Earnest Money Refund
On 2-9-04, I put a contract on a condo 'for sale by owner'. I gave the seller $1000 earnest money and in the contract it stated that I had up to 45 days to get financing. I was turned down for financing because the appraisal value of the condo was less than the amount the seller and I agreed on. My attorney is working on my case now and she tells me that it's a possibility that I could get my earnest money back but the seller may try and keep it.
I want to know, can I be refunded my earnest money based on the fact that the loan didn't go through because of the appraisal? What right would the seller have to keep my earnest money? 
Was the earnest money check made payable to an escrow account or the seller?
Mike
it was made payable to the seller. he deposited into his savings acct. is that a bad thing?
It's not such a good thing that the seller has the money. The seller may end up spending it. However, the same laws apply to earnest money regardless. If there is a dispute and the parties can't come to an agreement it would be decided by an independant attorney or in small claims court. Usually the cost of this is more than the sellers want to take on so in most cases the money ends up going back to the buyer. Since the seller has the money in his account it is a bitr more difficult. If it were in an agents trust acct or an escrow neither party would be entitled to it until they came to a written agreement or it went to court. Your contract had a financing contingency. You couldn't get financing based on the appraisal. In most cases you should be able to get the money back or ask for an adjustment of the sales price so that your bank can approve the loan. You may want to try to negotiate that. In reality, if the seller is asking too much for the house, the next person who comes along will not get financing either. He needs to think about that. Can you amend the sale price here and save the deal? One loophole here that may allow the seller to keep the earnest money is that he may contend that your financing was approved by the bank and that the appraisal was not written into the offer as a contingency of financing approval. He could argue that if you come up with the extra, the bank would close. ALWAYS protect yourself by the extra step of adding the statement "this offer is contingent on an appraisal showing the the property has a market value at or above the offered sale price." Put it in the lines used for other. Anyway, Good Luck with this!
Thank you all for your responses. Your responses must have came with 'good' luck because I just got a call from the seller stating that I can come and get my earnest money today. Thank God!
Take care...
If you still want the condo, try to renegotiate your contract purchase price for the lower appraisal value.