Toronto ON, Canada · Member since 2016 · 96 posts · 26 votes
Hello Dear BPers, I have a very basic question. I am planning on putting in some offers and the agent I am speaking to mentioned that I have to put 1% earnest money down on offers that I make. I wanted to check with the BP world if this is a common practice here in California?
There's no law that says it has to be 1%. It usually just depends on what is customary for the area. There certainly is no standard across the entire state.
Most of the agents I have dealt with have suggested I put down $1,000 (regardless of the price of the house) because that's the norm where they buy/sell houses. I've even offered on occasion to put down a lot more than that, and they've told me it won't make a difference.
If your agent is telling you 1% is what they recommend, I'd do it because that's probably customary for your area.
In the end, it doesn't really matter because you're going to end up putting 100% in no matter what you start with (unless you end up backing out).
Real Estate Agent · Redlands, CA · Member since 2016 · 253 posts · 115 votes
10y
Yes it is typically 1%-5% depending on how strong you want your offer to look. This only applies though to offers you make that are accepted. Not sure if they made that clear. When you put in an offer and the seller accepts, you enter a period called escrow. Within a couple days you need to deposit money into the escrow account to show the seller you are a serious buyer. Make sure you and your agent understand what timelines you need to follow to make sure you don't lose the deposit.
There's no law that says it has to be 1%. It usually just depends on what is customary for the area. There certainly is no standard across the entire state.
Most of the agents I have dealt with have suggested I put down $1,000 (regardless of the price of the house) because that's the norm where they buy/sell houses. I've even offered on occasion to put down a lot more than that, and they've told me it won't make a difference.
If your agent is telling you 1% is what they recommend, I'd do it because that's probably customary for your area.
In the end, it doesn't really matter because you're going to end up putting 100% in no matter what you start with (unless you end up backing out).
Real Estate Agent · West Columbia, SC · Member since 2016 · 37 posts · 7 votes
10y
My Market, Columbia, SC usually has $500-$1000 in Ernest money. As others have said, this can vary widely but should reflect the price of the house. Our average sales price is in the 175-200k range.
In the negotiations the most important parts of the offer are the sales price, contingencies and offer type (cash vs financing). Ernest money is there to compensate the seller for their time should the buyer act inconsistent with the contract.
$1k is fine in rural/outlying California (example: VA deal currently in escrow in Dixon where I set it up so the VA home-buyer is making money by getting a VA loan - that he's using to pay down his car loan muahahaha), 3% in hot urban markets (examples: Alameda, San Mateo, Contra Costa, & SF counties), but it's a convention and not a rule.
Escrow Officer · Temecula, Ca. · Member since 2016 · 418 posts · 152 votes
10y
I do investor escrows all day and my average wholesale deal has an EMD of $0 to $1,000, irrelevant of sales price. All agents usually want to see an EMD to give your offer some clout, but there is no "law" stating you have to put in an EMD, if all parties agree to no EMD.
Toronto ON, Canada · Member since 2016 · 96 posts · 26 votes
10y
Thanks everyone for your inputs.. really appreciate your insights. It gives me some perspective before pulling the trigger on any potential deal, especially that I am just starting out.