Q: We had our house under contract. and everything was on track. The inspection period had passed, and the buyer’s loan was approved; then he simply changed his mind because he found another house he liked better. We took our home off the market for six weeks for him. He left a good-sized deposit in escrow. Can we keep it? — Theodore

A: You are likely entitled to keep the deposit, but it is worth understanding where that right comes from, because it is not automatic.

A seller cannot keep a buyer’s deposit simply because the buyer walked away. You can keep it because your contract allows it.

Nearly every residential real estate contract includes a “liquidated damages” clause: an agreement that, if the buyer breaches, the seller may keep the deposit as compensation for the time and lost opportunity. However, you have this right only if it’s listed in your contract, which is why the first step is always to read it.

Reading the contract does two things. First, it confirms the buyer actually breached. From what you describe, the inspection period had passed, and the financing was approved, so the contingencies that would have let the buyer cancel and take his deposit back were gone. If a buyer walks after that because he found a home he likes better, he’s in default, and that’s what the liquidated damages clause was written for.

Second, the contract sets out the procedure for claiming the money.

The deposit is likely not in your account. It is held by an escrow agent, usually the title company or a broker, who is not permitted to hand it to either side on request. The agent can release it only when both the buyer and the seller agree in writing, or when a court or arbitrator orders it.

So even with a clear breach, you cannot simply demand the check unless the buyer consents, which is rare.

Most contracts set out exactly how this plays out, often requiring a written demand and mediation before either side can file suit. Failing to follow the procedure laid out in your contract can have consequences.

In most cases, the deposit is the agreed-upon remedy if a lawsuit has to be filed.

Occasionally, a contract gives the seller the option to forfeit the deposit and sue for actual damages instead, which can make sense when the loss far exceeds the deposit, but that is a longer, more expensive path. The contract will also usually provide for prevailing-party attorney’s fees, meaning the loser must repay the winner’s attorney’s fees.

Have a real estate attorney review your contract, confirm the buyer’s default, and properly send the demand.

Handled correctly, the deposit your buyer left behind should be yours.

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