How to get earnest money back the day before closing

12 Replies

Hello Folks,

I would appreciate it if I get some advice on one of our deals. We are purchasing a 240K property in Mckinney, Texas and are supposed to close the deal tmrw August 6th 2015. However, during the last walk through today we discovered more damages to the dry wall in the garage which was covered earlier by their furniture and wasn't caught by us or even the inspector and they haven't put this in the disclosure either. Apart from this issue the seller has already refused to pay the 2015 tax hike and HOA additional fees which was brought to our attention in the last minute. We have cut a lot of slack to this seller, since we wanted to make this deal happen. However, based on our recent discoveries we would have decided to walk away from the deal if the sellers won't budge and work with us on the repairs or come up with a mutually agreeable solution. Now my questions is if we can walk away and also be able to keep our earnest money, cause this was apparently not disclosed to us fully and the seller is basically trying to be unethical. Please let me know your thoughts. Thank you for your time.

Kind Regards,


@Rajiv Nair

Are you still within the option period of your contract? I believe most Texas contracts have an option period built in where you can exit for any reason. I'm assuming that since you're so close to closing, you probably are not.

I wouldn't worry about the drywall damage - it may look really bad, but drywall is inexpensive and pretty easy to fix yourself, if you're into that sort of stuff. While all defects in a house should be listed in the disclosure, I don't know the extent of the damage and it could be perceived as 'normal use', if the damage is light. I'm sure you could fight this, but I have a feeling that you would spend more in legal fees than fixing the issue at hand. 

The 2015 Tax Hike and HOA Fees are of more concern to me. I'm not entirely sure what you mean, but unless otherwise stated, taxes and HOA dues are prorated, so if they occur before the close, you shouldn't be paying these and they should come out of the owner's proceeds during the closing process. Now, this doesn't mean it is always the case, the last home I purchase specifically stated in the purchase agreement that I would have to pay the past due HOA fees, which were around $9,000. I didn't know the exact amount until it was time to close, but was able to estimate this when I made the offer on the house by looking at the judgements pending against it and extrapolating for newer missed payments. With all that being said, all that really matters is what is in the contract itself, where these fees are concerned.

Sorry for the 'not so helpful' answer,


Hello Christopher,

Thank you for the response. I should have been more clear in my earlier post. We got this SFR under contract sometime end of July, so we are way past the option period. We are about to close the property tmrw.

As far as the HOA issue goes, its not the sellers fault but ours since its not actually dues but some sort of fees for changing properties, the folks who put the HUD together didn't catch this either till the last minute and it clearly states that the buyers that is us would be responsible for it. We are totally ok with paying these fees, and also the hike in taxes compared to 2015 there is a difference of 300 dollars or so prorated for 8 months, its just that the audacity of the seller and the unwillingness to work with us is encouraging us to walk away from the deal.

Now on top of the above we have this damage which wasn't disclosed. I am not sure of the extent of the damage, I just had a talk with my wife who is in Texas now (BTW I am in Portland, OR) so didn't get the clear picture except that she mentioned there were 9 huge holes which was earlier covered up by their junk.

Thanks for the response once again.

Kind Regards,


Dont know how huge the holes are, but a 4'x8 'sheet of drywall is under 10.00

This part seems like a minor issue, even if you have to bring a drywaller in to replace or patch the holes, cost should be minimal, maybe I'm missing something. 

@Rajiv Nair

I can understand why you are frustrated and why you may want to walk away, but dealing with unhelpful and/or rude seller won't hold up to get you the earnest money back. The HOA Transfer Fee/Demand can be either paid by the buyer and seller and sounds like they stuck you for it in the contract. The increase in taxes has nothing to do with the seller, that is controlled by the government. Nothing to do there except appeal the increase, but given the rise in real estate values, unless your home is appraised inappropriately, probably a waste of time as I believe my houses in Texas were re-evaluated upon sale.

