What Happens to My Earnest Funds if I Cancel the Contract?

July 10, 2022
Author: Heather Connor, Realtor

There are three things that could happen should you cancel your contract.

Depending on the circumstances, here are the things that could happen to your earnest funds when you cancel your contract. Let's discuss quickly how these may occur:

#1 You get your earnest funds back

This occurs when you have correctly canceled your contract and is usually due to new information that you have found during your due diligence process. You exercise to cancel, utilizing what we call a contingency. Your agent will send a notice of termination which will state which contingency you are utilizing. And this can include items such as appraisal inspection, ILC survey, association documents, etc.

#2 You lose your funds and the seller gets to keep them

This occurs when you have failed to send the proper notice of termination or you did not send it in time for that particular contingency. In competitive markets, you’re seeing that buyers are waiving all contingencies when they’re cash buyers, which means the funds are non-refundable from the very beginning. 

#3 Your funds go into mediation or court

The outcome of the mediation or the court ruling will ultimately decide who gets to keep the earnest funds.

Follow me if you would like to see similar videos about real estate. If you have questions, send me a text 619.333.7412

Are you getting our Crested Butte Insider Emails?

Hyperlocal News, Real Estate Deal of the Week and living in Colorado’s Last Great Ski Town.