When people make offers on homes, including houses, condos, and downtown San Diego lofts, they generally need to make earnest money deposits to start the process. An earnest money deposit demonstrates you’re committed to the purchase as a serious homebuyer, and the money will go into an escrow account until closing, at which point it’s put toward your closing costs and down payment. The last thing you want to do is lose your earnest money, which is likely 1–3 percent of the purchase price. However, the deposit is usually nonrefundable to prevent buyers from changing their minds in the middle of the transaction. Luckily, there are ways to get out of the purchase and keep your earnest money. Here’s what you should know about getting your earnest money deposit back if you change your mind.
Time Frame to Change Your Mind
To find out if your earnest money deposit will be refunded if you change your mind, make sure you review your purchase contract. In California, a standard California Association of Realtors (CAR) purchase contract includes a clause that allows the earnest money to be returned to buyers if they change their minds within a specific time frame. This clause allows you to change your mind for any reason at all, including cold feet about buying or finding another home you like more. When buying a new home or working with an agent who isn’t a member of CAR, you may not have this contingency in your purchase contract. In these cases, you’ll need a good reason to walk away from the transaction without forfeiting the money.
The Home Appraisal Was Too Low
One of the most straightforward ways to have your earnest money returned is through an appraisal contingency in the contract. Your lender will require that the property be appraised to make sure it’s worth at least as much as the purchase price. If the estimate is too low, you’ll be required to pay the difference. The appraisal contingency in your contract means you only need to buy the home at the appraised value, which gives you leverage to ask for a lower price or change your mind and leave the transaction with your earnest deposit.
The Home Has a Major Problem
Most home sales are contingent on the results of a home inspection. You may change your mind about buying the home if the inspection turns up a mold problem, foundation issues, flood damage, or plumbing problems. In these cases, you can negotiate with the seller or walk away with your earnest money.
Your Other Home Hasn’t Sold
If you’re selling your current home and buying a new one simultaneously, you likely have a sale contingency in your contract that states you’ll follow through on the purchase contract only if your home sells within a specific amount of time. With this contingency in place, you can change your mind about buying the new home if your current home fails to sell by the deadline, and you’ll keep your earnest deposit.
If you’re getting ready to shop for a home, following these tips can ensure you don’t lose your earnest money. Experienced real estate agents who know the ins and outs of home financing can also help you save money when you’re ready to buy San Diego real estate. Downtown is one of the hottest areas around, and you can rely on the experts at 92101 Urban Living to help you find your perfect condo, loft, or penthouse. Call one of our friendly agents today at 619-649-0368.