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If a buyer backs out of a signed offer is given can you keep the deposit.

We had a signed offer on our 3 yr old home.  An inspection was done (no issues with the home). 3 days later the buyers decided they did not want the home because of "discrepencies" they found in the home
  • November 18 2010 - Westport
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Answers (5)

The buyer has that right. That is why they get inspections.
It is also crucial if you are past the contingency removals.

If it was based on inspections and you are past contingency removal, then yes theoretically you would get the deposit. But in reality there is still a small fight left. 

gl

tom
  • November 18 2010
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I'm sure they had an inspection clause and if they back out for whatever they found on the inspection, no you don't get to keep the deposit. Fix whatever was wrong so it won't happen again. They may have found another home or backed out for a different reason.
Its a tough market.
  • November 18 2010
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You should of course, speak to an attorney regarding your particular case.

You need to look at your contract and see how these "descrepencies" fall inot the inspection contingency ( if there is one).  I have not seen anyone lose their whole deposit over issues, but I did recently work with a seller that had their home sold and the people backed out, we settled for $5,000. 
The buyer did this to avoid litigation.

John Sacktig
Broker / Manager
Orange Key Realty
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  • November 18 2010
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Hi,
Most purchase contracts incorporate provisions regarding defaults, so the first step is to read your contract closely.

First, make sure your buyer has defaulted. Agreements often include contingency clauses, which allow the buyer to declare the contract null and void if certain criteria are not met. Some examples of contingencies include a satisfactory home inspection or adequate mortgage financing. Most clauses specify a time limit to meet the contingency. If the contingency is not resolved within the time limit, the buyer can back out of the purchase contract without penalty.

There are many contingency items that a buyer who gets cold feet can take advantage of to walk away from the purchase. If all of the contingencies have been resolved and the buyer decides to back out of the contract, it is indeed a default. In this case, check your contract for a liquidated damages clause, which will specify the compensation for which you are eligible. If you do not have a liquidated damages clause in your purchase contract, there are a couple of options you can pursue.

The simplest way to resolve a default is to keep the earnest money deposit. If you feel the earnest money deposit is not sufficient compensation, you can take your complaint to court. Keep in mind though, that going to court can be expensive and time-consuming, and the outcome is unpredictable. Before you take any action against your defaulted buyer, consult a real estate lawyer for advice on your particular situation.

Good Luck.
  • November 18 2010
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If the buyers backed out during their inspection contingency on the offer, then you have no right to keep the deposit.  If you are represented by an agent, then he/she should be able to answer the question in your situation and your offer contract.  The typical offer deposit is $1,000 so it is most likely not worth the effort to try and keep the deposit. If you think about it at least you did not take you property off market for 30 or 45 days to find out the buyers are going to close.  Good luck on your sale.

Best,

Eric
  • November 18 2010
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