Hand Money??
I am working on trying to purchase a 6 unit commercial building through a realtor. She is telling me that I should put at least $1000 of hand money in escrow. I questioned it and asked why not a smaller amount, maybe $500? She said if we want the offer to be taken seriously, then we should go with $1000. She said I would get the money back in the event the financing doesn't come through or events like that. Can anyone give me insight on Hand Money and if she is right??
Thanks for any advice!
Chris G 
It takes $1 to make a contract legal. You could probably go less than that in reality. However, the more earnest money you put down the more the offer is taken seriously. If you REALLY want the property go ahead and put all of your down payment into escrow! An offer with $10k or 50k earnest money will be taken a lot more serious. Make sure you have financing contengencies as well as other "outs" in case you really don't want the deal. I don't like to use "subject to partner" or other clauses like that but title contengencies and what not are essential.
GOOD LUCK
Thanks for your reply Frogger!!
That is what I needed to know
CG
For your 6-unit, you might want to include a contingency for a due diligence period (in addition to financing and title) which could give you some time to do whatever, whether inspections of the units, review of requested documentation, feasibility research & analysis.
I agree with frogger the more money you offer in escrow the more serious your bid will be considered. On a property of this type you will have to put down at least 20% to get financing from most banks.
Dear sharpREI,
Do you mean hard money? I'm not familiar with the term 'hand' money, is this something different?
If you go with Hard money, you'll still have to pay for it (through interest, points, etc whether you do a deal or not). I would think twice about borrowing 50K hard money just to check a deal out. On 50K that might cost you a minimum $500.00 (1pt down) plus about $60.00 a month (assuming 14% per year, 1 year), plus you'd probably have to back your loan with your equity in some other property that'd be worth min. $65K.
A private money lender might work with you if you promise a percentage of the deal over initial investment if the deal closes.
If I have misunderstood your post, my apologies in advance, I'm no expert.
I haven't heard the term "Hand money". Most call it "earnest money" or an "earnest money deposit"
If you put earnest money into the deal, you're more likely to close it....whether you should or not.
Keep in mind that realtors get paid when the deal closes, not when you cash out or cash flow.
Remember that 95% of realtors are looking out for THEMSELVES first, and you second. Most are short-sighted and want you to close so they get paid once this month. Nevermind that you'll never do another deal with them, but that's how most people in the sales idustry work. Don't get me wrong, there are great realtors out there that see past one deal and value repeat business, but the majority, like most things, are mediocre.
Remember that the realtor works for you and not vice verca. Do the deal the way that YOU think is most prudent and enjoy watching your realtor squirm as you remind him that that is what you'd like to do.
I am a mortgage broker, and my firm does not have any established relationships with any hard money lenders outside of Florida. Is there any national firms you would suggest?
[addsig]
Hard Money in the northern states means "non refundable". It is used usually in down payment terms. IE The down payment goes "Hard" at closing. And I would advise against it. Offer double the amount but make it refundable, or just disagree. Its one thing to lose the deal, but losing the deal and your deposit is just a slap in the face.
But based on what she had said that it is refundable, the term Hand Money (I assume) means coming from your hand. Either way the grand for a deposit is actually quite common. It is the magical number that every realtor asks for. Usually it is either a grand or 1% of the property value. There is no written law on this and that is why we negotiate it down. Tell her you would feel more comfortable if you held the money in your escrow(interest bearing) and put some money in an account to earn you some interest while it is there. If you dont have the grand, then tell her you need all your money to close, and can only put down XXX amount into escrow. Hopefully this will be a true statement.
Also what Hibby stated is true. What he forgot to tell you was that they make interest on the money as well, so that is also there motivator. lol
Good Luck,
Kyle
[ Edited by KyleGatton on Date 04/14/2004 ]