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What Happens To My Real Estate Deposit If My Purchase Falls Through?

Real Estate Deposits : 101


We recently sold a listing and after we obtained the deposit from the Buyer the Seller called me to ask when she could have the real estate deposit. Apparently she needed to make a purchase and was counting on that cash right away. Here’s the 411 on real estate deposits and what happens when deals fall through (or not)

You’re Sold Conditionally

A conditional sale is most common when a Buyer needs to confirm a few things prior to “firming up” on their purchase. The most common conditions we see are: Financing, Home Inspection, and Status Certificate review (condo only). Of course there are others but these three are most common. If the Buyer is unsatisfied with any of their findings during their conditional period they can back out of the deal and they get their real estate deposit back. Sorry you can’t keep it!

You Have A Firm Deal

Well this is where things get tricky. Many folks think that you are able to just take the real estate deposit if a Buyer walks or fails to close (aka Buy) the property once there is firm deal on the table. A firm deal is one which doesn’t have any conditions or the conditions have been satisfied by the Buyer and “waived” or “fulfilled” effectively removing them from the deal.

If the Buyer fails to fulfill their obligation to close the deal you must sue the Buyer for the real estate deposit and win, effectively have the deposit money (and anything over and above) rewarded to the Seller as damages.

So how do we determine the damage? Basically the damages are equal to the Sellers losses due to the breach. For example, the court may order the the property to be re-listed and sold. Once sold if there is a difference in price between what the original buyer paid and the new buyer (let’s assume it’s less) then that’s the damage. If the deposit originally paid is greater than the damage awarded then the balance is returned to the original buyer.

If the re-listing results in a sale price higher than the original sale price (that was breached) then it’s possible the entire deposit could be returned to the original buyer minus any losses incurred due to the delay.

So the main reason you can’t have the money before the Buyer actually buys your property is that there’s always a chance the deal won’t close. So to sum it up: You don’t just get the real estate deposit if the deal doesn’t close and you can’t have it until the deal closes. Clear? Questions? Just message us and we’ll holler back or use the live chat below.

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