One word you'll hear thrown around a lot in the property buying process is the word contingency. The American Heritage Dictionary defines the word "contingency" as "An event that may occur but that is not likely or intended"....this might actually get you MORE confused AFTER you've discovered what the literal definition is, so let me give you a simple way to think of it. When you're buying a property, think of it as a race. The start of the race is when your offer is accepted. The end of the race is when the deal is done. Money is exchanged and the deed is swapped. Whenever you buy a property, you practically always put a deposit with a third party escrow or title company. This deposit is refundable, so long as you have contingencies in place.
Well, whenever you're buying a property, don't you want to usually do inspections and make sure everything's ok with it?? If you're getting a loan don't you want to make sure that you and the property can fully qualify? All of these conditions are "hurdles" in the property buying process. These hurdles are contingencies. You make have two weeks to do any and every inspection on a property that you want. This first hurdle is your inspection contingency. If it's going to take 3 weeks to have the appraisal done and make sure you fully qualify for the loan, this next hurdle is your appraisal and/or your loan contingency. Commonly, but not always, this is the final hurdle before the last stretch to the finish line.
So long as you haven't crossed that final hurdle, or removed the final contingency, your deposit is refundable. Once you've jumped that last hurdle though, your deposit goes hard and is up for grabs to the seller if you back out of the deal. As a last bit of advice remember, if the deal doesn't close after you cross the last hurdle, it doesn't matter WHY...If you lost your job, if you found another property, or if at the last second the bank giving you the loan changed their mind -- it's completely irrelevant. So be sure before you cross that last hurdle you understand your original deposit is going to be at risk and take all necessary precautions...now that's good to know.