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The buyer is cancelling Escrow can I keep the deposit?

Posted on Feb 11, 2011 by in Active Rain | 0 comments

The buyer is cancelling Escrow can I keep the deposit?

The buyer is cancelling Escrow can I keep the deposit? One of my sellers asked me this question. I always wonder when this question is raised: 1. did my seller not read the Purchase Agreement, 2. did they not remember when we discussed “the liquidated damages clause” and the “buyer’s investigation clause”, or 3. are they just trying to be difficult out of frustrations that the buyers changed their mind about their property?

My answer is very cut and dry: 1. the buyer has the right during the investigation period to walk away without risking their Good Faith Deposit, (which here in California is, generally 3 per cent), 2. As long as Escrow is not cancelled the seller cannot sell the property to anyone else, hence the buyer will not sign cancellation until he or she is assured that she will get her money back, 3. Also by not returning the Good Faith Deposit the Seller is in violation of his/her contractual obligation and needs to be prepared that the buyer will take legal action.

Therefore to avoid unnecessary drama, complication I recommend that cancellation be signed quickly so we could move on and sell the property to a willing buyer. On a side note, generally the longer the property was in Escrow the more likely the Escrow Company will charge the buyer handling/cancellation fees from the Good Faith Deposit.


If you are a consumer  who is considering buying  or selling  a home, investment real estate, vacation homes, or beach properties in Southern California, Los Angeles, Century City, Westwood, West Hollywood, Beverly Hills, Culver City, Marina Del Rey, Venice or Malibu. Feel Free to give me a call at 310.486.1002 (USA) or email me at  or visit one of my websites at  Your Pet Friendly Realtor. I contribute a portion of my commission to Local Animal Rescue Organizations



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