BiggerPockets

Do you need a earnest money deposit to submit bids on all real estate properties, when dealing with realtors or will a proof of funds letter do.

Just a photocopy of a check, and proof of funds.

No earnest money until you have an accepted offer in place!

~Harrison Painter

Originally posted by Tony Thompson

Can earnet $ go towards down payment?

It does.
Technically, the earnest money is listed as a credit to the buyers side on the HUD-1 settlement statement, reducing the amount the buyer has to show up with.

I would try not bringing up an earnest money deposit or proof of funds letter.

If they ask for a deposit, see if a proof of funds letter will suffice. If not, try to get the deposit as small as possible and delay paying it as long as possible (like till there's a signed contract).

If they ask for a letter, provide one.

Is there any way at all of getting around this when dealing with a bank? Especially since the property has been on the REO market for at least 7 months! You would think that they would be thrilled to get it off the market even if there was a chance the deal would fall through. A bird in the hand is always better then two in the bush, right?

Anglea, actually it's just the opposite. As mentioned earlier in this thread the earnest money deposit is the only way the banks can determine the seriousness of the buyer. As you know each day a bank owned property sit on the market the bank loses thousands of dollars. Especially in a case where the house has already been sitting for 7 months as you said. The most serious buyers often put down more than $1000. In many of my cases the buyers have put down over half of what the accepted offer was. Although i would never advise a buyer to put down more than the required amount, buyers want the banks to know how serious they are about purchasing the property. Don't be misled about the earnest money deposits because if the deal bust and it's no fault of the seller, the bank WILL insist on not returning the EMD.

Originally posted by Anthony E Russell

I was advised to put down $5,000. Is that amount out of the ordinary? I figured $2500 would be a happy medium.

Anthony, is it an REO? What is the purchase amount? We can not properly advise you with the limited info provided.
Who gave you the advice of $5k?

A rule of thumb is a minimum of 3% for EMD on a bank REO. Give more of an EMD with a shorter close if you want your lower price, it does help prove you are a serious buyer. After all, money talks.