Chances of Losing EMD!

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Chances of Losing EMD!

Manuel A.
Rehabber · Albuquerque, NM - New Mexico · Member since 2011 · 283 posts · 38 votes

So I was about to sign an offer and I asked my agent is my EMD "safe". As in, can I get it back if my estimates are wrong/not close to the actual bids, cause (and this is probably obvious, I know...) I made my estimates in person today and was going to get actual bids when I actually got the house under contract.

Anyway, the answer I got from my agent is, "I can not promise you that you will get all EM back. If you back out because a home needs more work than you expected you should get your money back with Fannie Mae but I can not guarantee what the bank will do." She also told me HUD won't give back the EMD, which I understand. But:

Can Fannie Mae or any other bank/entity (besides HUD) really keep my EMD if my contingencies aren't met?!

I was always under the impression that this is not true. I feel confident in my ability to estimate, but I'm not sure that I'd bet $10,000 on it! (Well 10% of $92,500 which is still close to $10k...) I also didn't know I needed 10% for an EMD, I only planned on $3k which isn't that big of a deal but it definitely just hit me like a ton of bricks with what she told me! I told her I'm doing a cash offer, but I meant to say "financed" so I hope that's where the 10% EMD confusion is coming from...

I love learning new things,
-Manuel

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  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
    13y

    If you have a contingency, you can use it. The key is to ensure that you fully understand what the contingency says. In my state contract, the due diligence period is *literally* an option period -- you can back out for any reason (or no reason) during that timeframe. But, other states have contracts that are more stringent; for example, requiring a professional inspection or requiring that certain types of repairs are needed but that weren't disclosed.

    So, check your contract to see what it says. And btw, it sounds like your agent either isn't being straight with you (doesn't want you to know you can back out) or doesn't know the contract very well. There's nothing unknown about how a contingency works...if your agent can't give you details about when you will and won't lose your EMD, find another agent.

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  • Jesse Tsai
    Investor · Las Vegas, NV · Member since 2011 · 188 posts · 116 votes
    13y

    I second J Scott on that. In my state (NV), the due diligence period is essentially an option period as well.

    Carefully read your contract, and if there is anything that can be construed as an contingency, take full advantage of it.

    I may be wrong, but your agent sounds like they're simply trying to sell you something (and dont want you to know you can or how to back out) and aren't really trying to help you.

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  • Manuel A.
    OP
    Rehabber · Albuquerque, NM - New Mexico · Member since 2011 · 283 posts · 38 votes
    13y

    Yeah, I'm not sure whether to interpret the response from my agent as, "you never know..." or deception. Kind of like how I don't like to ever guarantee things, but just give certainty, cause in my head I'm always like, "you never know...". Something crazy that I can't think of may go wrong. That's my thought process mostly.

    To her credit, she was patient, very helpful, gave me great comps, and is quick when I ask from her. She's also rated highly even by investors which is why I chose her. (I emailed a list of agents and just picked which one I liked best from there) She did tell me she'll research my question more thoroughly and get back to me tomorrow...

    Thank you J Scott and Jesse Tsai! I have my confidence back in my contingencies now.

    Good lookin' out :)
    -Manuel

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