Expert: liznarr - 1/24/2008

Question
We have a contract on a new construction home. The contract is contingent (with
a kick out clause) on the sale of our current home. We may be getting
transferred out of state and may not be able to buy this home. What is the
policy in this case on the earnest money we put down? Thanks!"


Answer
Hi C,

Your Contact of Sale will dictate the terms of the return (or forfeiture) of any earnest money you have put up.

If you have a kick out clause contingent on the sale of your current home, and your home has not sold prior to the expiration/closing date of your Contract of Sale (and absent any other language in your Contract to the contrary), you should not be obligated to complete the sale.  In this case, your earnest money should be refunded in full.

In the case of a contingency such as you have in your Contract, read your Contract carefully to determine if the language states that your home must sell and ALSO close prior to the expiration/closing date stipulated.

If you are transferred out of state and your home DOES sell prior to your transfer, you might be obligated under your Contract to complete the sale.

ANY terms of ANY contract can always be changed by mutual agreement of the parties.  Any changes should be reduced to writing.  If you find that you will be transferred, it can do no harm to approach the Seller and ask to be released.  The Seller can either refuse or agree to release you.

In the event Seller were to agree to a release, he could release all or a portion of your earnest money.

Good luck to you, and write again if you have additional questions.

Regards,
Elizabeth