Earnest Money
by Tom
(Park City, UT, US)
If I have earnest money in a property and have filed a notice of interest then the bank has foreclosed is there any hope in getting my earnest money back?
About Your Earnest Money – What You Need to Know
By Lanard
Hi Tom – thanks for reaching out with your question. While I’m not a licensed attorney and can’t offer legal advice, I can certainly help you understand the general principles at play here so you can take the next step with more clarity.
When you put down earnest money on a property, it’s typically meant to demonstrate your serious intent to purchase and to secure the contract while certain conditions are met. That deposit is usually held in escrow until closing or until a contingency is fulfilled, releasing it one way or the other. Filing a Notice of Interest—sometimes called a “Notice of Lis Pendens” or similar, depending on your state—signals that you have a legal or equitable interest in the property, which in theory can help protect your position.
Now, let’s talk about what happens when the bank forecloses on the property after you’ve deposited earnest money and filed your notice. This situation complicates things. Foreclosure generally wipes out subordinate interests, and unfortunately, that can include a buyer’s notice of interest, especially if the lender's lien predates your agreement. That said, all hope is not lost.
The key factor in recovering your earnest money will be the agreement you had in place when the money was deposited. If you had a written contract with the seller outlining the terms under which the earnest money would be refunded, that contract would be central to the process. Some contracts specifically state that if the transaction doesn’t close due to seller default or other specified conditions, the buyer is entitled to a refund of the earnest deposit. If foreclosure happened before the sale could close, and you were not at fault, that may strengthen your case.
Additionally, since you filed a notice of interest, you’ve formally established your involvement and intent with the property. That’s not insignificant—it shows you took steps to protect your interest. But whether it’s enforceable or carries weight against the foreclosure depends heavily on timing, state law, and how the courts interpret your particular situation.
Because of all these moving parts, your best course of action is to consult a qualified real estate attorney in your state, preferably one with experience in both contract law and foreclosure proceedings. They can review your original contract, your earnest money agreement, the foreclosure timeline, and any related documentation to determine your legal standing and the strength of your claim.
In short, while foreclosure complicates things, it doesn’t necessarily mean you’ve lost your earnest money. With the right legal guidance and documentation in place, a viable path to recovery may still be available. So don’t give up just yet—speak with a local real estate attorney as soon as possible to understand your rights and options fully.
For a deeper understanding of how earnest money is handled—including refunds, returns, and applicable regulations—you may find this article from the National Association of REALTORS® especially helpful: Earnest Money in Real Estate: Refunds, Returns, and Regulations.
Best of luck to you,
Lanard
