What happens if buyers back out of a home purchase contract?

Question Details:

My husband and I are supposed to close on a resale home purchase on 3/31/10, but in meantime, we have decided to split up and divorce. The financing was to be in my name only (due to his bad credit). I need to notify the realtor and mortgage lender, but don't know what to say. Will we lose the $1,000 good faith deposit? I cannot afford the new home without my husband's income.

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