If financing falls through for a home buyer, what happens to the earnest money deposit?
Get Legal Help Today
Compare Quotes From Top Companies and Save
Secured with SHA-256 Encryption
If financing falls through for a home buyer, what happens to the earnest money deposit?
I’m selling home with purchase agreement that has finance contingency. Found out today buyer switched jobs during finance process and may be denied the loan due to reduction in hours worked weekly from 40 to 38. Since it appears financing will fall through due to buyer’s actions, is it reasonable to think I can keep earnest money. I’ve already fixed items from inspection report the buyer asked for
Asked on September 3, 2015 under Real Estate Law, Indiana
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 8 years ago | Contributor
You could only keep the earnest money if it appears the buyer did not have some reasonable grounds, external to the home purchase or mortgage, for the switch i.e. if it looks like he took the reduction in order to try to manufacture a failed a failed contingency and escape the loan. On the other hand, if this was a reasonable change for unrelated reasons e.g. better commute or hours more possibility of career advancement, even if there is a short term step backwards etc., then you most likely have to give back the earnest money the buyer's obligation is to try to go through with the sale in good faith, not to put his life 100% on hold, pass up good career moves, or otherwise take steps detrimental to himself.
IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.