Am I going to lose my earnest money? This is a question that is asked by every buyer almost every buyer I have ever worked for. The basic answer is:
No. If you follow the dates and deadlines in the contract.
Yes. If you DO NOT follow the dates and deadlines in the contract.
It is as simple as that. The Colorado contract allows for at least 3 ways for a buyer to back out of a contract and your earnest money will be returned to you per the agreement. There are a few more, but to keep it simple because every offer is different and because every transaction is different, these are the three you need to know whether you are a buyer or a seller.
- Inspection Notice Deadline and Inspection Resolution Deadline. When you (Buyer) made the offer you presumably had a date to have your inspection done and have inspection items requested to be fixed/replaced and submitted to the seller, this needs to be done on or before the date written in the contract. If you don’t want anything fixed because it is too expensive, or too many things were found and you just feel like this isn’t the house, this is where you back out. No explanation needed. Your agent will know what to do to pull you out of the contract and request the return of the earnest. If you do send a request and the seller doesn’t agree or send a resolution by the Resolution Deadline, you can back out here, as well.
- Appraisal Deadline is another important date. If the house doesn’t appraise for what you are willing to pay, whether you are a cash buyer or a buyer with a loan, you can back out here based on the fact the house isn’t worth the price you and the seller agreed to. The bank will not loan if the house is worth less, as per the appraisal, and if you are cash another reason to make sure you have an outside opinion of the value of the house.
- Loan Conditions Deadline. If you have passed the first two and think everything is fine you find yourself without a job you won’t qualify for the loan, therefore, you cannot pass the loan conditions set forth by the lender. If the interest rate changes too much and the payment is no longer affordable, this is another potential way to back out.
It is important that you keep in mind that every transaction is different, that you need to communicate with your agent and your lender and your lender and agent need to communicate to protect you, whether you are the buyer or the seller.
These are not the only three ways to back out of a contract and receive your earnest money back, but they are the most used deadlines. Be sure when you are working with a Real Estate Professional that they understand the contract, and remember in the State of Colorado, you can hire an attorney at any point in time during the transaction.
You can call me and know that YOU are in capable hands, who loves to negotiate on YOUR behalf and will represent YOU in the purchase and sale of YOUR next home.
