There are several opportunities within a contract for a buyer to get their earnest money back. Let’s go over them.

What Is Earnest Money?

earnest money depositEarnest money, also known as a “good faith deposit”, is put down on a home to show the seller you’re serious about purchasing. The deposit is typically due within 72 hours of a mutually executed contract in the form of wired funds or cashier’s check.

When a seller and buyer enter into an agreement, the seller takes the home off the market. If the buyer were to back out, it can cost the seller time and money to relist the property. Earnest money protects the seller in this event. Depending on the state of the market, earnest money is 1%-3% and held by the title company until closing.

The buyer’s deposit is not extra money they’re putting toward the home. At the completion of the sale, the earnest money is applied toward closing costs or down payment.

Earnest Money Refund

Earnest money is primarily used to protect the seller, but buyers are also well protected and have several opportunities to get their deposit back.

Property Disclosure

A property disclosure is a checklist of the current condition of the home that sellers are required to provide. Any prior damage to the home, even if repairs have been made, will all be accounted for. From hail damage to the roof, flooding in the basement, knocked over fence, it will all be in the document. Buyers have a right to review this information and if anything makes them feel uneasy, they are protected to back out of the contract and get a refund.


Homeowner Association policies and cost can quickly turn into a detour for a buyer. Buyers are shopping homes that fit within their monthly budget. For instance, adding an unexpected $270 HOA fee isn’t doable for everybody. Not having the freedom to paint your own home a specific color could be an annoyance. Discovering the HOA is known to be uptight and several neighbors have had harassment issues from the board would raise red flags for a potential buyer. As a result, a buyer to cut ties with that home.


Insurance policies are yet another reason a buyer may change their mind. A buyer could absolutely love a home, but their insurance company could come back and say their premium is going to be through the roof. Factors that impact your premium include the age and condition of the home, safety features, the cost to rebuild the home, the area the home is in. Since home owner’s insurance is a monthly expense, it may put buyer’s over budget, causing them to back out.

Health and Safety

The most common reason we see a buyer cancel a transaction is after the health and safety inspection. Inspectors do a very thorough job of finding every issue. A report pf lead-based paint or faulty electrical would be cause for the buyer to lose interest.


Financing woes are a hard one. There is often a misconception that nothing can go wrong after the preapproval. Underwriting still has to review income, credit score, and debt to income ration, and they very well may disqualify a buyer. In this case, a buyer would have no choice but to back out of the sale. Something like a spike in the interest rate the buyer is receiving could change their payment entirely and they may no longer be able to afford said home. While these situations are heartbreaking, they do happen.


Buying a home is the largest purchase most people make in their lifetime. It’s a massive investment with a lot on the line. Homes that appraise for less than the buyer’s offer may spark debate. Buyers have the option to ask the seller to reduce the price. However, if a seller stays firm, the buyer may ask for their earnest money back and walk away. Appraisal gaps are a common occurrence in today’s market. Since buyers are now expecting this as a part of the buying process and compensating with cash, we aren’t seeing this issue much.

These are several opportunities within a contract for a buyer to get their earnest money back. Key words: within the contract. If you terminate a contract within the dates and terms of that contract, you can absolutely get your earnest money back.

About The Author

my front range living real estate team colorado springs, ColoradoThe team at My Front Range Living are a group of full time real estate experts serving Colorado Springs, El Paso County and the surrounding areas. Their knowledge of the local community and experience in the industry provide you incomparable value when buying or selling a home. With several years of experience in helping out of state buyers and sellers, they are the go-to team when it comes to relocating and helping Colorado feel like home.

Even if you’re looking for an agent in another city or state, the My Front Range Living team has a network of experts that can connect you with the right professional.

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Earnest Money Refund