Definition
When a contingency is satisfied (like passing inspection), the earnest money is released at closing to be credited toward your down payment. It's returned to you only if you cancel under a valid contingency.
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Earnest money is refundable if contingencies fail (inspection, appraisal, financing). Released at closing to seller. Escrow agent holds until closing or contingency resolution. Forfeited if buyer breaches without cause. Contractual language defines refund conditions. Title company or attorney releases funds. Disputes over refund eligibility require mediation. Ensure contingency language allows refund. Earnest money protects both parties.
Pro Tip
Carefully review earnest money refund conditions in the purchase agreement to understand when you get it back.
Example
Earnest money was refunded when appraisal failed to support purchase price.