Earnest Money Deposit - Do I Lose the Deposit if I Back Out?

Reader Question: If I back out of buying a home, will I lose my deposit?

It depends on where you are in the process. If you have made an offer on the home, and the seller accepted the offer and took the home off the market ... then yes, you'll probably lose your earnest money deposit. That's usually what happens, at least.

But to find out for certain, you'll have to check your paperwork to see what is says. This kind of thing should be spelled out in your purchase agreement. There should be a paragraph or clause about the earnest money, what happens if the buyer defaults / backs out, etc. So start there.

The most important thing is not to buy a home you don't like. Maybe you thought the home was "the one" when you first saw it, but you've changed your mind for some reason. Hey, it happens. The worst thing you could do is say "Oh well, I guess I'll just buy it anyway." Sure, it can be hard to lose your earnest money deposit (if that turns out to be the case). But it's better than buying a house you don't want!

Here's a related article you might want to check out:

What Home Buyers Should Know About Earnest Money
You include earnest money with an offer on a house to show the seller that the you are serious about purchasing the house. But many buyers don't understand how this process works, how much money to put down, or what happens if they back out of the deal. This article gives a good overview of earnest money deposits.

Hope that helps. Good luck, and happy holidays.