First time buyer - I'm not going through with the sale, do I get my EMD back?

Written by Posted On Saturday, 03 May 2014 04:58


Answer – That depends on why you aren't going to close on the deal. The Earnest Money Deposit (EMD) is money that you put into escrow when you make an offer as a show of good faith and earnestness in your intention to buy the property. It is meant to give the seller some assurance that you are serious and that he should be willing to take the property off the market for a reasonable period of time, awaiting your efforts to get to the closing table.

The amount of earnest money expected has varied wildly over the last few years, especially during the recent recession and with foreclosed or short sales in particular. Of late we are slowing getting back to the place that we were before the recession when an EMD deposit of 3% of the offer price was fairly normal. Putting that level of money at risk certainly shows a good degree of earnestness. We’ll discuss below why I say that it is at risk.

All Purchase Agreement (PA) contracts have specific language that defines the circumstances under which the EMD is returned to the buyer. By default, if the reason that you have for walking away is not defined within those terms and conditions then there is a good probability that the sellers will exercise his right to retain your money as compensation for having taken his house off the market for some period.

The circumstances under which the buyer gets his EMD back are normally covered in the PA and include:

  • Dissatisfaction with the results of the home inspection or any other inspections that were agreed upon (well, septic, Radon, infestation, etc.). If the parties cannot reach an amicable agreement for repairs or remediation of the issues, then the contract can be declare null and the buyer gets his EMD back.

  • In ability of the buyer to obtain a mortgage within a specified period of time. This usually hinges upon the appraisal, but there are other circumstances that can prevent the buyer from getting a mortgage, even if he/she was pre-approved. The contract is declared to be null and the EMD goes back to the buyer.

  • Buyer dissatisfaction with the condition of the title. Usually discovered during the title insurance research, there may be “clouds on the title” – unresolved issues from the past that call into question the sellers ability to pass a clear title to the buyer – or encroachments, easements or other legal encumbrances on the title that the buyer does not want to live with. The seller is usually given some time to try to clear these issues up; otherwise the PA is declared null and the EMD goes back to the buyer.

  • Failure to agree upon ant changes to the standard terms of the original agreement, including any changes made in the form of an Addendum or Amendment. Sometimes Amendments will be proposed by the seller that the buyer won’t agree to include in the deal. If the seller is adamant then the whole deal could be declared null and you know the rest.

  • Dissatisfaction with the final walk-through that cannot be resolved. The final walk-thru normally takes place 24-48 hours before closing, so it is the last chance for things to fall apart. If the seller has done things to the property that substantially alter its appearance or value (at least it the mind of the buyer), then the buyer has the option to object and demand that the house be return to the state that it was in at the time of the offer. Often this involves the seller taking things out of the house, such as chandeliers or appliances that were either included in the original offer or not specifically excluded by the seller and thought to be a part of the house (attached, not just hanging on a wall or laying on a floor). Sometimes it involves damage to the house that the seller has caused either intentionally or by accident when he moved out. In any case, if this cannot be resolved to the buyers satisfaction the deal is done and the buyer gets his EMD back.

So, when does the buyer not get his EMD back? Usually this occurs in cases where the buyer gets cold feet (called buyer’s remorse) for no good reason. If all of the inspections went well and there are no issues with the title and the buyer has the “clear to close” from his mortgage company and the house is still in its original condition; then there is no reason for the buyer to balk. If he/she does and back out, refusing to close, then the seller is within his rights to keep the EMD. Does that happen often? No, but it does happen. I’ve had a couple deals fall apart with buyers that I was representing where the buyer lost his EMD. In one of them, it was a case where the buyers company told him that he was being considered for a promotion to a position in another state. That was great for him, but we were just a week away from closing and that circumstance is not covered in the PA terms and conditions. He didn't want to be saddled with a new house and mortgage, incase that promotion came through, so he gave up his EMD and walked away. To this day, I don't know if he ever got the promotion.

The bottom-line for buyers (first-time or seasons buyers) is that you should carefully read the Purchase Agreement terms and conditions and understand what your “outs” are in which you get your EMD back. Your Realtor should be able to explain each one to you. Buying real estate is not a game and the EMD money that you have to put at risk insures that you understand that and don’t try to play games in the deal; however, you are usually well protected in the PA language against being forced to buy a “pig in a poke” or give up your EMD. If you are unsure whether you really want to go through with purchasing a house, don’t make offers in the first place – you’re just wasting everybody’s time.


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Norm Werner

Norm Werner is a Realtor at the Milford office of Real Estate One serving the southeastern Michigan area of Oakland and Livingston Counties. Norm specializes in residential real estate. Norm lives and works in Milford Michigan and is married to Carolyn Werner. Norm and Carolyn live in a historic home just three blocks from downtown Milford, with their two dogs - Sadie and Skippy. Norm specializes in the historic homes of Milford and the surrounding area and is on the Board of Directors of the Milford Historical Society. Norm especially enjoys working with first time buyers and those at the other end of the real estate spectrum who are downsizing into their retirement home. 

In addition to his web site, Norm also owns and m,aintains web site, the web site. He is also the webmaster for and the web site and the MilfordCar web site, as well as his church web site - In addition to blogging about real eastate, Norm has a personal blog - - on which he shares inspirational messages and the occasions personal observation about life.

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