In the United States, whether a house purchase down payment is refundable upon cancellation depends on the terms of the purchase agreement and the reason for cancellation. Generally, if the buyer cancels the transaction without valid justification, the seller may retain the down payment as liquidated damages. Conversely, if the cancellation results from the seller’s breach of contract or failure to meet agreed terms, the buyer is typically entitled to a refund. State laws and local regulations also influence outcomes, with some jurisdictions imposing strict rules on refundable deposits.

The refund policy hinges on the contract’s “earnest money” clause, which outlines conditions for deposit retention or return. For example, if the buyer cancels during a contingency period (e.g., financing or inspection contingencies), the deposit is often refundable. However, if the buyer unilaterally terminates the deal after contingencies are resolved, the seller may keep the deposit. Data from the National Association of Realtors (NAR) indicates that approximately 65% of earnest money deposits are refunded when cancellations occur due to seller-related issues or financing delays. In contrast, only 25% of deposits are refunded in cases where buyers cancel without valid reasons. State-specific data reinforces this variability; California allows buyers to recover deposits if sellers fail to disclose defects, while Texas permits refunds if cancellations occur within the agreed contingency window. A 2022 NAR report noted that 78% of agents reported deposit disputes annually, with misunderstandings over contract terms being the primary cause. Ultimately, the refund’s likelihood is tied to contractual language, state statutes, and the factual basis for cancellation.