Earnest Money

[thegrapelady]

I have been trying to find a clear answer online but haven't been able to.  I have two questions about earnest money.

1. If a home does not pass the inspection (and because of this the buyer does not purchase the home) is the earnest money refundable?

2.  If the financing is not approved (even though it had been pre-approved)or there is a problem with the loan is the earnest money refundable?

Thanks!

[ShanetheMortgageMan]

These are actually state & contract specific questions, and are fully negotiable while you are making your offer.  Most contracts have contingencies, meaning that you are going to buy the home contingent upon certain items.  The three most common contingencies are: home inspection, appraisal & financing.  If you don't like the results of the home inspection, you can back out... if the home doesn't appraise for the sales price, you can back out... and if you don't get approved for the loan, you can back out.  Usually the contract states contingencies have to be removed by a certain date, such as you can't wait until the last second to get a home inspection, it must be done within 5 (or however many) days, etc.  Not all states have deadlines though.  If you don't already have a real estate agent then you might want to get one, or at least call a local title company and ask if you can come in and get a copy of the normal purchase contract that is used for your area.