OfflineIm trying to do my first assignment but i cant seem to get past this little problem. i put on offer for 260k on this house which is valued at 500k and the offer was accepted, its need a little work though. now the owner wants me to put earnest money up but i told him that i dont have any and that i can get it from the end buyer. he said before he can sign any contract he wants earnest money upfront, until then he can only release a contract to me (whats that mean?), i asked him if he would agree to have a clause in the contract stating that "earnest money due with 10 days of acceptance or this contract is null and void" and he said no. i dont want to market the property to my end buyer without a contract in my name where he could possibly go around my back and buy the property. what should i do?
First Deal, running into a problem
Posted on: Mon, 11/23/2009 - 21:14
I am working on my first shortsale, but I am so confuse. After talking to my RE agent, she even get me more confuse.
Here's the scenario please give me some guidance:
I have the home owner all paperwork, he owes 365k on the mortgage but when I look on Realtytrac the property value is 311K, is that the value to offer the bank for it?
What arrangement should i make with RE agent about commission?
Should I let her does the short sale or I do it myself?
The agent gave some of her shortsale package form, should I used her form or I can buy mine off the internet?
Anyone experience with HomeEq loss mitigation dept?
Anything I can do to maximize my profit?
Should I give the home owner some of the profit.
Thanks for any help!!!
There are a number of options that you could use here "dantheman". First since you say the homeowner wouldn't sign the contract without an earnest money deposit, try presenting him with a promissory note as earnest money.
Secondly, if you have an end buyer, ask them to put up the earnest money(slightly more than what's needed), or else you can just write out a check with an addendum in the contract that all earnest monies are to be returned to buyer for whatever reasons that you so choose. Just remember that any earnest money that you put up goes into escrow, and is not to be touched/used by anyone until a specified time period. So technically you're just writing a check that is to not be cashed, or deposited into anyone elses bank account.
Bryant Slade
The earnest money check will probably be deposited into an escrow account. So the funds will be drawn from the bank and deposited into the escrow account. If you do not have an end buyer who is willing to put up the earnest money, a promissory note (as maximilionalpha mentioned) would be another option.
"NOW GO FIND A DEAL"
Watch your thoughts; They become words,
Watch your words; They become actions,
Watch your actions; They become habits,
Watch your habits; They become character,
Watch your character, it becomes your destiny.
Frank Outlaw
youre right about check being cashed alchristmann. Im trying to buy a short sale property right now and they said that they are going to cash the 1K earnest check i gave them even though the offer has not yet been accepted. might be a dumb question but how does a promissory note work?
ron
There are a number of options that you could use here "dantheman". First since you say the homeowner wouldn't sign the contract without an earnest money deposit, try presenting him with a promissory note as earnest money.
Secondly, if you have an end buyer, ask them to put up the earnest money(slightly more than what's needed), or else you can just write out a check with an addendum in the contract that all earnest monies are to be returned to buyer for whatever reasons that you so choose. Just remember that any earnest money that you put up goes into escrow, and is not to be touched/used by anyone until a specified time period. So technically you're just writing a check that is to not be cashed, or deposited into anyone elses bank account.
thats the thing, i dont want to reach out to my end buyers and disclose the address and everything without locking up the property on contract first. and the owner also said she could "release" the contract to me but not sign it without earnest money. Is that enough to protect me as the sole individual to exercise my right to buy the property? Lets say hypothetically, i have the 1,000 or 1,500 dollars of deposit with me and i give it to her as earnest money, then it turns out none of my buyers are interested, im screwed i have no end buyer, what happens to that 1,000 or 1,500 dollars that was deposited into escrow? o and how does a promissory note work and would the owner realistically accept that instead of earnest money?
Dantheman24, I submitted my first offer today with the Earnest Money Deposite with a note at the back of the check "TO BE CASHED AT THE CLOSSING". I'm not sure how the listing agent would take that, but I told my agent to give it a try. I'll let you know if this works. We need to act crazy sometimes especially if we don't have the cash, if they accept it, BINGO!!!
