Silver Spring, MD Buyer FAQ: when is my earnest money deposit at risk??

Real Estate Agent with Thompson Company, REALTORS® MD594797

When a buyer submits an offer on a Silver Spring, MD or beyond property, a copy of his earnest money deposit check is included. The check must be deposited into an escrow account (typically the buyer's broker or Title Company's escrow account) within 7 days of contract ratification.

Although we recommend a deposit of about 1% of the sales price, it can be much larger. In multiple offer situations, for example, a larger deposit can help you stand out. That's quite a bit of money and, understandably, many buyers makes that a bit nervous.

Silver Spring, MD Buyer FAQ: when is my deposit at risk? Could I really lose my earnest money?

When I go over the paragraph concerning the earnest money in the Residential Contract of Sale, I also relay the following Real Estate story from the trenches to my buyer clients:

I was the listing agent on a property and represented the sellers. Our buyer's offer was chosen because the financing appeared very strong. There was a solid preapproval letter from a local reputable lender, a loan officer who answered her phone and a very experienced buyer's agent.

We moved along just fine: home inspection, termite inspection and appraisal were all done with little to no problems. Communication was excellent and all parties were kept up-to-date along the way.

Until about a week prior to closing that is.. about 4 weeks into the contract. All went quiet.

The scheduled settlement date was set for a Friday, a week prior we had yet to receive the financing commitment letter. The lender and buyer's agent kept talking about one "thing" that still needed to be verified but what that "thing" was exactly, was rather confusing. However, we were assured that all would be well... the Friday before, on Monday and then Tuesday, the day the buyer's financing contingency expired.

On Wednesday we were told that that "thing" that needed to be verified was taking a bit longer and we would likely have to push back our settlement date. But, there was still a glimmer of hope to settle on time ... so let's all hold off with the extension until Friday.

On Friday the settlement was canceled.

What happened? As it turned out, the buyer had quit his job on Monday but did not inform anybody. The lender found out on Wednesday when a final verification of employment call was made... a day after the buyer's financing contingency expired.

The buyer lost his earnest money deposit.

Per the Financing Addendum the buyer was required to promptly inform all parties if there was a change in his finances/employment that would impact his loan approval. He did not do that. Instead he thought that nobody would find out.

Silver Spring, MD Buyer FAQ: when is my deposit at risk? Could I really lose my earnest money?

Yes! When you, as the buyer, default and not perform according to the contract conditions, your earnest money deposit could be at risk. The contract between buyer and seller is legally binding!

Don't go out and make any large purchases between making an offer and settlement. Don't max out your credit card. Don't lend large sums of money to a friend. Don't misrepresent your finances. Don't lie about your employment. Don't quit your job days before closing.

Do follow all requests of your loan officer and provide any and all documentation promptly. Do work closely with your REALTOR®, discuss step-by-step what will happen between contract and close and when all contingencies expire. And do inform your REALTOR® and loan officer promptly about any change in circumstances! 

When you follow the above advice, you won't be putting your earnest money deposit at risk but walk into settlement with a smile!

*I am a REALTOR® & ABR® (Accredited Buyer's Representative) in Silver Spring, MD and beyond but I am not an attorney. No legal advice is given nor implied. If you are in need of legal advice, please consult legal counsel.*


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Thompson Company, REALTORS

16910 Oak Hill Rd, Silver Spring, MD 20905
o: (301) 384-9177 c: (240)593-2860

Andrea is a REALTOR® based in Silver Spring, MD, who has enjoyed assisting buyers and sellers in Montgomery and Howard County, MD (and beyond) for 16+ years now. She always answers the phone with a smile, enjoys running, hiking, and traveling, speaks German, reads a lot, blogs a little, and drinks too much coffee. 


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 Andrea Bedard, Thompson Company, REALTORS: from Just Listed to Just SOLD


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Fred Griffin Tallahassee Real Estate
Fred Griffin Real Estate - Tallahassee, FL
Licensed Florida Real Estate Broker

Oh, that is a painful story.  Especially if he voluntarily quit, and was not fired.  He should have held off for a few more days.

Jun 14, 2016 11:36 AM #1
Andrea Bedard
Thompson Company, REALTORS® - Silver Spring, MD
M.A.; REALTOR® Silver Spring, MD and beyond

It was painful Fred. I understand the buyer's reasons (which I didn't think were appropriate to disclose here) but it didn't change the fact that he was in a legally binding contract. Just a few more days but he thought he was save and nobody would find out.

However, all worked out for the seller in the end!

Jun 14, 2016 11:50 AM #2
Patricia Kennedy
Redfin - Washington, DC
Home in the Capital

Andrea, the contracts are pretty ambiguous when it comes to the financing contingency expiring - the seller has to sign and deliver a form saying, OK Buyer, you have 3 days to get the letter from your lender or the contract is void.  Even then, the buyer usually gets the deposit back.  But what tripped your guy up was concealing the job status.  


Jun 14, 2016 01:47 PM #3
Bob Crane
Woodland Management Service / Woodland Real Estate, Keller Williams Fox Cities - Stevens Point, WI
Forestland Experts! 715-204-9671

I dont see many people losing their deposits, but quitting your job in the middle of a purchase like this is certainly a good way to lose more than your deposit.

Jun 14, 2016 01:58 PM #4
Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

Andrea Bedard wonder why buyers do not stick to 10 commandments (Thanks to Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi ).

Scary answer - YES - however, they better know the facts...

Jun 14, 2016 04:16 PM #5
Beth Atalay
Cam Realty and Property Management - Clermont, FL
Cam Realty of Clermont FL

Hi Andrea, what was that buyer thinking? It's important for buyers to know and understand what they're signing. 

Jun 15, 2016 08:21 AM #6
Larry Johnston
Broker, Friends & Neighbors Real Estate and Elkhart County Subdivisions, LLC - Elkhart, IN
Broker,Friends & Neighbors Real Estate, Elkhart,IN

Hi Andrea Bedard , Some Buyers do things without thinking.  We had a client that lost his home a couple weeks ago, because he go mad a work prior to closing and walked out.  Needless to say, his wife was not happy!

Jun 15, 2016 12:19 PM #7
Andrea Bedard
Thompson Company, REALTORS® - Silver Spring, MD
M.A.; REALTOR® Silver Spring, MD and beyond

That's precisely it and why the deposit was released to the seller, Pat.

It was the first time in my 12 years Bob and I am glad I represented the seller.

I don't know Praful! I not only tell this story to my buyers but keep reminding them along the way. It's not a done deal until the last signature is placed at the closing table!

He wasn't Beth! He assumed it was a done deal and didn't anticipate his lender verifying employment again right before closing.

That sounds very similar Larry! It's not a pretty situation for anybody involved and an expensive lesson to learn for the buyer.

Jun 15, 2016 01:10 PM #8
Suma sridhar
.. - Fremont, CA
Realtor You Trust


Sometimes, listing agents advise sellers stating, this is an opportunity to make money from the buyers and let us get the  easy money . But I always try to be fair for both the sellers & Buyers I ask the sellers whether they prefer to take the entire deposit or Can we  try to get the new buyer for the property ?  If we get new buyer  within 1-2 week  I get the PITI of the sellers from the previous buyer.This makes buyers happy and seller will have the satisfaction of helping the jobless buyer. We are in relationship business and we need to understand other parties too &  think in their angle too.


May 24, 2017 10:26 PM #9
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Andrea Bedard

M.A.; REALTOR® Silver Spring, MD and beyond
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