Do I have right to the money?
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Do I have right to the money?
I was involved in a real estate transaction. I am for sale by owner. Days before closure I was informed that the buyer’s co-signer backed out. The agent informed me at that time that it was grounds for me to receive the earnest money. The next day he informed me that the bank wrote that because the co-signer dropped out that the buyer was no longer able to receive the loan. Therefore, they get the earnest money back as the sale is contingent upon financing.
Asked on August 9, 2019 under Real Estate Law, South Carolina
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 4 years ago | Contributor
The contract of sale with the buyer answers your question. Generally, if the buyer cannot carry through with the sale for any reason, the seller can keep the deposit or earnest money. A contract can include what is commonly called a "finance contingency" which states that if the buyer cannot get a loan or mortgage, he can get out of the contract and get his deposit back. But such a clause is enforceable as per its plain terms, and most have a deadline--i.e. if the buyer did not get financing by a certain date, generally a month or so before the closing date, then he can get his money back; but if that deadline passed before the buyer disclosed that he did not get financing, then the seller can keep the money. So you have to review the contract to see exactly what it says, because it will be enforced according to its precise language.
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