Under what circumstance can the seller keep the deposit?

The correct answer is based on the principle of breach of contract in real estate transactions. When a buyer defaults before the completion of the sale, they are essentially not fulfilling their obligations as outlined in the purchase agreement. In this scenario, the seller has the right to retain the deposit as a form of compensation for the buyer's failure to complete the transaction. This deposit serves as a measure of good faith on the part of the buyer and, if the buyer fails to perform, the seller may suffer damages as a result of the breach. Therefore, retaining the deposit is a legal and fair recourse to help mitigate those damages.

By contrast, if the seller cancels the listing, this does not automatically grant them the right to the deposit, as the cancellation could be viewed as their decision rather than a buyer default. Similarly, if the buyer overestimates their financing, this situation typically falls outside the context of defaulting on the contract, meaning they have not necessarily breached the sale agreement. Lastly, if the seller agrees to return the deposit at closing, it negates the retention of the deposit entirely, indicating that there is a mutual agreement to allow the buyer to retain their funds instead of keeping it.