Do I Lose My Earnest Money If I Change My Mind About Buying the House?

When your offer is accepted, you put down money to show you are serious. It is called earnest money. It is commonly around 1% of the home's price.

That money does not go to me or to the seller. It goes to the title company, which holds it. You deposit it directly with the title company, or you take it to their office. Before you send any money, confirm the instructions by calling the title company at its usual number. Nobody else, including me, sends you those instructions. If you buy the house, it usually counts toward what you bring to closing.

It is a number of days at the start of the contract when you can walk away without penalty, for any reason. It is usually about 5 to 10 days, depending on what gets negotiated. To have that right you pay a separate amount, called the option fee, agreed on in the contract. That fee has to be delivered on time; if it is late, the right may not hold.

Those are the days you do your inspection, look closely at what you missed during the showing, and decide calmly. If something does not sit right and you cannot reach an agreement with the seller, you can walk away with written notice in time, and your earnest money is usually returned. The option fee, on the other hand, usually does not come back.

This is where the earnest money really is at risk. After the option period ends, walking away without a reason the contract recognizes can mean the seller keeps it.

The contract can include other protections, for example about the loan or the appraisal, each with its own deadline. If those deadlines are met and notice is given in time and in writing, there are cases where the earnest money is protected. If the deadline passes, that protection goes with it.

1. Before you offer, learn your dates. I walk you through them one by one: when the option period starts and ends, and when the other deadlines fall.
2. Book the inspection on day one or two. Do not leave it for the end of the option period.
3. Read the report with me. I tell you what is serious and what is normal in any house. If the inspection found something, your options are in The inspection found problems in the house I want to buy.
4. Decide within the deadline. If you are going to walk away, notice goes in writing before the period ends. One day late changes everything.
5. Stay in touch with your lender. They tell you how your loan is going. I walk you through that process step by step, but approval is their decision.

• Thinking the deposit is lost the moment you sign. If you meet the deadlines and give notice in writing, usually not. Every contract is different, so read yours with me.
• Letting the option period run out while waiting to "see what happens."
• Giving notice by phone and not in writing.
• Sending the money to anyone other than the title company. Your earnest money goes to the title company, and if you get an odd email changing the account, call the title company at its usual number before you send anything.

A buyer made an offer, it was accepted, and they did the inspection at the end of the option period. The report came back with things that worried them, but there was no time left to bring in a second specialist or negotiate calmly. With the inspection at the start, they would have had days to think. That is why we build the calendar the same day the offer is accepted.

How much is the earnest money?

Commonly around 1% of the home's price, but it is agreed on in each offer.

Who holds my money?

The title company. Never the agent or the seller.

Does the option fee come back too?

Usually not. It is what you pay for the right to walk away during those days. If you buy the house, the contract decides whether it is credited to you.

What if the loan does not come through?

It depends on what your contract says about financing and on notice being given in time. It is looked at case by case.

Earnest money is not a trap. It is a commitment with clear dates. If you know the dates, you know exactly how long you can still say no.

Has anyone walked you through the dates in your contract before you signed it?

Text or email me your question or the house you are looking at, and I will explain what your deadlines would look like and where your money sits. No commitment, nothing to sign.

I am Veronica Yeary, a REALTOR in Dallas-Fort Worth, CRS, ABR, SRS and CIPS, in real estate since 2010.

469-441-8890 · Text or call · veronica@veronicayeary.com · Email