You’re going to buy a new home. You find the one that you want, make an offer, and put down a deposit. Weeks or even months go by, as you draw nearer to closing, and then you decide to back out of the purchase. Can you get your deposit back or do you lose it?
It depends. Generally speaking, almost all contracts that buyers and sellers sign have some contingencies. For instance, the contract may state that the deal is contingent on the home inspection; if the home passes, then the buyer has to complete the sale, but they don’t have to buy if it fails. Another common contingency is on getting the mortgage loan; if the lender denies the loan, the buyer does not have any obligation to purchase the now-unaffordable home.
When contingencies cover the reason that you back out, you get your deposit back. The seller does not get to keep it.
Where you run into trouble is if you simply change your mind and it’s not covered by a contingency of any sort. Maybe you thought you liked the home when you made the offer, for instance, but you decided later that you actually wanted a brick house. There is nothing wrong with the home you offered on, but it has wood siding.
You can still back out of the deal, but you may not get your money back if you do.
As you can see, people on both sides of a real estate transaction need to understand the ins and outs of the contract that they intend to sign — before they pick up a pen.