Nonrefundable Earnest Money

[Stephen De Vita]

I was underwriting a seller financed 32 unit deal in South Carolina. I was getting ready submit an LOI. I would put 10% down, due at closing. We never discussed any earnest money up to this point. The broker calls me said 1% of the sales price was going to be be due. That was about 30K. I told him any money I put down will be refundable for any issues like environmental matters, physical inspection, title, zoning, and if I can't raise funds. This were everything fell apart. I'm trying to take this as a learning lesson. Any thoughts on this or advice on how to make this work going forward? What does your negotiation look like when you are talking to brokers about refundable terms?  When do you agree to 1% nonrefundable terms?  

[Chris Seveney]

Quote from @Stephen De Vita:

I was underwriting a seller financed 32 unit deal in South Carolina. I was getting ready submit an LOI. I would put 10% down, due at closing. We never discussed any earnest money up to this point. The broker calls me said 1% of the sales price was going to be be due. That was about 30K. I told him any money I put down will be refundable for any issues like environmental matters, physical inspection, title, zoning, and if I can't raise funds. This were everything fell apart. I'm trying to take this as a learning lesson. Any thoughts on this or advice on how to make this work going forward? What does your negotiation look like when you are talking to brokers about refundable terms?  When do you agree to 1% nonrefundable terms?  

Where the deal most likely fell apart was that last issue - you cannot raise the funds.
You should absolutely be able to get your deposit back for unforeseen conditions on a property but you should not get it if you do not have the money. Its a seller financed deal so you should have the money already since you are not going to be a bank and they have already considered you as approved so if you do not have the down payment to me that is a huge red flag and I would not put the property under agreement and off market if a buyer did not have the money on hand.