Help with earnest money

View all Local Real Estate forums. General Real Estate Investing 34 Replies.

What are the best ways that I can bypass submitting cash dollars and etc. Depends on who the seller is and what they have instructed the listing agent to accept.

I have used earnest money notes many times, but it's easier to do that if the Realtors know you, or have heard of you, if you have a reputation of closing deals you make. Most standard contracts have a box of EMN. A deposit can also be made after the contract is accepted. Doubt any bank will be accepting a note like this, but a motivated seller might. Consider what the EM is used for, to cover the costs of default. If a buyer had a loan approved and just got cold feet, a Realtor might want a commission, since they did what they contracted to do, so the Realtor has an interest in what the EM might be.

If you can sell the Realtors, you might get by with a note. Bill Gulley, General Real Estate Academy https: I hope you get some good answers here, but my suspicion is that you won't. The seller rightfully wants you to have skin in the game if they are going to take their property off of the market.

I think the best you can likely do if there is blowback on the earnest money is to ask for contingencies to get your money back. Contracts are generally tilted toward the buyer anyway. Lot's of creative ways to keep your money from being at risk Is putting some money down an option? Who is picking the title company? Many don't worry about the title company, but I seldom do deals outside of my title company because I have a relationship with them and they are not likely to "misinterpret" me getting my earnest money back in the event I need to exit for some valid reason.

What is your incentive to bypass the EMD? As Bryan mentioned most sellers are going to want you to have some skin in the game, and you can actually use the EMD to your advantage to make your offer look stronger. I don't see earnest money as "skin in the game" it's not a down payment until the contingencies have been met.

At the time the contract is presented, an EM deposit is only demonstrating good faith, that the buyer will follow through with the offer, subject to the contingencies, like successful inspections. The "skin" comes off later, after the borrower can't walk on the deal. It is only there to cover or indemnify expenses of the seller that arise due to the lack of performance by nthe buyer prior to closing.

At closing, the deposit is credited to the buyer and reduces amounts due. You can eliminate the use of cash for an earnest money deposit by providing a note or even agreement to hold a draft which is done, but is ofetn illegal under state law.

I have been involved in trades where no EM was required since other assets were being exchanged. This will never fly if your trying to buy bank REO ;s. Now you can get away with it if your dealing with distressed owners. Don't think there is much of a way around it these days.

From a sellers point of view prices are already low.. Whats really annoying is some sellers want emd in certified funds.. I know as a realtor I will show anyone any house once. After spending some time with them if I feel they don't have access to cash or financing I will tell them I need proof of funds before showing any more houses.. I don't get paid unless they have the ability to buy something. Bill's idea about using a note in lieu of earnest money is a good one and I have heard of people using it successfully.

Are you finding good deals that have multiple offer situations such that the magnitude of the earnest money is really important? Are these resi or commercial properties? If you are doing a short sale can you write the check out to the seller if a title company isnt involved yet? If you have a good repore with the seller of course If the seller is not represented, you can certainly make the EM payable to the seller, but the obvious risk is that the seller takes the money and you never see it again.

That's the value of using an escrow company to hold the money -- you can be sure you'll get it back if the contract calls for you to get it back. Consideration is the key here. If there is none, do you have a contract? Most states require consideration for it to be a valid contract.

With all due respect, I believe you are incorrect here. We've had this discussion here on BP on several occasions, and I believe most here are in agreement on that. In fact, one thread specifically discussed EM in Texas, and everyone ultimately agreed that there is no EM required in that state or any other for the contract to be valid. But, I'm more convinced of this belief based on the fact that this specifically was a question on the general real estate law not state specific section of my real estate licensing exam.

The correct answer given on the exam the pre-test was that earnest money is not required for a contract to be valid. Contract law states that for a contract to valid, it requires consideration in the form of cash or equivalent. In a real estate contract, the promise to follow through on the transaction is considered acceptable consideration, and I don't believe this is contradicted by any state law in any state.

If I'm wrong, I apologize, but I'm fairly certain that this piece of contract law is consistent throughout the country. As far as contract law is concerned, I would have to agree with Jason on this, however, to avoid any discepancies at all, why not put some type of financial consideration down?

