Under what circumstance could a seller keep the earnest money?

A seller can retain the earnest money if the buyer defaults without a valid reason. In real estate transactions, earnest money is typically provided by the buyer to demonstrate their commitment to the purchase. If the buyer walks away from the contract without a valid excuse—meaning they don't meet the terms outlined in the contract or they fail to perform their obligations—the seller is entitled to keep the earnest money as compensation for the time and resources spent on the transaction.

This scenario reflects the purpose of earnest money: it serves as a security deposit assuring the seller that the buyer is serious about purchasing the property. Should the buyer default without proper cause, the seller has the right to retain that money, which is often stipulated in the purchase agreement.

The other situations do not generally provide grounds for a seller to retain earnest money. For example, if an appraisal exceeds the sale price, it typically benefits the seller but doesn't justify keeping the earnest money. Similarly, if a buyer secures financing after the fact, this often reflects a positive outcome where the earnest money would not be forfeited. Additionally, a decrease in market value is unlikely to contribute to a seller retaining the earnest money, as the terms of the original contract and actions of the buyer take precedence in such situations.