Ernest Money Strategy

14 Replies

I usually only put down $10,000--but I am NOT playing games and making offers on properties I cannot afford nor have the intention of closing on. 

Yep, my last one Thursday I put up $5k.  Do enough to let the sellers know you are serious and will perform!

in this market you not only need EM but you need POF to get any deals signed.

Originally posted by @Rich S. :

@Steve Vaughan are you calculating the $5K based on value of property or is that just your standard?  I'm curious if folks are using flat amounts or a %, etc.. 

In general, the more of a discount I ask for, the more I am willing to put up for EM.

This one specifically last week was for an odd property (old mobile on multi-family land) for all cash, quick close. Asking price $75k, accepted offer $47,700.

On financed houses, plexes, commercial apts, etc I generally offer at least 3%.   Especially in a competitive market situation.

The days of LOL $10 or $100 EM to tie the seller up are long gone (and should be!).

Thanks for your replies everyone.  Very helpful.

What about using a promissory note is anyone using those.

I have now a POF but still now money.

Originally posted by @Doug Orchard :

Thanks for your replies everyone.  Very helpful.

What about using a promissory note is anyone using those.

I have now a POF but still now money.

 A promissory note is basically owner financing. OF is a great way to obtain properties if the numbers make sense. It is usually cheaper than hard money. 

A promissory note for EM.....a non starter. I'm guessing your "POF" is some "off the internet" garbage.. None of this will work for listed properties or knowledgeable sellers.

The whole “wholesaling with no money” is a myth in today’s market

@Doug Orchard You don't have to pay the earnest money when you make an offer, so even if you make "many offers" it shouldn't be a problem. You only need to pay the earnest money once your offer is accepted. However, at the point of an accepted offer, you should have the intent to close and the money.

I'm new to wholesaling and trying to understand earnest money better. So the wholesaler is the one depositing the EM funds in the escrow account and is refunded these funds at closing? Or is it the buyer that refunds the EM to the wholesaler after closing?