Every once in a while, an agreement between a buyer and seller will be terminated before reaching settlement. This can happen for a variety of reasons, but there are a few fairly common ones, including issues with the home inspection, appraisal, and the buyer obtaining a mortgage.

When a deal falls apart, all involved parties will sign a termination agreement that outlines how deposit money will be distributed.  The deposit money is one of the most important things to consider, as the buyer made at least one (and maybe even two) good faith deposits at this point.


The buyer is entitled to receive their deposit money back if the reason for termination is due to something that was covered by a signed contingency agreement. For example, if the home inspection reveals damage or disrepair and the buyer had a home inspection contingency, they are permitted to walk away from the sale with their deposit money intact.  Similarly, if the home appraised for less than the purchase price and the buyer had an appraisal contingency, they are also permitted to terminate the agreement.

There are times when the buyer is not entitled to their deposit money, however.  If, for example, they simply decide to not purchase the home a few days before settlement because they changed their mind, the seller is then legally entitled to the deposit.


On the other hand, if the seller decides after signing the agreement of sale that they no longer wish to sell, the buyer actually has the right to take them to court and force the sale. This is called lis pendens. As you can probably imagine, it’s a pretty complicated and exhausting process — but thankfully it’s pretty rare that sellers wish to back out!  If you have any questions about how this process works, please be sure to speak to your EveryHome agent or give us a call here at the office.