If an earnest money deposit for a home purchase is not refundable, the buyer or seller must first review the purchase agreement to identify the terms outlining refundability conditions. If the deposit is non-refundable due to a buyer’s failure to meet deadlines (e.g., financing, inspection, or closing), the seller may retain the funds. In such cases, the buyer should: 1) Consult a real estate attorney to verify contractual obligations, 2) Negotiate with the seller to resolve disputes, 3) File a claim with the escrow agent if the seller breached the agreement, or 4) Pursue legal action in court if necessary. State laws, such as the U.S. Department of Housing and Urban Development (HUD) guidelines, often require clear documentation of why the deposit is non-refundable.

The non-refundability of earnest money deposits typically arises from contractual breaches or specific clauses in the purchase agreement. For example, if a buyer defaults on financing or fails to complete due diligence within the stipulated timeframe, the seller may legally retain the deposit. Data from the National Association of Realtors (NAR) shows that 12% of earnest money disputes in 2021 involved financing-related issues, while 18% stemmed from inspection or timeline failures. Additionally, the American Bar Association (ABA) notes that 30% of deposit disputes are linked to ambiguous contract terms, underscoring the importance of precise legal language. Escrow agents often enforce these rules per state regulations, such as California Civil Code § 1700-1725, which mandates clear refund policies. Legal actions to recover deposits are rare but possible if the seller cannot prove contractual violations, as reflected in a 2022 Federal Reserve study showing only 5% of such cases result in successful buyer claims. Ultimately, transparency in contracts and adherence to deadlines reduce risks.