An earnest money deposit is part of the home buying process, demonstrating the buyer is serious about seeing the transaction through to closing and transferring title. Because of this, you can’t just declare you’re no longer interested in the home and want your money back. However, if there are problems with the property, the seller has failed to adequately disclose some detail, or, you lose your job or income substantially drops, you’ll have a way out.

What You Should Do before Depositing Earnest Money

First and foremost, start with the property itself. If it has a new roof or just had a room or two remodeled, check with the local building code enforcement office to find out if the proper permits were opened and closed.

“Assuming that all goes well and your offer is accepted by the seller, the earnest money will go toward the down payment and closing costs. In many circumstances, you can get most of your deposit back if you discover something that you don’t like about the home.” —Realtor.com

Another thing you can do is to search public records from the clerk of the court’s office. Enter the property address, as well as the name of the current owner, to see if the property has one or more liens against it; if so, the seller is probably a defendant in an open civil lawsuit.

Should any of the above be discovered, do not, under any circumstance, give anyone an earnest money deposit. Instead, start your house hunt back up again and look elsewhere because this is far more trouble than it’s worth.

When You Can Get Your Deposit Money Back

The problem with the situation is, you don’t truly know what type of individual the seller is. If the owner is stubborn enough, he or she might go so far as to dare to file a lawsuit, strategically thinking that it will cost you a lot more time and money than it’s worth.

That might be an extreme example, but it is possible. Here are some common reasons buyers are eligible for a refund of their earnest money:

• The home inspection revealed some things in need of repair. This is one escape hatch you can use, if there are such material defects. Keep in mind, these must have substance in order to be effective.
• The home appraisal came in too low. Should the appraisal not match the purchase offer price, this too, is a way out. That is, unless the seller agrees to drop the price and allow the transaction to move forward.
• There is unpermitted work present. As stated above, unpermitted work can be a real problem for a seller, but if you want out, then this is yet another route.
• There are clouds on the title. Also as previously mentioned, liens and other encumbrances put a stop to a sale.
• The financing is being withdrawn by the lender. While this is generally out of your control, it is one of the conditions of the contract and will essentially void it because a key contingency is not being fulfilled.

Should none of these conditions apply, then you can speak with a real estate attorney to learn of your legal rights under the circumstances.