Escrow account good or not?

Question

i live in texas, and i was told not to set up and escrow account, because of possible differences between myself and the seller. Since the seller and I have to sign for it to redeem it. I understood that it was a good idea to put earnest money into an escrow account . What would be the reasoning to deposit money into an escrow account??
Also is this common practice in wholesaling?
im just trying to understand why i would want or not want to do this.

Thanks  to all that reply!
Your response really helps!  :D 
Abel

Tom Wood · Answer

In general, the idea is to put money in escrow rather than give it to the seller.  If something comes up and you need to get out of a contract it will be much easier to get it out of escrow than it would to get it back from the seller.

N/A N/A · Answer

ok understood, now if something does go wrong...which i cant please everyone, what do i do?Split the money to avoid a law-suit?LOL Really i dont want to have to lose any money on the deal because it went south, but i dont want to ruin my reputation. Has anyone had this problem before?

Thanks!
Abel

N/A N/A · Answer

ok so earnest money is not a requirement, and if it is deposited in an escrow account...once the property goes to closing that money goes to the seller right?
I guess if i were a seller and someone told me and showed me the earnest amount they are putting up front for consideration of the property, i would wonder why so little....of course i want to sell the  :badwords: house , and get on with my life.
What is the whole $10 deposit i hear about all the time being deposited for earnest money?? 10 the magic number...a rule......or tom does it, i will do it?
I guess i am lost on that practice.

Abel :help: -------  funny!

Ryan Webber · Answer

Well it doesn't really go to the seller.  Its normally credited towards the purchase price at closing.  That is if that's what the contract stipulates.  Whatever the contract says, the title agent does.

Jorge Espinoza · Answer

Marvin on the Purchase Contract that i sign with the motivated seller i always use "JORGE AND/OR" whoever my buyer is to add him on there.If that's what youre talking about.And about the contracts that i use are always Purchase Contracts i never used options before but heard there not recommended why i don't know. :D

Regards,
Jorge

:superman:  "Natural Born Go Getter" :superman:

Ryan Webber · Answer

I very rarely put anything as earnest money.  I have only been asked for earnest money by the seller maybe two or three times.  I only put earnest money if the seller is represented by an agent.

As a wholesaler, I would recommend that you put $0 as earnest money.  Even with contingencies the seller has to sign off for you to get the earnest money back once its deposited with the title company.  Earnest money is not required for a legally binding contract (at least in Texas), and I personally don't think it means much to a motivated seller.  They just want the deal to close, and they normally don't even understand what earnest money is.

Jorge Espinoza · Answer

Eagleone build your investors buyers list and do your DUE DILIGIENCE on the properties before you put them under contract so you won't have to worry about backing out .And yes if you do several of these you will ruin your reputation.I know of a guy that braggs about putting several properties under contract in my area but can't assign his contracts because he gets them at 97%LTV  pretty smart guy HUH.. LOL Yeah he's screwed, nobody take's him serious anymore, heck even the property owners know about him. "It's a small world".And about Earnest Money you could put down as much as $10 bucks but i always have my investor buyer's put it down for me they usually put down the whole purchase price as Earnest Money to show there dead serious.yeap the whole purchase price..HAPPY INVESTING..

Regards,
Jorge

:superman: "Natural Born Go Getter" :superman:

N/A N/A · Answer

Hey guys  i appreciate the advice!
I'm throwing a bunch of what-ifs out there . I do understand that doing my DUE DILIGENCE is very important. In fact the most important i think. I was informed by people about setting a escrow account up as a way to show seriousness in the property for the seller. 
Now jorge says he puts in as little as $10 in an escrow account.....how do u get away with that? Isnt that money looked at as a 'good faith payment'? LOL, dont get me wrong i am all for little as possible from my pockets...since there is little in my pockets! Hows is that possible? Doesn't the seller see and even sign on the escrow account you are setting up? 'Why are you only giving me $10 for your time in case it falls through".I can just hear it now.  :violin: Anyway...give me a idea of how that  works please!

aBeL :D

Jorge Espinoza · Answer

eagleone,as far as the $10 bucks earnest money it's been said that you could put up as much as that.However i never go that low the least amount i think i ever put down was $5k.   :protest:I think you misunderstood my last post or maybe i need to do some spelling check on it.Had like 4 beers and is getting a little blurry.LOL.. :beer:  :beer:  :beer:  :beer:

Regards,
Jorge

:superman: "Natural Born Go Getter" :superman:

Tom Wood · Answer

What you want to do is have a good contract with an inspection clause and financing clause.  Those give you the necessary outs if you need them and it should never go to a lawsuit.  You could also only put down a few hundred dollars so that in the case of a disagreement you just walk away.  I think you may be worrying about something that happens very infrequently.