deposit by the contract

what i dont understand, in real estate wholesaling is, that how could it be that,
when i sign a contract i dont give any deposit its sound very fishy, the guy sees that i am not serious, please explain how this works?

Gregory Harris

Real Estate Investor · Chanute, Kansas

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Aug 08 '10, 02:44 PM

You have to have at least a dollar deposit on any purchase contract to make it a binding agreement. If you want to avoid the confusion you could use a purchase option to obtain your equitable interest so that you can market the property.

Abraham Gros

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Aug 08 '10, 03:09 PM

but let me ask you if someone wants to buy ur house, and wants to give you a 10$ deposit would you look at him that he is serious?

Abraham Gros

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Aug 08 '10, 03:09 PM

but let me ask you if someone wants to buy ur house, and wants to give you a 10$ deposit would you look at him that he is serious?

Andrew Massaro

Wholesaler · Tampa, Florida

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Aug 12 '10, 03:14 AM

Put $1,000 on the contract as your deposit, but make sure the contract states that this deposit is refundable, and to be held in escrow by the title company. Then, tell your title company that you are not actually extending this deposit, and make sure they are ok with this. If not, find a title company that is...

Kim Anderson

Real Estate Investor · Tampa, Florida

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Aug 13 '10, 02:38 AM

but let me ask you if someone wants to buy ur house, and wants to give you a 10$ deposit would you look at him that he is serious?

I hear what you're saying, Abraham... I wouldn't take only $10 and perhaps you wouldn't. But a motivated seller would. They will do this becasue they are really, really, really motivated. When I have wholesaled, I have not put down more than $10 to get a contract with a homeowner.

Of course, there may be those homeowners who will agree to your price, but will want more money down... $100, $500, $1000 or more. But, pretty much everything is negotiable, so it then becomes your call on what your counter may be. But, yes, there are those that will do it for $10 and not look at you crazy.

Ryan Webber

Wholesaler · Amarillo, Texas

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Aug 17 '10, 03:42 PM

Originally posted by Gregory Harris

You have to have at least a dollar deposit on any purchase contract to make it a binding agreement.

No you don't. A single dollar of earnest money is NOT required for a legally binding contact

You really should do more research before you make statements like that. See I've bought hundreds of houses with no earnest money. I've done extensive research on general contract law and my state's specific laws, and I've also discussed it with other EXPERIENCED investors who have studied general contract law and their state's specific laws, and really on top of all of those I base my statements on personally having in-depth discussions with multiple attorneys who are EXTREMELY well qualified in real estate contracts and law.

95% of my deals I've put absolutely no earnest money on.

$0

The other 5% were listed properties except for 2 houses. The 2 non-listed exceptions, one seller was a title agent and one was an attorney. They both wanted earnest money because they understood the business and wanted me to have skin in the deal, not because it was required legally.

I've only even been asked about earnest money by less than 10 sellers. Motivated sellers don't know and normally don't care.

Yes, we all understand that you or I WOULD require earnest money IF we were the seller, but we are NOT the seller. If I was the seller I wouldn't be selling to you for 50 cents on the dollar in the first place, so going down the whole "why would anyone do that" road is kind of a slippery slope of idiocy. I've had this exact discussion on multiple occasions with NON-wholesalers and everyone of them seems baffled that anyone would be financially irresponsible enough to sell their property without earnest money. I find it amusing that we completely overlook the obvious fact that we are talking about people who are selling their property to you for HALF of its retail value. Why are we even debating whether they have the financial where-with-all to require you to give enough earnest money or not. OBVIOUSLY their priorities are different than yours. OBVIOUSLY if their priority was to make the most well thought financial decision they would NOT have even called you.

When you deal with a motivated seller, you will understand. They DON'T care. They just want to be done with the hassle of it all. That's their priority. Relief.

Edited: 08/17/2010 at 03:53PM by Ryan Webber

Jaremy Moritz

Real Estate Investor · Houston, Texas

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Aug 23 '10, 03:13 PM

Ryan, I am with you 100%. I've done nearly 400 deals and I've put up earnest money on less than 10 (other than on a few REOs I bought).

The way I see it, wholesaling is not investing. You are not buying this for yourself. You are not buying it retail. Don't mislead a seller into thinking that you are the one that will be buying it. The key is to be completely transparent about your intentions. If the seller insists on having earnest money, let them know that when you find a buyer, they will be the one putting up earnest money. Any objection can be overcome - it's all in how you pitch it.

Wholesaling is negotiating. Wholesaling is problem solving. Period. Don't make it more than that.

Why is earnest money even a topic for you when dealing with a motivated seller? If you make a point to explain earnest money and why you aren't putting any up, of course the seller will object. 90% of my discussions with motivated sellers have to do with their motivation, how I can solve their problem, and how the transaction will go down. The other 10% is the initial rapport building that has nothing to do with the property or their problem. Most sellers don't care about the details like earnest money, title company, etc. They care about how you can take away their pain. Don't create a problem where there shouldn't be one. Focus your conversations around their problem and how you can solve it, not about the numbers and how you've got "no skin in the game". The skin you've got in the game is the time and skill involved in eliminating their problem. If a seller raises a stink about earnest money, tell them that you'll be investing your time into finding a solution for their problem. Shift their focus back to the cause of their pain and how earnest money is not a solution - a buyer is.