Can You Get Your Closing Costs Back if You Don’t Buy a House After Putting Down a Deposit?

Many home buyers face a dilemma when they accept a home offer and put money down into escrow, only to find that they cannot complete the purchase. This article explores the legal and financial considerations when you are unable to buy a house, and whether you have the right to get your closing costs back.

Understanding the Sale Contingencies

When you accept a home offer, it is often contingent on certain conditions, such as a successful home inspection or a loan approval. If these conditions are not met, you may think you have a chance to recoup your closing costs. However, the terms of the purchase and sale agreement (PSA) typically detail the consequences if these conditions fail.

When Contingent Conditions Do Not Hold

If the sale was contingent on the property passing a home inspection or loan approval, you may have a better chance of getting your closing costs back if these conditions are not fulfilled. Sellers are often required to make repairs or arrangements with the lender in such cases, protecting the buyer's interests.

Protecting the Seller’s Interests

Ultimately, sellers have the right to keep the deposit if the sale does not go through, especially if they have another buyer waiting in the wings. Once the deposit is made, it serves as a safeguard for the seller, preventing buyers from backing out at the last minute.

When you submit an offer and put money into escrow, you are essentially guaranteeing that you will complete the contract unless something goes wrong. Failure to follow through can result in the seller keeping your deposit, as they have already committed the property and other buyers may have moved on.

What Are Your Options?

While the seller is entitled to keep the deposit if the conditions of the contract are not met, there are still a few options you can pursue:

Discuss with the Seller: You can try negotiating with the seller to return your deposit. However, the seller is under no legal obligation to do so, and they have every right to keep the money since you did not fulfill the terms of the agreement. Kindness of the Owner: In some cases, the seller might decide to return your deposit out of goodwill. This is rare, but possible, and you can ask the seller if they are willing to do so. Legal Advice: If you believe there was fraud or misrepresentation, you may be able to get your money back through legal action. However, it is advisable to seek professional legal advice before pursuing this route.

Conclusion

While putting down a deposit is a significant financial commitment, it is crucial to understand the terms of the purchase agreement. If you are unable to complete the purchase due to unforeseen circumstances, the seller is generally under no obligation to return your deposit. However, if the sale was contingent on conditions that were not met, you may have a stronger case for getting your closing costs back.

It is always advisable to protect your interests by seeking professional advice, understanding the terms of your purchase agreement, and ensuring that you have completed your due diligence before signing any documents.