Can You Keep A Home Buyer’s Deposit Money If They Back Out

Performance Property Real Estate Question

Q: My wife and I are selling our home. If we sign a contract with a buyer can we keep their deposit money if they back out? Paul, Bergenfield, NJ

A: Real estate is done in writing, so my advice is always read the purchase contract before you sign it whether you are a buyer or a seller. A home buyer’s deposit may be refundable or non-refundable. Most standard real estate contracts however contain contingency clauses that may give a buyer room to back out of a contract. The 2 most common contingency clauses that appear in written real estate contracts are 1. A mortgage contingency and 2. an inspection contingency.

If, for example, your purchase contract has a mortgage contingency and you can demonstrate that you were unable to obtain a mortgage or if your contract has an inspection clause and the seller is unable or unwilling to address issues arising from your home inspection, you may be able to get out of your contract. However, if the language in the purchase contract says that the buyer’s deposit is non-refundable, then you can keep a buyer’s deposit money if they back out of the transaction. Thanks for your question, Paul.

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