In fact, the more cash put down, especially when dealing with REO or short sales, the stronger your offer looks, so why make it appear weaker by not giving a cash EMD? For those looking to eliminate the need to place an EMD , I say I don't belong in this game if you don't have the means to put something down.

Help! How do I get my earnest money deposit back??? - The Guldi Group

Will Barnard, Barnard Enterprises, Inc. I was trying to place the earnest money check with escrow, and then have it remain un-cashed until my contingencies were removed.

I got opinions from three different attorneys because I wanted to be able to sue for specific performance if a seller backed out of a contract.

Each said my chances of winning a suit for specific performance where basically zero without cash consideration. I'm not saying that you are wrong, but I am saying that a judge will look at a "promises to close" differently than actual cash consideration. You don't want to be in a situation where the other side can say, it's not a valid contract.

It's a basic contract law premise. A promise is not the same as cash as far as consideration in contract law. Contract law actually varies from state to state, but they are state laws. The best way to not have to put an EMD down is to have done a bunch of transactions previously with a track record of closing on the deals you agree to purchase from that seller. Then and only then should you bypass putting EMD's down.

Like Wil said, for those looking to avoid the EMD you might want to avoid getting in the game. As a new investor, I need to hold on to as much money as possible. With "retail" transactions you know, those weird people that buy houses to live in them , the EMD is as follows at least in my neck of the woods:. I like this house, but I don't love it.

I REALLY like this house. I'm in love with this house and my agent is a bit of a novice.

I'm paying cash and expect a significant discount. So for investors, keep in mind that your offer is being compared to other offers, and even if it's not, there's still an industry standard. If you come at me with a Zero EMD , I'll be countering it, guaranteed. Most folks don't counter though Jake Already have an account? How a Newbie Can Start Building Wealth Through Real Estate. Use your real name. Make it at least 8 characters.

Create a new account instead. An email has been sent with a confirmation link. That link will get you back here to reply. We look forward to your post. Log In Email Address: Share on Facebook Share on Twitter Share on LinkedIn 1 of 2 pages First Last. George Courtney Real Estate Investor from Los Angeles, California posted over 6 years ago. Hi Guys, What are the best ways that I can bypass submitting cash dollars and etc.

Bill Gulley Investor, Entrepreneur, Educator from Springfield, Missouri replied over 6 years ago. Bryan Hancock Investor from Round Rock, Texas replied over 6 years ago. Escape clauses in the contract 3. Inspections Is putting some money down an option? Todd Brittingham Real Estate Investor from Walled Lake, Michigan replied over 6 years ago. Curt Davis Residential Real Estate Agent and Turnkey Provider from Memphis, Tennessee replied over 6 years ago.

Scott Williams Residential Real Estate Agent from Battle Creek, Michigan replied over 6 years ago. George Courtney Real Estate Investor from Los Angeles, California replied over 6 years ago.

Full-Time Investor from Charlotte, North Carolina replied over 6 years ago. April G Real Estate Investor from Westminster, Colorado replied over 5 years ago. J Scott from Ellicott City, Maryland replied over 5 years ago Moderator. Originally posted by April G: Chris Colvard Wholesaler from Dallas, Texas replied over 5 years ago. See my wholesale contract for a way to minimize earnest money any still meet these guidelines: Sorry, Here's a functional link: Originally posted by Chris Colvard: Yes, you need consideration to have a valid contract.

J Scott, In Texas it is required. This can vary by state. So everyone else, please check the state you are in to see if it is a requirement. Chris, With all due respect, I believe you are incorrect here. Will Barnard Developer from Santa Clarita, California replied over 5 years ago Moderator.

J Scott, I hear you. Originally posted by Will Barnard: Kevin Kaczmarek Real Estate Investor from Fishers, Indiana replied over 5 years ago. Kristina Gaskins from Charlotte, North Carolina replied over 5 years ago. What is the price of the property? How are you funding the deal? Jake Kucheck Residential Real Estate Agent from Newport Beach, California replied over 5 years ago. With "retail" transactions you know, those weird people that buy houses to live in them , the EMD is as follows at least in my neck of the woods: Bryan Hancock Investor from Round Rock, Texas replied over 5 years ago.

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