How to negotiate lower earnest money deposit with agents?

Question

What are some of the ways you can pay lower earnest money deposit with an agent?

Danny Polanski · Answer

You can use any amount you want as an EMD. The lower it is, the better it is for the buyer.

Real estate agents, err used car salesmen, will tell you go higher but that is not good for you as a buyer. Be very wary of agents and their advice.

Wale Lawal · Answer

@Antonio Bodley

Fortunately, buyers can take steps to avoid or mitigate these earnest money mistakes. With some forethought and guidance, they can make an offer confidently.

1. Set Limits

Before buyers begin looking for a home, they should spend some time thinking about the type of property they want, including size, number of bedrooms, and other features. This is a good time to make a list of must-have features, nice-to-have features, and deal-breakers. Buyers also need to know how much they can realistically spend. Defining criteria now lowers the chance buyers will hastily agree to buy a home that doesn’t meet their needs.

2. Be Wary About Removing Contingencies

Contingencies exist for a reason. It’s easy to fall in love with a house at first sight, and buyers are sometimes surprised to find out the home’s secrets. However, being forced to go through with the purchase of a home that’s inaccessible, uninsurable, or severely damaged can be a costly experience.

What you spend to correct the problem may be more than what you would have lost if you walked away. However, buyers don’t have to put themselves in the position to make that decision. They can walk away from a seller who refuses to accept a contract with contingencies.

3. Work With an Experienced Team of Professionals

Selecting a reputable real estate agent is incredibly valuable for the buyer. They can explain contingencies to the buyer in great detail, so they’re better prepared to decide which contingencies to include in the contract. A real estate professional can negotiate the contract with the seller to ensure each contingency makes it into the document. The buyer should work with someone they trust to guide them through the process.

All the best!

Bill B. · Answer

Every dollar your EMD is lower than your required downpayment to make the purchase anyway looks like an attempt to lower your risk when you back out for a reason not covered by your contingencies.

If your purchase would require $20,000+ downpayment but you want to put down $2k instead of $5k as an earnest deposit you have to admit that looks bad.

Personally I’ve always gone the other way. I’ll offer an oversized EMD. 1) it shows I’m serious and have access to the money my offer says I do. 2) it doesn’t matter unless my offer is accepted. 3) I plan to purchase the property so as long as the emd is less than the downpayment I lose use of the money for 30 days. 4) if I ever had to back out it would be because of one my 2 contingencies (5 days inspection period or financing. Although the only deal I’ve ever backed out of was because of an HOA rule, that contingency is built in to all properties with HOA’s.)

Eliott Elias · Answer

It is up to the seller and what they feel comfortable with, the realtor will advise them, and in most cases be the deciding factor. Why would any seller take less earnest money than 1%?

Dustin Allen · Answer

@Antonio Bodley

Earnest money deposits should not be negotiated with agents. That should be between the buyer and seller through the agents.

There are customary amounts in most markets and the buyer should be able to offer whatever they want. In CA we typically see 3% for primary residences as that is all that is at risk if a buyer defaults on a primary residence purchase. Investment properties get a little more creative and buyers might offer a large deposit and good terms with a slightly lower price if it’s cash.

Get creative and see what they will accept.

How to negotiate lower earnest money deposit with agents?

How to negotiate lower earnest money deposit with agents?

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