What happens to the earnest money deposit if a buyer cancels the contract after the Loan Qualification Deadline?

When a buyer cancels a contract after the Loan Qualification Deadline, typically the buyer may lose their earnest money deposit. The earnest money serves as a demonstration of the buyer's good faith and commitment to the purchase of the property. Once the Loan Qualification Deadline has passed, the buyer is expected to have secured financing or otherwise fulfilled their obligations regarding that condition.

Contracts often include specific contingencies that protect the buyer's earnest money, but if a buyer cancels the agreement without a valid reason tied to these contingencies after the specified deadline, they risk forfeiting the deposit. This is intended to compensate the seller for the time and resources they invested while the property was off the market, alongside any potential losses incurred due to the delay.

In contrast, if the buyer cancels the contract prior to the Loan Qualification Deadline or for reasons allowed by the contract, they are generally entitled to a full refund of their earnest money. Other options mentioned would either misrepresent the rules regarding the handling of earnest money or impose conditions that typically do not exist in standard real estate transactions.