Question about earnest money

Question

We signed a contingent offer to buy a house and put $1000 earnest money down with the realtor. The contingency was based on us selling our current home. It has been 2 weeks (the offer was for 60 days) and in that time we have found out we are pregnant and I have decided to stop working and stay home with our 4 kids so we really can't afford the new home anymore if we will be living off of just my husbands military paycheck. We really don't want to loose the earnest money by backing out so i'm thinking the only way not to loose the money is just to turn down any offers we get on our house in the next 6 weeks, but to do that would keep stringing the seller of the other house along and waste our realtors time...do you think if we told the realtor the truth we would still be able to get the earnest money back or is turning down any offers the only way to ensure getting our money back? thanx for any help!

Answer 1

Legally, you should lose your earnest money if you do what you are suggesting.

Even though it is not specified in your contract terms, you are nonetheless required to make a good faith effort to satisfy all contingencies.  If it is a financing contingency, then you must apply for financing.  You don't get to simply sit on your butt, fill out no mortgage applications, and then say, "Oh, well, I don't have financing.  I'm backing out."

Likewise, if the contingency is selling your home, then you must make a reasonable effort to sell.  Deliberately refusing all offers is certainly not a good faith effort.

On the plus side for you, if you failed to sell your home, the burden would be on the sellers to prove that you deliberately made sure the sale contingency was not satisfied.

Answer 2

Depends on the contract, but usually there are clauses built into the contract that you could use.  For example, there is usually a clause stating that the contract is void if the purchaser fails to secure financing.  You should talk to your real estate agent.  They will know the ins-and-outs of your contract and whether or not there is someway you can back out without losing your $1000.