One of the most common questions is, "what happens to my deposit if I don't buy the house?". Here are the most common scenarios.
What happens if you have put a deposit down on a house, but you’ve changed your mind? What happens to your 3% deposit?
In California, we have what is known as an “active contingency removal.” This means you have to remove your contingencies in writing. If you don’t, your deposit is safe.
This is how it works. Imagine you have found some big issues with the house during the inspections. Maybe the foundation is crumbling, or the title isn’t clear. You decide to cancel the escrow. In that case, a cancellation is sent to the seller and the escrow company. You have not removed contingencies in writing, so you’re entitled to a refund.
Here’s another scenario. The inspections are taking a little longer than expected. Maybe there was a holiday during the contingency period, or perhaps the inspectors have simply been booked. In this case, the listing agent will generally grant an extension. If they won’t grant an extension, they still must issue what is called a “Notice to Perform”; after that, a “Demand to Close,” which takes about four days. Even though it’s past the seventeen-day contingency period, you haven’t removed the contingencies in writing; therefore, you are entitled to receive the deposit back.
In the third scenario, you have done the inspections, everything turned out great, and you’ve removed your contingencies in writing. Now, for some reason, you can’t follow through with the sale. In this situation, you lose the deposit, and the seller is entitled to the full 3%.
So when you sign that piece of paper in front of you, you are removing all your contingencies. You’re locked in. You’ve lost your deposit. You are buying that house. The agent sends it to the seller, and it’s done.
This is the process in California. Contact a local real estate agent, as your state may differ.