earnest money? - Posted by Troy

Real Estate Investing Real Estate Financing
1

Posted by Mary (CA) on November 03, 2007 at 18:05:45:

Don’t know whether they’ll take you seriously, but you don’t have to put up any money. Your signature is sufficient to make a deal. (Dumb realtors might not know this; but most should.) A lot of realtors tell their non-business clients that the buyer should put up earnest money - but I’d think banks ought to know that it’s not necessary.

Considering the shenanigans the banks were doing (non- enforceable contracts that only they could get out of, etc.) I’m trying to avoid putting any money up. Though with last one, I gave them $1,000 check on $980k property AND I said Mary Nichols and/or assigns. (they didn’t reject; just said come back with my best offer)

Mary

2

earnest money? - Posted by Troy

Posted by Troy on November 02, 2007 at 21:24:56:

Hello Everyone,
Is there any way to not put up any earnest money when you make an offer on a foreclosure, and get it accepted? Any advice or suggestion on how I might do this would be greatly appreciated.
Thank you

3

Re: earnest money? - Posted by Tai

Posted by Tai on November 04, 2007 at 11:53:39:

If you are making offers to a bank, most banks require
a “proof of funds” addendum together with the offer, to
show that you are actually financially able to close.
if you cannot come up with earnest money, you probably
cannot come up with this proof of funds addendum anyways, so this would be a non-starter.

when I make offers, I usually include a photocopy of
a big check as earnest money, to make the offer
look stronger to the typical (individual) sellers.

the check does not need to be delivered to escrow
company until the offer is accepted, and if I change
my mind I can always cancel the contract within the
inspection period for no reason at all.

as far as I am concerned, the earnest money is never
at risk as long as I cancel within the specified
time frame. a higher earnest money amount makes my
offer seem stronger because many sellers mistakenly
think the deal is stronger because of it.

for example, in CA, by law only up to 3% of the
purchase price can be forfeited as earnest money. in
the boom times I would put 5% as the earnest money, and
many sellers would think my offers are “stronger” than
the other offers with 3% earnest money, when in fact
the same 3% of money is at risk for all offers.

4

Re: earnest money? - Posted by Max-Va

Posted by Max-Va on November 04, 2007 at 06:27:02:

You need to explain further.
Who are you making the offer to, the seller, the bank, or who?
Banks won’t often accept an offer without an EMD. Why is this a problem; are you short on funds?
Sellers usually will work with any amount offered. My usual amount is $10.
I have $1000 on deposit with my title/escrow company and a letter to that effect, that I send with every offer I submitt to a large mortgage lender wether it is a REO or shortsale. The same $1000 works for mulitiple offers at the same time

5

Re: earnest money? - Posted by Frank Chin

Posted by Frank Chin on November 04, 2007 at 03:47:38:

Troy:

You’re talking about making an offer to a bank, right?

Both the wife and I worked in lending, and you’re dealing with employees. We answer to bosses, and to take an offer from someone, with an indication (no eanrest money) that he either won’t have the money to close, or can walk away from it when a better deal down the street turns up a week later can be a “career ender”.

I can imagine the weekly staff meeting when the boss asks “so, when are we closing on that foreclosed property that we got the offer on”??

And the answer is after a long silence “ummmmm, uhhhh, the deal is off”.

Boss says “so we keep a few bucks for our trouble, right”??

And the answer to that is “ummm, uhhh, not excactly”.

I can picture the boss saying “see me in my office after the meeting”.

Being a deperate homeowner is one thing, but would I want to look this stupid working at a bank?? I rather say there’s been no offers because of the bad market and leave it at that. I can’t get fired for that.

I made an offer once with very little earnest money, and walked away from the deal a week later when a similar house in a better neighborhood came on the market, a week later, for almost $40K less.

Frank Chin

6

Re: earnest money? - Posted by Ed in Idaho

Posted by Ed in Idaho on November 03, 2007 at 18:28:19:

Alot of people (and realtors) still think earnest money is needed to make a contract legally binding, but really the contract itself is enough. Even if you only put down $10 or $100, I think it makes you a little more serious in the eyes of the sellers and their agents. Could make the difference! The best way to get away with no earnest money is having the ability to close quickly. If you can do that, and they know it, there won’t be any talk of that pesty earnest money deposit!