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Do you lose your down payment if you back out of a home purchase? 

| Feb 4, 2021 | Real Estate Law

When you made an offer on a house that caught your eye, the seller wanted 5% in earnest money. The house was just over $300,000, so you gave them around $10,000 as, essentially, a down payment to show that your offer was serious. 

While that was true at the time and you intended to buy the home, you now want to take your offer back. If you do, are you going to lose the $10,000 that you already paid? Or can you get that money back from the seller and start looking for another home? 

Why are you pulling your offer?

The biggest question to ask is simply why you’re pulling the offer. Your contract should have contained a few contingencies. If they cover the reason you’re removing the offer, you typically do get the money back. If not, the seller likely gets to keep it since you broke the deal. 

For example, one contingency that most people use is that the home has to pass an inspection. If it fails the inspection, you can pull your offer and get your money back without penalty. You’re not legally bound to buy a home that is unsafe or not up to code. If the home does pass the inspection and you just decide to pull your offer to buy a different house, though, you will probably lose the earnest money that you already have in the deal. 

How can you explore your options?

Buying a home can be complicated. Be sure you explore your options and understand all of your legal rights. Talk to an experienced real estate attorney about your situation before you decide the next step to take.