How To Handle Deposit In A Private Sale
Hello to all,
I'm a first time landlord wannabe about to purchase his first property and I'm realizing how much I don't know!!
One of the first questions that comes to mind is the issue of "earnest money" in a private sale. Normally with a broker involved, as I understand it, the broker handles the earnest money and puts it in escrow and guarantees the return of that money to the buyer if the deal falls through.
But in a private sale, there is no such guarantor. So if I were to give a deposit to a seller, what stops the seller from cashing the check until I'm good and ready to sign on the dotted line? "A promissory note", I hear you all saying, which is usually contingent on the P&S getting signed, but even AFTER a P&S is signed, things can go wrong like inspections and financing.
What is common practice with deposits in private sales?
Also, (I know it's totally negotiable and the generic answer is "as little as possible" but...) what is a reasonable amount to agree to give as a deposit from the seller?
Thanks for your advices! Love this board.
-presley
You can state that an earnest money deposit of $XXX will be deposited into escrow within a reasonable period of time after acceptance of offer. This gives you both the ability to settle on an attorney or title company to take care of the closing, and establish the escrow. This also keeps your money out of the hands of the owner until you're ok with them having it.
You could give them an insignificant amount up front in cash, with the balance to be delivered to escrow when established etc. The amount of earnest money is also negotiable. All of this is pretty much dependant upon what you and the seller can agree upon.
Good luck,
Jeff