Everytime you repeat the words "I CAN DO IT" with conviction, you cancel or override your fear and increase your confidence. By repeating this affirmation over and over, you can eventually build your courage and confidence to the point where you are unafraid. -Brian Tracy-
There are a number of options that you could use here "dantheman". First since you say the homeowner wouldn't sign the contract without an earnest money deposit, try presenting him with a promissory note as earnest money.
Secondly, if you have an end buyer, ask them to put up the earnest money(slightly more than what's needed), or else you can just write out a check with an addendum in the contract that all earnest monies are to be returned to buyer for whatever reasons that you so choose. Just remember that any earnest money that you put up goes into escrow, and is not to be touched/used by anyone until a specified time period. So technically you're just writing a check that is to not be cashed, or deposited into anyone elses bank account.
thats the thing, i dont want to reach out to my end buyers and disclose the address and everything without locking up the property on contract first. and the owner also said she could "release" the contract to me but not sign it without earnest money. Is that enough to protect me as the sole individual to exercise my right to buy the property? Lets say hypothetically, i have the 1,000 or 1,500 dollars of deposit with me and i give it to her as earnest money, then it turns out none of my buyers are interested, im screwed i have no end buyer, what happens to that 1,000 or 1,500 dollars that was deposited into escrow? o and how does a promissory note work and would the owner realistically accept that instead of earnest money?
You need to make sure you have your contingencies in place. A promissory note might alleviate the burden of coming up with earnest money, but unless you have contingencies to let you out of the contract if need be, you will still be responsible to pay the note.
"Obstacles can slow you down, but they can only stop you with your permission." Dean Graziosi (BARM pg 101)
"For I know the plans I have for you," declares the Lord, "plans to prosper you and not to harm you, plans to give you hope and a future." Jeremiah 29:11
For a little about me, welcome to the site, and a few tips for new DG family members, click on this link: http://www.deangraziosi.com/user/3249
There are a number of options that you could use here "dantheman". First since you say the homeowner wouldn't sign the contract without an earnest money deposit, try presenting him with a promissory note as earnest money.
Secondly, if you have an end buyer, ask them to put up the earnest money(slightly more than what's needed), or else you can just write out a check with an addendum in the contract that all earnest monies are to be returned to buyer for whatever reasons that you so choose. Just remember that any earnest money that you put up goes into escrow, and is not to be touched/used by anyone until a specified time period. So technically you're just writing a check that is to not be cashed, or deposited into anyone elses bank account.
thats the thing, i dont want to reach out to my end buyers and disclose the address and everything without locking up the property on contract first. and the owner also said she could "release" the contract to me but not sign it without earnest money. Is that enough to protect me as the sole individual to exercise my right to buy the property? Lets say hypothetically, i have the 1,000 or 1,500 dollars of deposit with me and i give it to her as earnest money, then it turns out none of my buyers are interested, im screwed i have no end buyer, what happens to that 1,000 or 1,500 dollars that was deposited into escrow? o and how does a promissory note work and would the owner realistically accept that instead of earnest money?
You need to make sure you have your contingencies in place. A promissory note might alleviate the burden of coming up with earnest money, but unless you have contingencies to let you out of the contract if need be, you will still be responsible to pay the note.
yea but if i dont come up with earnest money there wont be a contract to get out of, lol, because i wont be in one to begin with. what happens if i had money to deposit and the deal falls through for some reason? will that money be returned to me? cause im not at that point in my life where i could say o whatever its only 1500 dollars. any1?
I don't believe they can cash the check until you have an accepted offer. Even if the owner accepts the offer, it must be approved by the mortgage company. Until that is done, you do not have a contract. ( I do not even take an earnest money check from the buyer until the bank has approved the contract. We do not want to be responsible for holding the check. This is what my Broker advises.)
Al
"NOW GO FIND A DEAL"
Watch your thoughts; They become words,
Watch your words; They become actions,
Watch your actions; They become habits,
Watch your habits; They become character,
Watch your character, it becomes your destiny.
