Earnest Money
How much earnest money do you usually put up when offering on a listed house that needs rehab? Do you use certified funds or just give a personal or business check? My realtor is saying $1,000 certified funds check. I think this is kinda high considering most of my offers will be rejected. Also, do you give a earnest money check on each house you offer on or just 1 to the realtor to apply to first accepted? Thanks for the help.
[ Edited by iamhappy on Date 12/30/2003 ][ Edited by iamhappy on Date 12/30/2003 ]
I never come up with Cash Earnest Money. It's just something Realtors use to tie you to the deal. Offer the Agent a Earnest Note for the 1,000 payable the day before closing. Then you have no money out of pocket and no one really cares about collecting the earnest money the day prior to signing.
An earnest money deposit isn't payable until some one fails to perform or the transaction is completed. however if you're going to be making 10 low ball offers with the same realtor/agent, then 1 check should suffice. it goes to the deal that gets accepted. He can make an annotation on the contract that he is in posession of an earnest money check to be delivered within 48 hours of acceptance of the offer (or something like that). That takes care of his apprehension, and gets your offers submitted.
I have not had to provide certified funds for an earnest money deposit, and personally feel that it shouldn't be necessary. If you write rubber checks, there are laws in place to deal with you.[ Edited by jeff12002 on Date 12/30/2003 ]
I just tell the relators that I will provide the earnest money once an offer is accepted. If they don't want to accept that then I tell them that I will not write the offer.
Remember, you are in the drivers seat, the relator works for himself. I have never had a relator fail to write the offer without earnest money.
Thanks all for the help
All I have to say is that earnest money situation is customary to each regional area. If you are buying a house listed on MLS through a realtor, they will ask you for earnest money because an offer submitted without earnest money is NOT a good offer. Remember, a seller in this case is usually also represented by a realtor. So, if I were a seller's agent, and the seller received two offers - one with earnest money, and one without - I would suggest to the seller to take the one that was accompanied by proof of earnest money.
In the Chicagoland area, a copy of the personal check made payable to the listing company is usually sufficient proof to the listing agent and seller that earnest money are real(remember, it's a federal crime to write bad checks).
compwhiz,
I have never been asked for earnest money until the offer has been accepted. Then the earnest money is at risk as liquidated damages if the buyer backs out after contingencies are removed. I would have too many checks and too much money out there if I attached one earnest check to each offer. You can tell the RE agent that an earnest money check will be immediately forthcoming upon acceptance of your offer.
Here in CA earnest money is made out to Title Companies who act as escrow for the purchase, hence there is no need for the earnest money unless there is an acceptance of an offer. When buying in states near you, sometimes I have found that real estate agencies have there own escrow accounts, but again this assumes an accepted offer.
When you write an offer through a Realtor you can use a promissory note or state that cash will be deposited into escrow within 24 hours after acceptance.
I seldom use Realtor's so simply give a nominal sum deposited into escrow when the owner accept and the balance at the closing of the transaction.
Some Realtors request it, but it not a requirement. If the realtor you are dealing with is asking for an amount you feel is too high, simply state to them what you will offer as hornest money (after the offer has been accepted. If that's not acceptable, then let that Realtor know you will be using another Realtor.
Wow thanks for the answers. I think I'll be looking for a new realtor to work with. There's been a few things that I didn't like that he was saying (kinda pushing me away from any wholesaling) I don't like to be told what can and cannot work, when I know it can. Thanks again!!