Return Or Forfeiture Of Down Payment
Sales of real property involve a significant investment. Real estate transactions
change people's lives and require extensive planning. As such, sellers
like to know that buyers are serious when they make an offer to purchase
property. Often, a buyer will tender a down payment with the signed real
estate contract— also called earnest money — to show the seriousness
of their offer to purchase.
If a buyer backs out of a purchase agreement at the last minute or without
valid cause, the earnest money may be forfeited to the seller. At the
law office of Vishnick McGovern Milizio, our real estate attorneys represent
parties in disputes regarding the return or forfeiture of down payments.
How Earnest Money Is Handled
Most contracts have certain contingencies that allow a buyer to walk away
from the purchase of a property, for example if the buy cannot in good
faith obtain a loan. If a buyer walks away from a purchase agreement for
a reason that is not listed in the contract as a basis to withdraw, it
will be more difficult to have the earnest money returned. Earnest money
is generally paid into an escrow account held by the seller's attorney.
Common contingencies that are written into a contract for sale that provide
for a return of earnest money to a buyer include:
- Appraisal of the property — VA loans protect a buyer's earnest
money by stipulating that an appraisal cannot come in below the sale price.
- Passing a property inspection — If an inspection reveals unsatisfactory
conditions, the earnest money should be returned.
- Obtaining financing — Earnest money is refunded if a buyer does not
qualify for a loan. Many buyers are prequalified.
- Selling a current property — Many buyers cannot afford to own two
properties, so they write a contingency into the contract that they must
sell their own property. If that doesn't happen, the earnest money
is usually refundable.
Let Us Review Your Case
We welcome the opportunity to review the facts of your real estate matter
and provide a candid assessment of what you can expect. Our lawyers represent
both buyers and sellers throughout the New York metro area in these disputes.
Call us or use our
online contact form to schedule a consultation.