What happens to earnest money if the contract is terminated due to buyer contingencies?

When a contract is terminated due to buyer contingencies, it typically results in the refund of the earnest money to the buyer. Buyer contingencies are specific conditions outlined in the contract that must be met for the agreement to proceed. Common examples include financing, home inspections, or appraisal contingencies. If these conditions are not satisfied by the specified time, the buyer has the right to terminate the contract without penalty, which includes the return of their earnest money deposit.

In this context, the earnest money serves as assurance to the seller that the buyer is serious about purchasing the property. However, when contingencies are in play and the buyer exercises their right to terminate based on those conditions, the buyer is entitled to recover their earnest money. This protects the buyer's interest and provides a fair outcome in situations where they cannot proceed with the transaction due to issues outlined in the contract.