3rd Party for Deposit??

Question

Looking at a property for sale by owner as my first deal and waiting for approval on my financing.  Based on discussions with the financier I am confident that the loan will come through but buyer received a slightly lower offer and is tempted to move on it.  Wants a deposit to know that I am serious, as the other potential buyer has offered to put up 5k as a deposit (on a property selling for 110k).  Am more than willing to put down a deposit with a 5 day option period as I am very serious.  That being said, I don't know the seller well at all and am worried that if the loan doesn't come through for whatever reason I won't ever see my deposit again.  Is there any kind of company that will act as a third party and hold the deposit until the option period expires?

Kyle J. · Answer

@Jordan Tebbs  This can vary a little bit based on where you're located (and your profile doesn't specify).  However, for example, in my area once you have an accepted purchase agreement between the buyer and seller you would then go open escrow at a title/escrow company.  They would handle the title work and also hold any earnest money deposits in escrow until the sale closes.  So what you're essentially looking for is an escrow company.  Might be called something different wherever you're at.

Whatever you do though, do NOT give the money directly to the seller to hold on to.

Karl B. · Answer

Hello. If you've signed a sale agreement I would deposit the 5K to the title company you're using as earnest money.

There's nothing wrong with not using a realtor, especially in a FSBO purchase, but definitely hire a good real estate attorney; he or she will recommend a good title company if you don't already have one in mind and make the buying process much easier than going at it alone (remind the seller they're saving 6% because no realtor is involved - even if they're already well aware of that fact they love to be reminded of it).

Clint Votruba · Answer

In Illinois/Chicagoland area, title companies generally don't hold Earnest Money because attorneys coordinate the closings.  Of course, do not give the Earnest Money directly to the Seller.  I hold onto EM as the Seller's attorney on a FSBO but am willing to allow Buyer's attorney to hold it as long as he gives me evidence that he deposited the check into his trust  account.

I would not give Seller Earnest Money until you have the Contract signed by the Seller.

Good luck.

3rd Party for Deposit??

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