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3 Ways a Buyer can Lose their Earnest Money Deposit

There are several moving parts when buying a home, but working with a real estate professional will help keep everything on track. While you may have several questions throughout the buying process, one of the common is concerning the earnest money deposit, especially when a contract falls through. Let’s take a closer look at an earnest money deposit and the reasons that could cause it to be forfeited by the buyer.

What is an Earnest Money Deposit?

When submitting an offer, the earnest money deposit (EMD) is the amount a buyer puts down before closing to show the seller they’re serious about buying the home. The EMD is held in an escrow account until the closing day, where it is applied to the buyer’s closing costs. It is a way to ensure buyers do not make offers on multiple homes at once without a commitment to following through to closing on them. Without an earnest money deposit, buyers could essentially make offers on their top home picks until they decided on the one they liked best. Doing this would take the house off the market, and if the buyer changed their mind or got cold feet could leave the seller at a disadvantage by missing out on other potential serious buyers while their home was under contract with a less committed buyer.

Can a Buyer Lose Their Earnest Money Deposit?

In most situations, the earnest money deposit is returned to the buyer if the contract does not work out on the home. However, some circumstances result in forfeited earnest money for the buyer.

3 Reasons a Buyer’s EMD can be Forfeited

Buyers Waived All Contingencies in the Contract

Offers that waive contingencies, such as real estate financing or inspections, can be more attractive to the seller. However, these contingencies are in place for buyers to get their earnest money back if they cannot purchase the house due to a reason covered by the contingencies or the inspection period reveals serious issues.

Waiving these contingencies could mean kissing your EMD goodbye if you, as the buyer, back out of the contract.

Ignoring the Timelines in the Contract

As you read the contract, pay close attention to the specific time frames outlined. The real estate contract outlines the time period for securing financing, getting a home inspection, negotiating repairs, having an appraisal, and the closing date.

If you see a “time is of the essence” clause, it is a must to complete the tasks on-time, or you could be in breach of the contract.

Cold Feet or Change of Heart about the Home

If all the contingencies have been removed or waived, and the buyers have a change of heart about purchasing the property, the sellers are usually not going to agree to give the earnest money back. As long as the sellers have fulfilled all their obligations to the contract, they can request to keep the earnest money if a buyer just gets cold feet about buying the property.



In a hot real estate market, like we are currently experiencing in Southwest Virginia and Northeast Tennessee, an EMD should be an essential part of your offer. While it may not be a requirement, it can give a seller higher confidence in your offer and show how serious you are about purchasing the property. Your REALTOR will help you navigate the buying process and can answer any additional questions you have about earnest money deposits.

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