Bypassing the Earnest Money Deposit

Real Estate Investor · Los Angeles, CA · Member since 2010 · 59 posts · 5 votes

Hi Guys,

What are the best ways that I can bypass submitting cash dollars and etc. for the Earnest Money Deposit suggested by a realtor in order for my offer to be seriously considered?

Many Thanx

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Curt DavisBusiness Member

Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes

15y

Most people want to avoid putting down EM b/c they are broke or new to investing. This will never fly if your trying to buy bank REO;s. Now you can get away with it if your dealing with distressed owners. Tell them you will put down $100 in EM but it will be held with your closing company.

Good luck

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Rob Gillespie
Specialist · Cleveland, OH · Member since 2011 · 1k+ posts · 852 votes
15y
George,
First off, great name! I named my son after you! Anyhow, you may want to get in tight with a title company, they can hold your check without depositing it.

This will not work on buying bank owned stuff. They like to use their own title companies.

Earnest money can be a good thing. When I lowball, I offer 1k not refundable and a quick close. I tell them they can take the money now to use as they want once the title work is back. It REALLY motivates a broke seller!! :mrgreen:
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James Hamling
Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
15y
Originally posted by Curt Davis:
Most people want to avoid putting down EM b/c they are broke or new to investing. This will never fly if your trying to buy bank REO;s.

I must disagree, or, just plain say your wrong. I have bought REO's without EMD, every time actually. I have supplied verification of funds, and similar notes, but never an EMD with my offer, EVER. And I have bought from several banks, and Fannie doing just that, no EMD, until after they have accepted my offer, after I have had the property inspected, verified all numbers, and decided to go ahead.

I am sure some will say I am just a special case...... well, ok, but, seriously, I am no Einstein. If I can do it, I don't see why anyone else can't.

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Will BarnardPro Member
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Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
15y
James your post is a tad misleading unless people recognize this:
So what you are areally saying is that you do noy put up any upfront EMD, but you do after the offer is acepted and fully executed and you have completed your inspection.
I want to point some things out here for all to know: There is a HUGE difference between offers on standard sales, short sales, and that of REOs. When dealing with standard/private sellers - if they are motivated enough, you can get them to agree to just about anything, including no EMD.
However, when dealing with REO's (at least in the areas I invest) your offer will not be considered complete without a copy of an EMD check. Now keep in mind that this is just a copy going with your offer and that the real check is still in your hands and not cashed or given to anyone until the offer is fully executed into escrow - at which time you have a limited amount of time to get it in - per your purchase contract. Only then have you actually placed down an EMD.
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Todd Brittingham
Real Estate Investor · Walled Lake, MI · Member since 2010 · 121 posts · 66 votes
15y
Honestly guys I don't understand the debate. Whether it's legal or not is really a mute point. The fact is that if you place an offer on a property, you want to buy the property. Put yourself in the seller's shoes for just a minute. If they accept your offer they are taking the property off the market. Your earnest money deposit is a show of good faith that if you back out of the deal they at least have something for the lost marketing time and expenses they incur to continue to hold the property.

Now, with that said, if you want the property, you're going to have to pay for it anyway, so why not put as big of an EMD down as possible. This is a great way to make your offer stronger, and if you really want to send a message to the seller put down a 100% EMD.

Now I know not everybody has the ability to do this on every offer they present, but think about the message you're sending to the seller when you tell them you don't want to put any money up. If it's between you and another offer that has an EMD and everything else is equal, whose offer will they choose?

Again, the point is to get the seller to like your offer, and a high EMD is one way to do this without increasing your offer price.
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Jason Rist
Rowlett, TX · Member since 2013 · 1 post · 0 votes
12y
How then, would one succeed if they start out flat broke (poor) nor have rich relatives or friends? How does one get proof of funds from a hard money lender or get approved to begin with? I guess, until I find that one motivated seller who has nothing to lose by taking a chance, I'll lose out on good deals for lack of earnest money.
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Richard C.
Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
12y
Originally posted by @Jason Rist:

How then, would one succeed if they start out flat broke (poor) nor have rich relatives or friends? How does one get proof of funds from a hard money lender or get approved to begin with? I guess, until I find that one motivated seller who has nothing to lose by taking a chance, I'll lose out on good deals for lack of earnest money.
Yes, that's right. If you cannot put up an EMD, you have no business mucking about in peoples' lives, which is what you are doing when you offer to "buy" their house. Notice I did not say that you must actually provide an EMD, because I don't want to get in the middle of that fight. But if you don't even have 1% or so of the purchase price, people should not be relying on you to close. And sellers do rely on offers to buy. They give notice at their jobs. They put down EMDs of their own, on a new house, or deposits on apartments. They don't get their kids signed up to stay in their desirable school by the deadline, because they think they're moving.
Real people suffer real losses when promises are made by someone with no capacity to honor them.
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Richard C.
Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
12y
Originally posted by @Kristina Gaskins:

Love this topic as I am working with a realtor right now that won't budge on an offer if I don't give her at least $1,000!!! As a new investor, I need to hold on to as much money as possible. Why is $500 unreasonable?
It's not. For a offer of less than $50,000. How much are you offering?
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Norma H.
Investor · Pace, FL · Member since 2015 · 23 posts · 7 votes
11y
Will $100 EM work in California? If not, what will?
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J ScottPro Member
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Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
11y
Originally posted by @Norma H.:

Will $100 EM work in California? If not, what will?
I has nothing to do with the state. It has to do with the particular seller.
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