6 ways to lose your EMD (Earnest Money Deposit)

7 minute read by Jason Gelios REALTOR®/Author

It can be frustrating going through the home buying process only to have to walk away from what a buyer thought would be their next home. Not to mention having to get the seller to agree to release the earnest money deposit that was offered with the accepted offer. 

Here are 6 ways to lose an earnest money deposit:

1. Failing to meet deadlines
It is critical that a home buyer stays on track and meets the deadlines set for things like home inspection, appraisal order and getting final docs to the lender. 

2. Getting caught up inn a bidding war
A lot of emotions can pop up when getting caught up in a bidding war. If a buyer decides to waive certain contingencies in their offer and then decides not to move forward due to buyers remorse, they just may lose that EMD.

3. Agreeing to a non-refundable deposit
If a home buyer agrees that they will lose their deposit if they don't close on the home for any reason, then it will be lost. oftentimes this happens when multiple offers are received and a buyer feels desperate to gain leverage over other offers. 

4. Failing to understand what 'As-Is' means
If a buyer is purchasing a home and it states as is, that simply means that a buyer can not just walk away due to inspection or other issues that may arise. before buying an 'As-Is' home, make sure you understand the risk. 

5. Waiving contingencies prematurely
If a home buyer waives certain contingencies prematurely, it opens them up to risk. One example of this is when a buyer waives the right to have a home inspection but then later learns that the home has issues that could be costly. 

6. Walking away from a home purchase for personal reasons
While some sellers may feel some compassion for a buyer that has been dealt with one or more personal issues, typically the seller will keep the deposit. This is due to the home being off the market during the process and usually a mortgage payment being made by the seller. 

While these are some of the reasons how a home buyer could lose their deposit, many times it is at the discretion of the home seller whether or not they should agree to releasing it. Both buyer and seller need to sign a mutual release form stating how the EMD will be distributed.