Hello everyone, love this site. I'm proof up by my lender to do my first investor so I'm the exit buyer, and my best friend found a great deal at $22/sqft on a home that's 4000 sqft of living space, and place the home under contract with an option to assign. My lender now wants $400 for an appraisal to be done but also wants $1000 as earnest money. I get the $400 for an appraisal but shouldn't my best friend who is asking 10k for his assignment fee be the one to determine the earnest money or is it the original seller, certainly not my lender am I correct? I was told earnest money can be as little as a dollar to make the deal binding, I like to give$100 instead. Need help ASAP, don't want to see this deal slip through my fingers.
What is your lender's reason for trying to make that call?
Maybe talk with the seller or your friend and find out their thoughts on the EMD. Then find out why your lender wants to set the EMD. Maybe he means no more than $1,000. Or possibly he means he wants you to fund the appraisal and the earnest money.
I appreciate your thoughts but what I'm aiming for to hear is that in fact, its going to be my friend who sets the emd for the fact that he's flipping the deal to me......right??
Lender's don't determine earnest money amounts. Sellers determine if they require EMD and the amount. Are you sure the lender is asking for EMD and not some kind of up front fee. Is there an agent involved? Agents will want to make sure there is earnest money.
Find out who is requesting the $1K and what it's for. In a wholesale deal it can be either the wholesaler or the end buyer that puts EMD into escrow.
BTW: Earnest money does not make a contract/deal binding. Earnest money is often refundable and a contract can be binding without it. "Consideration" is what makes a contract binding. Consideration can be many thing besides money, including the promise of the seller to sell and the buyer to buy (at least in California).
Thank you K.maire poe, I suspected it as much. The lender is a group of private investor that lend to "2nd chance" clients, basing their lending on the applicants income and nothing on their credit. The entry program is 5K plus 1K in EMD,....and I guess as a general rule, they offer 1k as emd to close the deal. However, in my case, the amount is going to be determine by the seller, hence, if I can get the seller or my friend to accept $100, then I'll do that versus $1000
The EMD will go straight into their pocket if the deal somehow gets blown out. Who else have you consulted?
I check with the state of texas real estate license, BBB, talked to one of the past clients, google them since they are in business for a few years, nothing negative about them.
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