Frank Outlaw
LOL! Ok, I got lost there with all the quotes. THINK I'm talking to the correct person now?
You're right. The original question is about the EMD. That is a good suggestion, about the promissory note. I just meant that whenEVER you make an offer, you want to include your financing, inspection contingencies (or whichever ones you use), so that you DON'T lose your earnest money if something happens. Especially if you are just starting out and need those escape clauses. As far as earnest money, I have heard of things as creative as offering a car, or even land or livestock as money down (of course the more creative the seller, the more open they might be to THAT kind of thing. lol) So, about the promissory note, just ask. The worst he can say is no, and unless you totally tick him off for some other reason, he'll always be willing to look at other options. This is also a time where if you have a friend willing to short-term loan that amount, or you've got a 0% interest credit card or something, you have options. Just think creatively. I'll bet you surprise yourself where you can come up with that money.
JUST some thoughts..
Rina
"Obstacles can slow you down, but they can only stop you with your permission." Dean Graziosi (BARM pg 101)
"For I know the plans I have for you," declares the Lord, "plans to prosper you and not to harm you, plans to give you hope and a future." Jeremiah 29:11
For a little about me, welcome to the site, and a few tips for new DG family members, click on this link: http://www.deangraziosi.com/user/3249
You're right. The original question is about the EMD. That is a good suggestion, about the promissory note. I just meant that whenEVER you make an offer, you want to include your financing, inspection contingencies (or whichever ones you use), so that you DON'T lose your earnest money if something happens. Especially if you are just starting out and need those escape clauses. As far as earnest money, I have heard of things as creative as offering a car, or even land or livestock as money down (of course the more creative the seller, the more open they might be to THAT kind of thing. lol) So, about the promissory note, just ask. The worst he can say is no, and unless you totally tick him off for some other reason, he'll always be willing to look at other options. This is also a time where if you have a friend willing to short-term loan that amount, or you've got a 0% interest credit card or something, you have options. Just think creatively. I'll bet you surprise yourself where you can come up with that money.
JUST some thoughts..
Rina
so let me get this straight, if i dont include a financing contingency or an inspection contingency i might lose my EMD? if i just let the contract expire without buying the property i'll lose my EMD? if deal falls through do i not get my EMD back?
But the reason for earnest money is to show the seller that you have every intention to follow through on the contract. This is why a person must do their due diligence on a property, and also include contingencies that can let them OUT of a contract if need be. MOST people buying a property are going to need a loan, so just about ANY seller will be EXPECTING a finance contingency (which means if you can't get a loan, the deal is off). MOST sellers will be EXPECTING the buyer to want an inspection, therefore will not baulk at that contingency. The only time you should make an offer with NO contingencies is if you KNOW it's a killer, killer deal and you have cash and already know exactly what you are going to do with it, or have a buyer already ready to snatch it up from you. I can't say there are many of those circumstances, so yes, you always want your contingencies (escape clauses).
Rina
"Obstacles can slow you down, but they can only stop you with your permission." Dean Graziosi (BARM pg 101)
"For I know the plans I have for you," declares the Lord, "plans to prosper you and not to harm you, plans to give you hope and a future." Jeremiah 29:11
For a little about me, welcome to the site, and a few tips for new DG family members, click on this link: http://www.deangraziosi.com/user/3249
Rina
o ok thanks rina. i personally think the best clause in any contract if your tight on money is where the sellers allows you to submit earnest money within X amount of days and if you dont the contract becomes null. you solve your earnest money problem and you also give yourself a way out of the contract if your end buyer doesnt take the property off your hands. im not an expert on this contingencies, should i just ask my lawyer if he could include the inspection clause in my contract and make it simple as that? getting through that first deal is so tough..........
Yes, if you can write the contract that way, that's very good. I would also add at least the inspection clause for the sake of your buyer.
And, like others have said, they shouldn't insist on EMD until the offer has been accepted. Typical here is "within 3 days of acceptance".
