What happens to the deposit when buying a home in Massachusetts, what happens depends on why you decide not to move forward and what your Purchase and Sale Agreement says.
Here are the most common situations:
Before your offer is accepted: If you haven't submitted a deposit or your offer hasn't been accepted, you generally owe nothing.
During a contingency period: If your offer includes contingencies (such as a home inspection, financing, appraisal, or sale of your current home) and you terminate the contract according to those contingency terms and deadlines, your earnest money deposit is typically returned in full.
After contingencies have been removed: If you simply change your mind after your contractual protections have expired, the seller may have the right to keep your deposit as liquidated damages, depending on the terms of the contract. In some cases, additional legal issues may arise if the contract allows for other remedies.
If the seller breaches the contract: If the seller is unable or unwilling to perform under the agreement, you are generally entitled to the return of your deposit and may have other legal remedies.
In Massachusetts
The deposit is usually held in an escrow account by the listing broker or the seller's attorney. If there is a dispute over who is entitled to the deposit, the escrow holder typically cannot release the funds until:
Both parties sign a written agreement authorizing the release, or
A court orders the funds to be released.
If you're considering backing out
Before making a decision, it's important to:
Review your Offer to Purchase and Purchase & Sale Agreement.
Check whether any contingencies are still in effect.
Speak with your real estate agent and your real estate attorney before sending any notice to terminate.