Confused about Earnest Money - Please Help! - Posted by Jose O. (FL)

Posted by Mark-NC on July 21, 2001 at 14:40:08:

Melissa,
It’s a pretty simple process and it is probably one of the easier ways to make money in this business.

The basic concept is; If I put a offer to purchase contract on a property and it is agreed and signed by both Buyer and Seller I now have equitible interest in that property even though it has not closed yet.

As an example let’s just say the contract price was for $50,000. I call my wholesale buyer and tell them I have a deal on a property and ask would they like to buy my contract for $3000? If they say yes, It is just a simple matter of using an assignment of contract to assign all your interest in the contract for an assignment fee.

The buyer you assigned the contract to then takes the offer to purchase contract you sold them to closing. They then use their money to close.

The bennifit is simple, you do not have to close on the property or use your money to close. You are basicly just selling contracts not the property.

I hope this helps…Good luck!

Mark

Confused about Earnest Money - Please Help! - Posted by Jose O. (FL)

Posted by Jose O. (FL) on July 21, 2001 at 11:29:47:

This a great forum and I would like to thank you in advance for your help. I have read in this board that you should never give the earnest money to the owner or the broker, but to give it to a title company to hold it in escrow.

This is my question. If am planning on flipping or assigning the contract to another investor, Should I use a title company anyway? And if yes, how much should I expect to pay for this service?

Thank you very much for your help.

Re: Confused about Earnest Money - Please Help! - Posted by Greg Schultz MI

Posted by Greg Schultz MI on July 22, 2001 at 11:54:02:

I have this clause…
EARNEST MONEY: At Seller’s request, Buyer will deposit a check for the sum of $100.00 as earnest money, upon Buyer’s receipt of accepted contract. Earnest money check is to be made payable to: … and shall be held in escrow with … Check is not to be cashed until day of closing. In the event Buyer does not perform as agreed under this contract, Seller(s) agrees to accept the Earnest Money Deposit as full liquidated damages and this contract shall then be null and void.

Greg

Re: Confused about Earnest Money - Please Help! - Posted by Mark-NC

Posted by Mark-NC on July 21, 2001 at 12:28:11:

Jose O,
If you give it to the title company it cost you nothing assuming that is where the deal is going to close.

One of the problems that have come up in my area is many of the listing agents require that they hold the earnest money or they will not accept the offer at all.

So what I did was place an extra provision on my addendum when I assign my contract that states;

Assignee also agrees to pay at the signing of this Assignment an earnest money deposit of $ ________ to match the earnest money deposit on the offer to purchase contract that pertains to this assignment. The Earnest Depost is held in escrow by _______________________ and all rights to this earnest money are assigned or transferd to the Assignee upon the execution of this assignment.

This has worked pretty good for me and it prevents me from tying up all my cash on these deposits.

This can also be a good strategy if you are short on funds, If you assign your contract the same day your offer is accepted.

All my deals are set up so my assignment fee doesn’t come to me untill the day of closing but at least doing it this way with the earnest money I am into the deal for nothing untill it does close.

Mark

What is assigning contracts mean? - Posted by Melissa

Posted by Melissa on July 21, 2001 at 14:06:57:

Please for give me for being so “green” as I am just starting, but what does assigning contracts mean and what does it involve/benefit?

Thanks,
Melissa