Hard Earnest Money Deposit

4 Replies

Hi all,

I operate mostly in Texas which is very hot and terms seem to be very seller friendly (quick diligence periods, hard earnest money deposits, etc). What are the normal terms in your market right now? What are they historically? Specifically, I'm most interested in understanding what earnest money deposits look like for your respective markets (size, refundable/nonrefundable, all up front, one deposit at close and another after diligence). 

Thank you!

Just bought in Texas. It ranges on how strong your offer is. Typically 1 to 2% of purchase price. The more contingencies you have the weaker the offer. The most common refundable earnest monies are (1) finding something you weren’t expecting as part of the inspection and (2) financing falling through. No real science to this one, very straight forward.

Maryland is typically $1,000 EMD (if you have proof of funds or prequalification) at contract execution being held by either Agent or Title Company for conventional sales. I have seen some hard deposit terms being accepted in final and best offer situations over the typical EMDs. These are refundable based on inspections unless the contract strickly prohibits it. Maryland uses a statewide form for most transactions.

I might suggest offering a hard deposit at contract acceptance with an additional deposit to be made at the end of the due diligence period. If you get the property tied-up and don't like the due diligence, think of the hard deposit as a "Lease Option" payment and try to JV or assign the contract to another buyer in the area.

California (LA area) is usually 3% of purchase price or $5000. I’ve seen and used both of them. All depends on the buyer and how much money they have on the front end.