I completed the previous post writing about earnest money. In this second post about new construction, I will specify six way a buyer can possibly get his or her earnest money returned from the builder or seller.
The first reason buyers can potentially get their earnest money returned is if the house appraises for less than expected. So, if the builders agrees to put an appraisal contingency in the contract then the buyer may be able to get his or her earnest money returned if the home appraises for less than the original purchase price or the buyer can agree to only purchase the house at the appraisal value.
The second reason buyers can potentially get their earnest money returned is if the builder agrees to a financing contingency. This means that if you cannot get financing, then you can potentially get your earnest money returned. This one is harder for obvious reasons.
The third reason buyers can potentially get their earnest money returned is if the builder agrees to a sell of buyer’s previous home contingency. This means that if your old home doesn’t sell, then you don’t have to purchase the new construction.
The fourth and probably most important reason buyers may be able to get their earnest money back is if you find out the new construction has major flaws. Many minor flaws can be fixed and the deal can go through, but if there are major flaws buyers can get their earnest money returned. Make sure there are no major flaws.
The fifth reason buyers may get their earnest money returned is that the house isn’t finished. So, if the home isn’t finished a buyer can get his or her earnest money returned.
The sixth reason a buyer can get his or her earnest money back is if the seller backs out. This will not typically happen in new construction unless the builder decides not to complete the subdivision that is being developed.
The caveat to the above six approaches is that the builder will have to agree to put the contingencies in the contract. Not all builder will agree to write all of the above or any of the above contingencies in the contract. If the contract says none refundable you will not probably get the earnest money back without a lawsuit. Check back to the blog for part three of the series on new home construction. Please feel free to share this post on your social media page, leave comments below, and subscribe to this blog.
