If a formal contract cannot be finalized or mortgage financing is denied due to reasons not attributable to either party after paying a reservation deposit or down payment, demand a full refund

When you pay a reservation deposit or down payment but a formal sales contract cannot be executed, or mortgage financing fails due to non-fault causes (such as unexpected policy tightening or sudden bank lending moratoriums), the developer is legally obligated to refund your deposit or purchase funds with interest. If loan rejection results from your personal credit defaults or inadequate income documentation, the deposit is forfeited. If rejection stems from developer permitting defects, the developer must return double the earnest money.

Zero monetary cost. Review mortgage contingency and earnest clauses carefully when executing reservation agreements and formal purchase contracts. If a developer refuses a refund, civil litigation is required.

Under Supreme People's Court judicial interpretations on commodity housing contracts: where earnest money is collected through reservation or subscription agreements and the formal contract cannot be concluded due to fault of one party, standard earnest deposit rules apply (the defaulting depositor forfeits the deposit; the defaulting receiver pays double). However, if the formal sales contract cannot be concluded due to causes not attributable to either party, "the seller shall return the earnest deposit to the buyer." Regarding mortgage financing: where the purchase contract stipulates mortgage financing but the loan contract cannot be finalized, rendering contract performance impossible due to causes not attributable to either party, both parties are entitled to rescind the purchase contract. In such circumstances, the developer must fully refund all received purchase principal alongside accrued interest or refund the earnest deposit. Circumstances not attributable to either party include unexpected macroeconomic mortgage tightening or sudden regulatory credit quotas imposed post-signing. Conversely, failure caused by the buyer's credit delinquency or unverified income represents buyer fault, whereas developer project licensing deficiencies or bank blacklisting represent developer fault.

In judicial practice, determining whether financing failure was "not attributable to either party" is evaluated on a case-by-case basis. To safeguard rights, explicitly write financing contingency clauses into the purchase agreement stating what remedies apply if mortgage approval is denied. If a subscription agreement already contains all essential terms of a commodity housing sales contract and the developer has collected housing funds, courts will treat the subscription as a binding sales contract rather than an unexecuted reservation. Pursuing refunds through courts takes 3 to 6 months. Benefit magnitude is categorized as High based on recovering hundreds of thousands in deposits. Primary beneficiaries are yourself and your family.

最高人民法院 (2020 修正). 关于审理商品房买卖合同纠纷案件适用法律若干问题的解释（第一、四、五、十九条）. https://www.court.gov.cn/fabu/xiangqing/282621.html；全国人大 (2020). 民法典（第五百八十六、五百八十七条）. https://www.spp.gov.cn/spp/fl/202006/t20200602_463888.shtml