Do I need earnest money to get a contract for expensive homes in California?

5 Replies

I'm a new wholesaler in Pasadena, CA. Houses here have a median retail value of $600k-$700k. When I hear podcasts, read books, articles, etc. I learn that as a wholesaler I don't need any money to put down in order to get a house under contract. If I do at all, then it could be between $50-$1000 depending on the seller. However, a mentor of mine here locally told me that I need to put down 3% to get a house under contract for a wholesale deal. Here that could be $15k or more depending on the house!!! Yikes! I don't have that kind of cash to put down on several houses each month. So what's the truth? Could anyone tell me? For the Los Angeles market that is?

3% EM is standard for purchases, however sometimes with wholesaling that all kind of goes out the window....usually in the less sophisticated areas. I doubt there is much sub 3% happening in Pasadena but IDK for certain. Certainly, no educated Pasadena seller would take less today.

@Matt R. is correct... for properties listed on the MLS. Those books, podcasts, and seminar guys are talking about when you talk directly to the seller. Preferably a MOTIVATED seller. If the seller is truly motivates $1000 will work just fine, if not then they aren't likely to accept your low ball offer in the first place.

Step 1 of real estate investing is Find a Motivated Seller

@Joshua Carvalho  , the EM is most of time necessary. @Judah Hoover  & @Matt R.  are both correct. 

Keep in mind that if you intend to wholesale properties listed in the MLS, most investors won't take you seriously. Those properties are available for everyone to see.

You'll find gold in the properties that are for sale and are not marketed in the MLS. You have to find that gold nugget by either mailings, knocking in doors, find absentee owners, etc.

Good luck!

Lumi Ispas, Real Estate Agent in IL (#475.113981)
773-392-2906

hey Joshua! I was actually in pasadena today looking at a deal! I Would reccomend having 2-3 solid buyers lined up so that once you get an offer accepted, you can immediately pass it on to your buyer (for a fee of course) and have THEM send in the emd. You usually have 2-3 days to send it in and that shouldn't be an issue for serious flippers 

Bill

Instagram: flipsocal 

Originally posted by @William Larsen:

hey Joshua! I was actually in pasadena today looking at a deal! I Would reccomend having 2-3 solid buyers lined up so that once you get an offer accepted, you can immediately pass it on to your buyer (for a fee of course) and have THEM send in the emd. You usually have 2-3 days to send it in and that shouldn't be an issue for serious flippers 

Bill

Instagram: flipsocal 

 Good advice here Will, what's your current strategy?

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