Earnest money - who pays?

Question

Hello Everyone,

I'm fairly new to this site but have been in the investing trenches for the last few months now and have a question which is now becoming a grey area for me. As a wholesaler who locks up a property with a private seller, there is a line in the purchase and sale agreement for earnest money to be deposited within x hours or days of signing this contract. My question is, do I as the wholesaler put the EM check in escrow? If so, then why do I keep hearing from my potential buyers telling me not to write the EM and that they will do it? If I do assign the deal to an eager buyer, do they reimburse me for the EM check or do they write another one to the title company? If I can't find a buyer interested in the property during the inspection period and it is a non-refundable EM, am I out that EM? If so then i'm confused. Therein lies the grey area.

ANY feedback to this is worth its weight in gold.

Thanks in advance,

Scott

Dustin Haviland · Answer

@Scott Schechtel I am not a wholesaler, but as a title professional, an EMD is required within the allowed time. If the contract isn't assigned within that time frame, you are required to deposit the EM. Once you assign the contract to an end buyer they become responsible for the EMD. Either the end buyer deposits the EM or the wholesaler will deposit and receive the EM as reimbursement in addition to their fee. Second topic; yes you will be out the EM if you can't find a buyer and back out of the deal.

Andres Diego · Answer

@Dustin Haviland How exactly does the wholesaler ensure reimbursement for EM? Is it simply a clause in the assignment contract?

Scott Schechtel · Answer

Okay that is about what I figured. Thank you