Don't hesitate to ask your attorney any questions you have. It sure helps to go into something confidently. just makes it that les stressful, especially deal#1.
Good luck! and have fun.
Rina
"Obstacles can slow you down, but they can only stop you with your permission." Dean Graziosi (BARM pg 101)
"For I know the plans I have for you," declares the Lord, "plans to prosper you and not to harm you, plans to give you hope and a future." Jeremiah 29:11
For a little about me, welcome to the site, and a few tips for new DG family members, click on this link: http://www.deangraziosi.com/user/3249
well my offer has been accepted but we havent signed any contract yet because i dont have any EMD to give. should i just market the property to my end buyer as if i did have the property locked up? should i hope that my end buyer will contact me if hes interested in buying and not the owner himself? and if he wants to buy because its such a killer deal would he give me earnest money to fulfill the contract without even wanting to see the house? if any1 could enlighten me that would be great.
hey dan, just wanted to give you a little inspiration on completing that first deal. i am currently doing my research and getting helpful information from individuals on this site. let me know how everything turns out, i myself hasn't even gotten a buyer or seller yet. I can just imagine the frustration up ahead, thanks for sharing your experience and with goals comes objectives followed by success. goodluck!
Dan,
Use the search engine on this web site and type in (Non-Circumvent Agreement)it will give you posts on that topic.
Invest in yourself!
Dan if you've already got a buyer lined up and you're confident about yourself, then go to the homeowner and offer him a promissory note for whatever amount that he's asking(if you feel comfortable with the amount). After all, a promissory note gaurantees that you're going to pay that earnest money no matter how you look at it. I've been as bold as to just have a promissory note attached to the contract without asking the owner(s) if they'd accept one or not, just explain to them that's the way that you're used to doing your business and haven't had any problems with it thus far. Whatever it is that you do, just be confident and do like the t.v. commercial and "never let them see you sweat".
Bryant Slade
thanx for your feedback. i guess a promissory note is the only way to go because i dont want to approach my buyer without the contract in my name. how exactly do i come up with this promissory note (havent had much experience with it)? do i download it of the site, do i talk to my lawyer about writing one, or do i write it myself and how exactly would it look? appreciate the help. this is such a killer deal, i kinda dont want it to get away, lol.
Use the search engine on this web site and type in (Non-Circumvent Agreement)it will give you posts on that topic.
hey rosefield thx for bringing up that thread, that agreement might really come in handy. so all i do is present this document to my buyer and make him sign it before disclosing any addresses and then im home free?
Just google "real estate promissory note templates" and that should pull you up a whole host of templates to choose from. If your lawyer will write it up for you, then that's even better, just make sure that you understand it before you sign it, but either way you do it, it's going to be legit. Also, the last thing that you'd want to do is disclose any property to a potential buyer without having that property locked under contract because they'll want to see the property and take a walkthough of it eventually if they're serious and when that happens what are you going to do? Exactly! So therefore lock it up under contract and dont rush yourself, relax and it'll all fall into place for you.
Bryant Slade
lets say i use a promissory note to lock up the contract, and the deal falls through and i cant sell it to an end buyer for whatever reason, would i still have to pay the owner the amount that was on the promissory note?
Dan,
I believe you have the right idea about showing your funds in a deal!And yes,non-disclosure & non-circumvent agreement...I'm not backing it,Just saying it is better than nothing.Only you know this deal Dan (you were there) Did you disclose to the seller what you are doing(assignment)?If you did,I do not see the problem.The promissory note(IOU)could work...Max says yes!
Keep your focus and get started on the next line of talks(Deal).
Invest in yourself!
Doesn't the Seller sign the Non-Circumvent Agreement?
yea the seller knows my exact intentions on assignment but still insists that she cant enter a contract without earnest money......im hoping she accepts this promissory note thingy or else im screwed. the offer was 260 and she accepted and she wants 10% down, im like wat!! isnt earnest money only supposed to be like 1000 or 1500 dollars at most?