Real estate transactions come with some risk. Sellers take a risk when they accept an offer. They are no longer talking to other potential buyers and could loose out on other options if the deal falls through. A seller often asks for a deposit to help mitigate this risk. The buyer and seller will then set up an escrow account to safely hold the deposit.
What happens if a buyer changes their mind?
Any number of things can lead to a buyer second guessing their decision to purchase the property. The value of the property could plummet before closing. The buyer could get a new job and need to relocate. A change in health could warrant a different living situation.
Whatever the reason for the change, the buyer should know that backing out of the deal will likely come with the risk of losing the escrow deposit.
Why would the buyer lose their deposit? Isn’t escrow designed to keep the money safe from the seller?
The escrow is generally set into place to hold funds until each party completed a particular action. Although the seller generally cannot reach the funds until completion of the closing, the buyer cannot get these funds either. The exact working of the escrow account will depend on the provisions used to create the account.
What if the other party broke the agreement?
If you believe the agreement was broken and that the deposit should be refunded, you can challenge the decision. The best options for resolution will depend on the details of the case. In some matters, arbitration may work well while others may do best with traditional litigation.