Wholesaler · Houston, TX · Member since 2014 · 15 posts · 2 votes
Hi all,
In what form do you accept a buyer's earnest money deposit? I've heard of some investors who only accept a cashier's check and others who will take a money order for EM.
If you are in the cashier's-check-only camp, do you find it a nuisance trying to lock up a deal on the weekend when it is extremely difficult for a buyer to get a cashier's check since banks are closed?
Thanks for your input! Looking forward to the replies. I'm in TX if that makes a difference in the process.
Unless you're using a contract other than the TREC form, the E/M will go to the title company. You can require contractually that the E/M be by certified funds only, but that may cause some delays during weekends and holidays. And since the buyer is charged with delivery of the earnest money (in the TREC form), I just usually allow them to tender a personal check to the escrow agent.
In Nevada, the EMD goes directly to the title company or escrow company (via broker if you're an agent), so what matters is what they will accept. The title companies I've worked with will accept certified funds (money order or cashier's check) and will also accept personal checks, but they have a hold period on the account (I think it is like 5 days).
Banks are open on the weekends, as are various places you can get money orders, however, real estate contracts generally have a place where you can commit to putting an EMD at the title or escrow company within X days, to account for weekends or holidays or what not.
-Christopher
P. S. While it doesn't say either way in your post, I get the feeling that you are preparing to hold money from a flip or wholesale deal where you obtained the buyer, but you should be very cautious and research prior to accepting any money. I would never EMD funds into any of my business or personal accounts - I know for licensed individuals in Nevada that it is expressly illegal and I'm guessing that it poses a problem for non-licensed individuals as well (commingling funds).
Wholesaler · Houston, TX · Member since 2014 · 15 posts · 2 votes
11y
@Christopher Brainard. I'm not licensed but am trying to get all my ducks in a row for a deal. Thanks for your input.
I've heard conflicting advice on the matter so I turned to BP for a weigh in. One investor said cashier check only (absolutely no money order or personal check) and if the buyer didn't have it, to postpone until they did. This same person suggested that when the funds are received that title can be verbally informed that I accepted x amount outside of closing. I should then ask that the amount be deducted from my assignment fee.
Although I'm not licensed, I have heard that it is not legal/advised to commingle funds. So that advice was confusing.
The other thing I didn't agree with is that if I'm forcing my potential buyer to produce a Cashier's check, I'm making them jump through an extra/unnecessary hoop. He was ready to lock in the deal at 7:45 pm on a Saturday...where should he go to get a cashier's check? Most likely, I'd be waiting until Monday morning for him to produce EM in that form, but that's plenty of time for him to walk away from this deal and find another who is not so strict on only accepting that type of payment.
Hope this extra info helps in providing feedback.
Unless you're using a contract other than the TREC form, the E/M will go to the title company. You can require contractually that the E/M be by certified funds only, but that may cause some delays during weekends and holidays. And since the buyer is charged with delivery of the earnest money (in the TREC form), I just usually allow them to tender a personal check to the escrow agent.
Wholesaler · Houston, TX · Member since 2014 · 15 posts · 2 votes
11y
Thanks, Guy Gimenez! The investor I mentioned in my post made it sound as if a MO was completely out of the question. But I'm with you on not delaying a motivated buyer who's ready to make a deal! Appreciate the heads-up on the protocol with a TREC form vs any other, too.
Hey Kim, technically the EM in the TREC does go to the title company BUT if it's a wholesale deal I require it be paid to my company. We have been tugged around too many times by buyers that drag their feet. Luckily we have never lost a deal to it, but they don't seem to play games once they hand you a Non-Refundable EM check. I prefer certified funds. Just so it's clear to all parties, add a statement under Special Provisions "Buyer and Seller agree the Earnest Money is made payable to Company, LLC and is Non-Refundable".
If you do have the buyer deposit the EM with the title company and they default, both parties have to agree and sign a release in order for that money to go to you. If they make a check out to your company, it's yours no questions asked. I had a deal last year where we put 1k EM down but the seller couldn't produce clear title - she refused to sign the release.... We still have 1k sitting in the title company's bank account. Eventually it goes back to the state.
Thanks for sharing your first-hand experience on the matter. The buyer definitely knows the EM is non-refundable. We make sure to include that notice in our marketing as well as in the contract. Truly appreciate the advice of a fellow investor in Texas. =)