheduled. In the meantime, you and the seller can try to negotiate a settlement.
A real estate attorney, like those at Bangs McCullen Butler Foye & Simmons LLP, can help you determine what is the best course of action to pursue if your deposit has not been refunded.