So that leaves us with the drywall. If there are 9 holes in one wall (lets say 10'x10'), it is going to cost you a few hundred to get it repaired. The primary cost here is just going to have the contractor come out and the small scale of the project. You can DIY this yourself for under a hundred. Since it is a garage, I doubt that if you don't perfect the finish, anyone will notice or care. 

If you withdraw from the sale, you will need the seller to sign off on returning your deposit to you, which I doubt will happen. Then you would need to sue them in small claims court to attempt to recover your deposit due to the non-disclosure, but I'm not sure if you would win. Either way, just the time spent suing them will outweigh any judgement you receive.

Anyhow, if you like the house and you're getting it at a reasonable price, I would probably just bite my tongue, cast a few voodoo curses on the seller, and close on the property. Some people just aren't good people and you shouldn't let them get you down. 


I'm hearing a classic case of buyers remorse.  If the actual damage is extensive take pictures and notify the seller that you will not close until the problem is dealt with.  They could close and have funds held in escrow to accomplish repairs

Thank you for your responses.

Nick  - Thats right.. Just double-checked the contract and seems like that would be the way to go, if the seller doesn't budge.

Dell - The point was just not the holes, but the way the seller is reacting completely unethical. I know its a sellers market, but that doesn't mean they should be hiding stuff away.. Besides just got a contractor in and they say its going to be about $350 to get the work done. 

Bob - Thats exactly what we did. Got the walkthrough done this afternoon, reached out their agent let them know that we are going to walk away if they aren't prudent about this issue, got a contractor in found the cost, and now negotiation is going on.

Christopher - I completely agree with your point. I am not going to fight for the earnest money if its not going to be handed. I would rather walk away take that money add some more to it and invest in Portland instead of Dallas where my family is planning to spend our future.. Loved the Voodoo idea, ha ha.. But I would rather just move on and connect with right folks than dwell with such characters which is dime a dozen..

Will provide more update to the thread as things gets cleared up. But I think we got the answer to our question. Its just a matter of time now.. We have our exits lined up.

Thanks again for all the timely valuable suggestions

@Rajiv Nair

  not sure about Texas however in our state and only experienced RE brokers know this generally... if you were not given a state approved disclosure document that you signed of on that was filled out by the seller... you can withdraw from the transaction at any time and all EM is refunded..

Hello Jay,

Thanks for the insight, however the disclosure was a legit state approved document, however the issue is that the seller just conveniently  "Omitted" damages that should have been disclosed appropriately.

Thanks for responding.

Kind Regards,


@Rajiv Nair

You're going to have a really tough time selling non-disclosure of visible damage as a legitimate issue.  Also, the disclosure document is generally geared toward non-cosmetic issues.  And, drywall damage in a garage, which isn't even required by state building codes to be drywalled, would be considered cosmetic.

As for the taxes, how was the contract written? If the contract specifies that the seller is responsible for prorated taxes through closing, they have no choice but to use the current tax assessment for those calculations. The same goes for the HOA. If your contract says they are responsible for any incurred HOA fees, through closing, they must perform. If they fail to perform on either of those, they will be in default on the contract, and you may exit the transaction with your EMD. If you didn't write the contract to make those items the seller's responsibility, then you've learned a lesson and need to get that straight with your agent, before your next purchase.

Thanks for all your responses.

Wanted to close this thread with a good note that we were able to close the property and negotiated with the seller to pay towards the damages. The HOA fees was not sellers responsibility to being with. As I have explained in my responses earlier, this was a fee that was supposed to be paid by the buyer, unfortunately wasn't showing up in the HUD1 until the 25th hour, which was ridiculous. As far as taxes are concerned Seller had already agreed to pay us prorated cost as per 2014 taxes, but we know that the taxes for 2015 are going to be definitely higher and have an amendment in the HUD to have them reimburse the amount once the taxes for 2015 comes up which is sometime in Nov 2015..

My wife is signing the papers as we I write.

Kind Regards,