Promissory Note in Escrow as Ernest Monies?

Question

Hi!

I'm new to the board! Looks like a great place with great tips!

I have a question... I have several friends who, here in MIA, are using promissory notes as an escrow deposit?? With so many foreclosures here, there are many deals... It's overwelming actually.. Trying to get the best deal often involes making multiple offers, to see wich ones stick.. This could tie up capital in a hurry.. So, promissory notes?

Have any of you guys have used them? If so, wich ones? Wich wording would be best to protect myself?   :beer:

Account Closed · Answer

Yes, I've used a promissary note as earnest money. It has to be made good the same day the offer is accepted, and many sellers are OK with that.

I don't know how a bank would feel about it on a foreclosure. Maybe if you sent along something with it that showed you had the funds to cover it?

In my area, earnest money is given to the broker whom my agent is working under and it is cashed and put into the broker's escrow account immediately.

Kiting checks is illegal, and the last person I'd try to give a bad check to is a bank as a down payment on a purchase.

Hernan M · Answer

As an invester, me personaly.. I wouldn't accept it..

BUT if your house is going under foreclosure(or close to it), and I still have zero offers, than it's better than no contract at all. To me, the differance between a note and 500 cash is not much. But if you start making Loooooot's of offers, it adds up fast. And, some owners might try to keep it. I think it's safer. Maybe agreeing to place some cash in escrow after inspection..

Hernan M · Answer

2,200 foreclosures and Short Sales in Miami Dade. This is not even Pre-foreclosures.. Most, are not even getting offers..

Jon Holdman · Answer

So, to be clear, when I make multiple offers, the earnest money checks are all good.  Realistically, though I don't expect most of them to ever get cashed.

Jon Holdman · Answer

I've never gone as far as all_cash, but I have made five offers at once and have had a few more than that outstanding at once.  Like he says, you check is not cashed until the offer is accepted, and I've also never had the first offer accepted.

Not heard of a promissory note as earnest money.  I have heard people putting a deposit into their lawyer, and referring to that in their offers.  But, my agent and the listers always insist on a check for a specific amount made out to a specific payor.

Frank Adams · Answer

If someone sent an offer to me with a promissory note instead of a check I'd ignore/tell the agent to stick it where the sun doesn't shine.

I've made as many as 30 offers in one day, $500 earnest money with each one. This was in the '80s so $500 was like $2K today. I didn't have ANY capital tied up. Unless, and until an offer was accepted. In my life I don't think I've ever had an initial offer ACCEPTED.

Based on the counter offers I received I could immediately tell which ones were worth my time for me to counter-offer. Out of 30 there weren't going to be more than 1 or 2.

Sounds like something a guru would preach to people stupid enough to p**s away money on guru seminar.

all cash