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Can buyer back out, who receives earnest money?

We have a buyer that has notified us that they are cancelling the escrow. We have all docs signed, we have a signed contingency removal, we have been approved by the appraiser. We have the pre-approval information from the bank. Is there any way they can back out at this point other than loan problems. They had also made a $7500 earnest money deposit, if they do back out who keeps the money. We have not been given any reason at this point...

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February 16 - US
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Simply put: your contract has the final say. You can also ask whoever is holding the earnest money when they plan on turning it over to you . . . !
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February 16

Hi Sharkfans,

Look at your executed contract. There will be a section that specifically refers to Earnest Money. When it has to be deposited, as well as what happens in the event of a dispute. If you are being represented by Realtor, Your agent will discuss the contract with you and let you know what your options are. Also, Depending on the reason a buyer backs, they may be entitled to keep their earnest money. i.e During the building inspection phase of the contract, or another would be there is financing problems prior to the final loan date. Your best bet is to consult your realtor, and your contract.

Best of luck to you in the sale of your home!

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February 16
Profile picture for wetdawgs
It depends on the terms of the agreement.  While you mention that the buyers had "pre-approval", preapproval is not the same as having a loan approved.     None of us know the details of your contract, or the reason the buyer backed out.    So, whether or not you will get the earnest money will depend.

Perhaps Stephanie has more knowledge of your contract, but without seeing it and knowing the details I'm surprised she is so confident.

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February 16
Sharks Fan.  Sorry to hear about your dilemma.   Yes, the buyer can always back out - we can't make people honor their contractual obligations.  However, there are penalties involved if contingencies have been removed, which in your case, it sounds like that is exactly what has happened.   If a buyer breaches their obligations under the contract then yes, they can forfeit their right to the earnest money deposit.   Talk to your agent and confirm for sure but it sounds like you, as the seller, will be entitled to the earnest money if the buyer simply walks away after contingencies  have expired and he has loan approval.  Good luck with it but I hope that you are able to salvage the transaction. 
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February 16
Sharks Fan,

It would depend on what contingencies are in your Agreement.  If the buyer is outside the scope of contingency periods, then it is unlikely they can terminate the Agreement without risking escrow.  However, if they still have time on a contingency, they could terminate and receive escrow back - it would really depend on what was agreed to.

In the event of a dispute, you should seek legal counsel in order to determine your options.
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February 16
 
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