When can I get my earnest money deposit back?

When you purchase a home, you include a 1%-3% earnest money deposit with your offer. Once the offer is accepted, the earnest money deposit is delivered to the escrow company. The escrow company deposits the funds into an escrow account. This deposit is a “good faith” deposit demonstrating your intention to buy the home.

 

If you back out of the purchase after removing all your contingencies, then the seller is entitled to keep your deposit. This is a very fair way to do it because, by accepting your offer, the seller has taken their home off the market for a period of time, therefore, not allowing any other buyers to purchase the home.  

 

A higher deposit can strengthen your offer as it shows that you are very interested in following through with the purchase. When writing an offer, you also have the option of adding to your initial deposit amount in the form of an “increased deposit”. This increased deposit amount usually goes into the escrow account after the contingencies are removed.

 

In a standard California offer, there are 3 main contingencies: Finance, Appraisal and Inspection. Some offers include all 3 and other buyers may not have 3 main contingencies. For example, if a buyer was paying cash he/she would not have a finance contingency. If you remove your contingencies and later decide not to follow through with buying the house, you may be out your full deposit for liquidated damages to the seller.

 

If you do not remove your contingencies and are not able to buy the house due to a financing/appraisal reason or do not like something that you have seen after inspecting the home further, you are free to back out of the contract and receive your deposit back from escrow. If you have specific questions, please feel free to call us. We would be happy to explain it in greater detail.