Who pays the earnest money deposit?

Question

I am a bit confused on this topic so lets just get started. First off I was wondering if as the wholesaler do I have to pay a earnest money deposit to the seller or does the cash buyer do that since I am assigning the contract over to them. If I have to put down an earnest money deposit made out to the seller do I get that back when the deal closes and when the cash buyer buys the property or is that put towards fees/taxes I will have to pay? Also as the wholesaler should I ask for earnest money from the cash buyer or not, thank you.

Eliott Elias · Answer

You pay the earnest money deposit initially. And you also require an earnest money deposit from your cash buyer. Your deposit gets refunded to you. The cash buyers deposit is applied towards the purchase price. And is nonrefundable.

Michael Germano · Answer

Hi there

I am an experienced investor where I JV with Wholesalers across the US providing funds for EMD and double closing.  Happy to connect to see if I can help.  I have funds and resources to help close deals.  The long and short is that if you're a wholesaler and need help with your earnest money deposit, I can help you!  I can provide short term funding solution for your EMD!  The process is simple, we work directly with you, and your title company, send the EMD to the title company.  When you find a buyer, we get our loan back plus our fee at closing.  We can also provide double close funding up to 500k.Happy to connect to discuss further if you have any questions.

Account Closed · Answer

Hi Peyton,

As a wholesaler, earnest money maybe required to secure the contract with the seller, and the cash buyer usually takes over the responsibility for the earnest money deposit.

Whether you get the earnest money back depends on the contract terms. It's common for wholesalers to ask for earnest money from the cash buyer as well.

hope it helps!

Jesse LeBlanc · Answer

ONLY if you're double closing will you need 2 separate "purchase & sale" contracts.  When you're assigning your contract, you will have just that, 1 original purchase contract and 1 assignment of contract.  so 2 contracts but 2 different documents.  The first is with you and the seller agreeing to buy their house.  The 2nd is with your buyer, assigning your original contract to them for a specific fee, they then step in as the buyer.

Jesse LeBlanc · Answer

No, it was not considered Ordinary Income.  This is merely a wash.  $1 out and $1 back in, $0 net profit, no ordinary income to report, no taxes paid.   IF it were EMD you kept from a buyer that didn't perform, that would be income and taxable.

Peyton LaBarbera · Answer

Unfortunately I am not interested in double closing at the moment but thank you for taking the time to comment.

If you have any information about any of the questions I had that would be great, thank you.

Bob S. · Answer

Of course, YOU need to put it down and of course you get it back .  PLEASE do not attempt to do deals ,,,,,,yet. Please get to your local RE meeting, learn then apply what you learn. Also YOU need to ready to close if you can't find a buyer.

Good luck

Jesse LeBlanc · Answer

You can simply email the closing company since your buyers EMD is there and get it anytime.  You can also wait until it closes, then the closing team can add your original EMD to the assignment fee all in one check/wire. If you are double closing, then your EMD will be independent of your buyers and must remain with the closing team until closing.

Peyton LaBarbera · Answer

@Bob Stevens Don't worry I am still in the learning process I don't intend to step within 6ft of a contract or start to attempt to make deals before I fully understand all the ins and outs of wholesaling

Misty Amburgy · Answer

Hello Peyton,

Great job taking action.

Yes you pay Earnest money, however, it doesn't have to come out of your pocket. There are people that will pay it for you in exchange for part of your assignment fee. Yes I am one of those such people.

The contract that I use protects the EMD if the deal does not close.

And Yes whatever, you paid in EMD, it is a good practice to ask for the Cash Buyer to put up double your EMD amount. So if you put up $1000.00 ask for at least $2000.00.

If you have any other questions.

I'm happy to help

Who pays the earnest money deposit?

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