Condominium Contract May Allow Builder To Keep Earnest Money

Added March 12, 2008 by Ilyce R. Glink and Samuel J. Tamkin

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Summary: When you put earnest money down on a condominium with the intention of buying it you risk losing that money. Even if you can't sell your current condominium, that doesn't mean you'll be able to ignore the terms of the contract. It may mean that the builder will keep your earnest money even if you don't end up buying the condo.

Q: I put down earnest money on a condo last May. I was also selling my condo. My condo didn't sell and I was very honest all along with the builder of the condo about the status of my condo.

The builder said all along not to worry about the contract, but they were just stringing me along. Now they said they don't have to give me any of my deposit back. The Austin, Texas, market is still strong, so they should not have a problem reselling my unit. Can you please help me get my money back?

A: You need to review your purchase agreement for the condominium you are purchasing. I might even suggest that you talk to a real estate attorney to review your contract and any other documents you have from the builder of your condominium.

There may be something in those documents that may allow you to back out of the deal.

However, you signed a contract and agreed to buy the new condo. If the contract doesn't give you the right to cancel the deal if you don't sell your current home, you would be required to close on the purchase whether or not you have sold your home, or even if it would put you into bankruptcy.

The builder's remedies would be set forth in the contract. If the contract specifies that the builder gets to keep your deposit as the builder's remedy, then they may be entitled to keep it unless there is case law or a state law that would require them to give all or a portion of the money back.

Please take your documents and go to a good real estate attorney who is familiar with new construction laws in your area.

March 12, 2008.

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