A buyer is entitled to return of earnest money if which condition occurs?

The entitlement of a buyer to return of earnest money is typically grounded in the conditions surrounding the acceptance of their offer. When the seller refuses the offer, the earnest money should indeed be returned to the buyer because no agreement has been established. The earnest money serves as a show of good faith by the buyer, and when an offer is rejected outright, the contractual obligations that would have rested upon acceptance do not exist.

In contrast, if the buyer backs out before acceptance, the earnest money may be at risk because no formal contract has been executed, and this can sometimes be viewed as a decision made at the buyer's own discretion. If the buyer is unsatisfied with the inspection results, they may have a stipulation in the purchase contract that allows them to negotiate or withdraw; however, if this isn't clearly defined in the contract, there may be complications. Finally, if the buyer withdraws during the consideration period but the seller has not yet officially accepted the offer, again, this creates uncertainty regarding the return of earnest money because the offer is still open for consideration.

These nuances reinforce why a buyer is entitled to a return of earnest money specifically when their offer is rejected by the seller, preventing any binding obligations from forming.