“Hi Gary, I’ll be buying a San Diego home within the next few months. I’ve never bought a house before, so please excuse me if this is a dumb question. If I make an offer and it gets accepted, but I end up not buying the house, do I lose my deposit?”
Answer:
As you’ve heard before, the only dumb question is the one you don’t ask. And yours is a good question anyway.
Basically, if you cancel using your rights in the contract, you’ll get your deposit back. But if you cancel without the right to do so, you are at risk to lose your deposit.
Let me explain…
Real estate contracts have contingencies, where one party (usually the buyer) has the right to end the agreement without penalty within a set number of days under certain circumstances.
A common contingency is the right to inspect and investigate the property and object to the findings, typically for 7 to 17 days after the offer is accepted. So if on day #6 you decide you don’t want the house, you can cancel and get your deposit back. But if you decide this on day #18, it’s too late.
Here’s how deposits are handled and how you get yours back…
When your offer is accepted, your agent is required to send your deposit check to the escrow company immediately. Escrow cashes it and holds the funds. If the sale cancels, escrow can only give you or the seller the money with mutual instructions from both buyer and seller, or with a court or arbitration order.
So you and the seller must both agree on what happens to the deposit. If not, then you or the seller must go to court or arbitration to determine its fate.
99% of the time, if you cancel consistent with your rights in the contract, the seller will agree to release your deposit. For the rare 1%, it takes court or arbitration.
