REO Low Earnest Money Deposit Realtor Pushback

Eric, I am pretty sure Anita sends a copy of a check in with her offers with a the contract reading that earnest money will be paid at closing. Im not 100% because it was awhile ago.I am sure If Anita pops on she will let you know .

$10 dollar earnest is hard for most Realtors to get a grasp of. Your approach can work and here is another suggestion:

Create a photo copy of the $1,000 dollar check. Have the Realtor send in the offer with the photo copy and an addendum that reads: "Earnest money to be paid within X days." or "Earnest money to be paid at closing."

For the X days I usually put 15.

Another approach would be to send in a promissory note. Here is the promissory note that I use:

Nathan Street and/or assigns (buyer), promises to pay ____________ (seller) the amount of $1,000 (one thousand dollars) earnest monies for the purchase of real property, known as ______________ located at ______________________ at the closing of such purchase.

This note is legally binding. The fulfillment of such promissory note is contingent upon all addendums and contract conditions being met from contract dated _______________.

You can also change the last sentence of the second paragraph which reads: "at the closing of such purchase." to "within ________________ days."

I have found however that most Realtors do not understand the note approach so I have to teach them.

However you do it the purpose is to give yourself some time before you have to pay earnest. This time would allow you to find a buyer who would then pay the earnest instead of you.

One more approach I wanted to add:

You can take your $1,000 earnest and put it in an escrow account. Escrow is an independent third party who is not partial to either the seller or the buyer.

You would give escrow instructions to give the money out upon a contract acceptance and according to the addendums in the contract.

You would add the addendums as before - you will pay in X days or at closing.

Escrow is a great deal because no one gets the check and you do not need to worry about the seller cashing the check or the Realtor doing the same. But, your earnest is still viable and in play (meaning an acceptable form of earnest).

Just like Nate said....

I copy a check which has my signature and the amount of 1k. When we make an offer, my Realtor copies my copy that I gave him, and he fills in the date and Listing agents RE company name. If the offer is accepted I send my Realtor a real check. I don't have any verbiage in the contract, this is just what we do...I've never had a listing agent come back and say that they need a real check to entertain the offer.

D

Nate, BC and CBR are all right. And yes, I always send a $500.00 copy of a check in with my offer. My realtor just copies it every offer.

Most sellers today are not requiring a copy of the check. The contract shows the amount of the earnest money to be delivered to the escrow company when the contract is accepted. If the seller requests a copy of the check, then a photo copy is used. This is common in my area right now.

Al

Thankyou for this valuable info because if I get hung on this stepping stone I will know how to approach it and not scramble around and use my bill money for earnest money and not even get it back. I like the copy of the check system and that way I am not using my own money but the buyer will pay for it. Another thing I like is if I don't sell it then I won't lose a cent. This is a great no money down technique

There are a lot of great items posted and I agree with the $1k copy of the e.m. check. This has worked for me, in the past and on my past 2 deals in April. If you establish a relationship with a realtor and carry yourself as a professional they usually will go for it. Be Confident and assertive as a real estate investor. Good luck! Believe and Achieve

Great ideas and advice. What a great community of investors we have here.

Thank you,
Eric

cool...I picked up some good info...Good question erb12345

Good Advice.. I put an offer in today with my RE agent and she wanted me to give her a 1k deposit I ended up giving her 100$ and having the rest due upon my offer being accepted. Its funny because I have worked with other RE agents in the past and I never put a dime down when I was submitting an offer. the only money required was if and when the offer was accepted. has this happened to anyone else??? I like the advice stated here especially the photo copy of the check!!

This is a great strategy and a big help for me. The end buyer gets the honors, oh what fun!

"No more chicken feed"

Rod

what is the point of having earnest money deposit due at closing? Isn't all the money (purchase price) due at closing anyway?

The earnest money deposit tells the owner/bank that your serious about fulfilling your due diligence and obligations of the contract with the exception of whatever contingencies you put in the contract allowing you back out if you do not agree with the findings of those contingencies or risk using your deposit.

Just wanted to let myself know that i just had an aha moment reading this post. Thanks for all the great info.

i know what earnest money means, but when the closing date arrives, isnt that the supposed day when all the money is due for the house? so i dont see the point in the seller or the agent agreeing to have EMD due at closing, when they are eventually going to get all their money at closing. can any1 clear this up.

Yes the EMD would be credit back to the buyer when all the parties involved in the transaction go to closing. If you the buyer didn't fulfill your due diligence (or if you're assigning the property to another buyer and they've given their EMD and they don't fulfill their due diligence) then the Seller would be compensated for the time that the property was taken off of the market if it didn't close with the exception of exit contingencies in the contract. Its standard practice that the EMD is collected when the Seller has accepted a contract between themselves and the buyer again unless agreed otherwise.

Earnest money is "up front money". It is like a deposit to hold the property. As a Realtor, I would not allow my "seller client" to accept earnest money at closing. The earnest money is a tool that can be held over the buyers head to insure performance on their commitment to the contract. If the buyer fails to perform, the seller can cancel the contract and keep the earnest money. As dantheman24 said, earnest money that is not due until closing would have no purpose.

Al

thanx for clearing that up AI. I just didnt understand why a realtor would accept earnest money being due at closing, since that is when all the money is due anyway. but then how would you suggest some1 coming up with earnest money to pay the seller when they have no money to give, assuming this will be an assignment deal?

Some investors, on this site, have suggested using a promissory note for the earnest money. If you perform to the language of the contract, you will never need to come up with the money, and the seller will have the necessary security. The contract can also be worded to return the earnest money to the original buyer (you) at closing.

Al