Who gets the earnest money?

[Ilan M Aliphas]

I'm selling a townhome in Houston, TX and we are 2 days away from closing.  The house went through inspections and everything passed with flying colors. Sometime after the inspection a water leak coming from the neighbors home caused damages to the property. The neighbor's insurance will cover the cost to fix the damage. However, due to the timing the Buyer is asking for $20k price reduction due to the water leak damage.  My profit on this sale is slightly less than the requested discount so I am not willing to accept it. I rather fix the damage, have the neighbors insurance pay for it, and find a new Buyer once the issue is resolved.

The important question is: After I say NO to the requested discount, if the Buyer decides not to proceed with the purchase, would the Buyer be entitled to receive their earnest money back or should I?

Thanks for the advice BP!!!