Earnest money deposits

[Thai Nguyen]

So I am selling an investment property in Sacramento and after about 3 weeks, the buyer fell though. We had another back up offer so we decided to send the original buyer a cancellation stating we are going to keep their deposit because they wrote the offer as an all cash offer but did not state it was contingent on a sale of their own home. Upon sending the cancellation, the agent threatened to hold it up in court and then title said we can not move on with the sale to the new buyer until the matter is resolved.

My question is, how frequent is it that seller keep deposits without having to fight for it? What is the process say we did decide to fight to keep it or should I just give the money back and move on with the sale to the new buyer?

[J Scott]

What exactly do you mean that you sent a cancellation? Was the contract still in force? If the buyer missed the closing date without fulfilling the contract or extending it, you shouldn't have to send a cancellation. The fact that you sent a cancellation says to me that you were trying to cancel the contract before the buyer defaulted. Is that true?

Perhaps you can be more specific about timeframes and whether the buyer actually defaulted or not?