That’s easy, or should be. If the seller does not accept your offer, you’re entitled to your deposit back, immediately. It’s just that simple. The seller has to agree to your entire offer, including any terms you propose. If the seller agrees to the price but not the terms and counters with different terms, which you don’t accept, there’s no deal and you’re entitled to your money back. If the seller accepts your terms but counters with a different price, which you don’t accept, the deal’s off and you’re entitled to your deposit back.

The moment the seller declines your offer and “counters” (proposes a deal different in some way, no matter how small), the original offer is dead. Unless you accept the seller’s counteroffer, you’re entitled to your deposit back. Once in a very great while an unscrupulous agent will say something such as, “Even though the seller didn’t accept, I made a goodfaith effort to get the deal through. Therefore, I’m entitled to half the deposit. I’ll return half to you and keep the other half.” No way. In the typical purchase offer, the agent gets a commission only if the deal is consummated. If the seller never agrees, no commission is due. Politely tell the agent you want your entire deposit back immediately or you will report the agent to the state department of real estate. That should do it. (Note: If you sign an agreement with a buyer’s agent, be sure to read it carefully, especially with regard to how the deposit is handled.)

What If the Seller Accepts

and Then, Later On, the Deal

Falls Through Because of Me? There are many reasons the deal might fall through because of your fault. For example, you could be counting on Aunt Harriet to give you the money for the down payment. You get the seller to sign an offer, secure financing, and poor Aunt Harriet has a heart attack and dies. Her money will be tied up in probate for years. Sure, you didn’t do anything intentionally to quash the deal, but you don’t have the expected money to perform. As far as the seller is concerned, it’s your fault. Or you get cold feet. You take a look at those huge monthly payments and you decide that you can’t go through with it. You want out, period. Or you find another house that is really perfect. You want to get out of this deal so that you can get the other. Or . . . There are lots of reasons that you might not want to or not be able to complete your end of a purchase agreement. The point here is, however, that for whatever reason, it’s your fault the deal doesn’t go forward, and if you don’t have a contingency clause protecting you (see below), what are your chances of getting the deposit back?

Put simply, your chances are not good. In fact, you could be in hot water and liable for a lot more than just the deposit if the seller decides to sue you for specific performance (demanding that you complete the transaction). Most sales agreements provide that if you default, the seller is entitled to keep the deposit. (Separately, the listing agreement between seller and agent may specify that they will split the deposit in the event of your default.) Thus, at least in theory, as soon as you default on the deal, your deposit is lost. And, of course, there could be an irate seller to deal with. In the past when a buyer defaulted, a seller occasionally did sue for damages, thus tying up the courts and causing long-term problems for everyone concerned. As a result, liquidated-damage clauses for residential real estate have come into wide use in sales agreements and are accepted and even codified in many states.

Will a “Liquidated Damages”

Clause Protect Me? Basically these clauses state that if you and the seller agree in advance, the deposit (or a portion of it) will constitute the entire damages the seller is entitled to in the event of your default. In other words, if the deal doesn’t go through and it’s clearly your fault, you agree in advance that the seller can keep the deposit, provided she or he agrees not to sue you for additional damages or specific performance. Many states put limitations on liquidated damages. In order to keep more, the seller has to prove in a court of law that it’s reasonable to hang onto the money. If you want your money back, you have to prove that it’s reasonable for you to get it. Either way, for practical purposes, the seller is usually satisfied and unless you’re litigious by nature, you probably are satisfied, too. (Of course, both seller and buyer can agree to virtually any amount as liquidated damages, though it’s normally not to your advantage as buyer to agree to a high amount.) You may be asked to sign or initial a clause in the sales agreement that states that if you do not go through with the sale, your deposit is automatically forfeited in exchange for the seller not suing you for specific performance. Should you sign?

Ask your attorney. On the one hand, signing the clause (assuming the sellers also signs) helps to limit your loss to the deposit receipt. (It does not guarantee it there are few guarantees in life!) On the other hand, it almost ensures that you’ll lose the entire deposit, whereas, depending on the situation, you might otherwise get at least a portion back.

What If There Are

Extenuating Circumstances? While what potentially can or cannot happen may seem quite dire, what actually happens in practice can be somewhat different. If you simply back out because you change your mind or find a better house, chances are that neither the seller’s agent nor the seller is going to be sympathetic, and you stand an excellent chance of having them demand your deposit. However, if circumstances cause you to default your aunt, whom you were counting on for money, dies or you get sick or injured or something happens that is truly beyond your control then it’s often a different story. Here, you are truly relying on the goodwill of the seller’s agent and the seller. In most cases where I have seen this happen, the buyer has gotten most, if not all, of the deposit back. Agents are not in the business to make money on deposits. Sellers are interested in selling, not in keeping the deposit of a person who falls on hard times. I have seen agents bend over backward in these circumstances to get the seller to give the deposit back. I have seen sellers gladly return the deposit, sometimes over the agent’s objections. Of course, you could get the bad apples, but goodwill in people is everywhere.

What If the Seller (Not You)

Fails to Go Through with the

Deal? Why would a seller fail to go through with a deal, once signed? Simple. You offer $150,000 for a house and the seller accepts. Two days later another buyer comes in with an offer of $175,000. Wouldn’t it be wonderful if the seller could get out of your deal and accept the new one? The seller would stand to make an additional $25,000. That’s plenty of reason to default.

In these circumstances you are fully justified in demanding the return of your deposit. In addition, you may want to sue the seller for specific performance, to force a sale to you. (After all, you could then resell for the higher price and keep the profit yourself!) When the seller defaults, you usually will get the deposit back. Usually the seller is more than happy to do everything to get that deposit back to you in the hope that you won’t take further action. If you still want the property, check with your attorney. You may decide to take further action.

What If It’s No One’s Fault, but

the Deal Just Can’t Be Made? There are a lot of reasons that a deal might not go through. You may not be able to secure adequate financing. The title to the property may not be clear. There could be extensive termite damage. It could turn out that the house is in the middle of a flood plain. The reasons are endless, and they crop up in a good many deals. In most cases there’s a way to work them out. Other financing is secured. The seller clears the title. The termite damage is fixed. You agree to accept the risk of flood damage for a lower price, and so on. In other words, the problems are solved one way or another. However, sometimes it just doesn’t work and there’s no deal to be made. What happens to your deposit then? If you’ve given it to an agent who has kept it in a personal trust account, you can demand it back, and in most cases the agent will immediately return it (perhaps risking the ire of the seller). If the conditions of the purchase agreement can’t be fulfilled, normally you’re entitled to get it back, and most agents don’t want to argue the point. On the other hand, if the deposit’s been placed in an escrow account, it usually takes both the buyer’s and the seller’s agreement to get it out. Maybe the seller is angry that the deal fell through and says, “I’m not signing anything.” There your deposit sits, even though you’re perfectly entitled to it. Unless the agent can prevail and convince the seller to release it, it could remain there for a long time!

As a practical matter, however, as soon as another buyer comes along, the seller probably will be forced to release it so as not to jeopardize a later sale. All of which brings us back to my original point. The money you put up for deposit is at risk. The less you put up, the less you risk.