What do I do when seller ask for a large EMD?

12 Replies

I'm a new investor starting with little to no money. I agreed to buy a house for 95k but then seller wanted a $1000 deposit. How do I convince him to lower deposit ?

Prove to him you are serious with your offer in a different way. 

Ask him why he's requiring so much, if you want to talk him out of it, you need to know why he wants it. 

or crazy ideas as an alternative

Offer something else as collateral to put into escrow?  Maybe trade a car title? 

or cash advance on a credit card. Ive read of people doing that here it might work!

Blackmail a family member (this works!)

How are you planning to come up with the down payment? Are you do a conventional loan, FHA, some other type of financing?

Is this a for sale by owner, or is it the realtor who is asking for the $1000 earnest money? In NJ this is a common request, but it's usually the realtor asking for it. I know investors who have refused to pay it and still closed deals, but they had very strong financials showing they could close.

If you don't have any money, how are you buying a $95k house?

Let me guess:  By "New Investor" you mean you read a book or website about "Wholesaling"?

Chances are you cannot convince the seller to accept less.  $1000 is less than I would accept for a property at that price range (I want to see 2-3%).

It was standard to give $1,000 earnest money deposit way back when I bought homes in the 1980's and 1990's.  The seller will think you are not serious or won't get funding, and if the seller is worried about those things, they aren't likely to take the property off the market for you - unless they can't sell it to anyone else.

@Richard C. I should've included that I planned on wholesaling it. You are correct I did read a book and have been attending local meetings for a while. So this is not something I'm jumping into. 

Originally posted by @Fantasia Bowser:

I'm a new investor starting with little to no money. I agreed to buy a house for 95k but then seller wanted a $1000 deposit. How do I convince him to lower deposit ?

I plan on wholesaling the deal I forgot to mention that 

The seller has sniffed you out as a wholesaler, and realizes that it is unlikely that the deal will close. That is why they are insisting on a real EMD, and why they are unlikely to waver on it.

Go find a less savvy seller, I guess.

Some wholesalers might suggest that you try to pay them a smaller amount for an "option" contract giving you the exclusive right to buy the property for the next X number of days.

$1k is nominal on a $100k property.  I certainly wouldn't accept an offer on a property in that price range without EM of more than that.

That's a very small EMD, 1% of the offer? As a serious buyer I'll usually put 10% down on my offers.....but then again I'm not a wholesaler.

If you're seller isn't completely desperate they probably won't take a rubber band and some string from your pocket as the escrow deposit.  Any halfway knowledgeable seller will want a reasonable amount of money so there's some consequence if you bail at the last second.    

One option would be to write a 10-14 day inspection period into the contract and give the seller the $1k deposit and if you can't move in in that period then cancel the contract, get your money back, and don't waste any more of the seller's time than you need to.

@Fantasia Bowser

 maybe you might want to bird dog for a few investors to get enough funds for an emd.

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