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Author Topic: Hmm Earnest Money Question  (Read 5802 times)

Offline Tayman

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Hmm Earnest Money Question
« on: October 01, 2003, 01:02:42 am »
Ok, well I thought I found a good property until I had the inspection done.  Luckily I found someone that didn't charge me for the inspection after he found a major defect in just 10-20 minutes.

Either way, I paid 500 dollars earnest money to the Title Company with an option out clause($25) in case something like this happened.  The clause gives me 10 days to get out of the contract for whatever reason.
Here is the situation:

I have faxed over the request for earnest money to the seller.  My real estate broker hasn't been able to contact the seller...  I don't know what is going on, but I don't like having $500 tied up, when I could use it for another contract.  Is this something that happens frequently?  Are the sellers trying to pull a fast one?  My broker has told me as long as I have signed and dated the request, everything will be fine.

Is there a way to get a contract on a home without paying earnest money until the inspection is done?  

On a sidenote...I found a foreclosure that I would like to purchase.  It is way below market value (Va Foreclosure) in a good neighborhood.  I was told by another real estate broker that I would need to pay more than the asking price in order to win the bid.  Could this be a possiblity, or just a way for the broker to get more money?  I was under the impression that I should never pay more than the asking price or market value(somewhere around 70% of market value minus repairs). I stepped away from the deal when the broker asked for a personal check made out to him for the earnest money....  **sigh**  There is no way in hell I would do that.  Did I avoid a scam or am I being a little to cautious?  I am thinking about trying to make an offer on the home.  The asking price is in the 50's and the market value is in the 80-90 range.   :brow  (I was told I would need to bid in the high 60's to win)

Suggestions?

I definetly need to start slow.  It seems like there are plenty people out there ready to screw you over.   :roll:

Offline MikeM

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It's YOUR money, not theirs!
« Reply #1 on: October 01, 2003, 09:42:01 pm »
Hi Tayman,
Look man, it's your money, your contract not the Brokers or anyone else's. The legal fact is that a licensed Broker/Realtor is obligated to present ANY offer you submit. Whether HE/SHE likes it or not. Remember at close, everyone except you are going to walk away.
You do your due diligence, formulate your offer and give it to the Broker for submission. TREC does not have any stipulation that the Broker must like it. You offer what makes sense to you, everyone else can just lump it. If your bid is low, the worse that can happen is that they won't except it. At least now you have a firm starting point.
DON'T let these guys dictate your business to you, your the boss.
Go get'em Tiger!
MMTJ Property Corp.

Offline Tayman

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Re: It's YOUR money, not theirs!
« Reply #2 on: October 01, 2003, 10:12:31 pm »
[quote
author=MikeM link=; date=0]Hi Tayman,
Look man, it's your money, your contract not the Brokers or anyone else's. The legal fact is that a licensed Broker/Realtor is obligated to present ANY offer you submit. Whether HE/SHE likes it or not. Remember at close, everyone except you are going to walk away.
You do your due diligence, formulate your offer and give it to the Broker for submission. TREC does not have any stipulation that the Broker must like it. You offer what makes sense to you, everyone else can just lump it. If your bid is low, the worse that can happen is that they won't except it. At least now you have a firm starting point.
DON'T let these guys dictate your business to you, your the boss.
Go get'em Tiger![/quote]

 :mrgreen:  

Let me ask you this question.  Can your broker find out how many bids have been made on the home and how much each bid was made for?

I have been told that they know how many bids have been made, but they don't know the exact amount of each.  I want to know if this is really true, or are the brokers just using it as leverage.

Offline makenmoney

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A Few Thoughts
« Reply #3 on: October 07, 2003, 11:45:07 am »
Hi Tayman,

I read your post and thought I'd throw in my 2 cents. You have some good questions!

   Ernest Money-  I've had 3 contracts recently which I cancelled after having the inspection done.  In 2 of them we had the same delima you are having.  We faxed the termination paperwork but the seller refused to sign for the release of ernest money.  The title company is required to wait 30 days for the seller to sign the papers. After that they are able to review your contract and return your ernest money without the seller signature.  Worst case scenario you may have to wait 30 days.

  Second-  I have NEVER made a check out to a mortgage broker for the ernest money. It has always gone to either the title company or to the lawyers office who will be handling the transaction.  Where is the broker going to keep the money? In his personal checking account???? You were smart in not giving it to him. If I were you I would consider getting a different broker!  There are far too many of them out there hungry for the work to have to struggle with someone that may not be completely honest.  

   Foreclosure- I haven't dealt with VA foreclosures but I've been following the HUD foreclosures and an REO list pretty closely lately.  It seems that most of them are selling for the asking price or below.  There are a few that sold for more than the asking price but when you work through the numbers I suspect that these are retail homeowners that really wanted to insure they got the house they wanted and basically got it at a discounted retail price.  Like Mike said.  Work your numbers for the profit you need and don't pay a penny more than that.  If you do, you may not be an investor very long.  You may lose the bid because your price is too low but there are other deals out there.  Better to lose the bid than to lose your shirt.  Many people use the formula ARV * 70% - Repairs.  If the property appraised for 90K  and you pay 60K then there is no room for repairs.  ( I haven't found one yet that didn't need something).  If it only appraises for $80K and you pay 60K then your upside down already.   If the broker is giving you bad advice- get a different one!!  Trust your instinct.  Sounds like you're making some wise choices already.

   I do know that HUD publishes their bids on their website.  I'm not familiar with VA homes.  You might check out their website and see if you can find it.  
   
  Hope these tidbits help. Good luck!

Kathy Mersiovsky
[email protected]

Offline Tayman

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Hmm Earnest Money Question
« Reply #4 on: October 07, 2003, 10:59:20 pm »
Once again, I would like to thank all of you for the great suggestions.   :mrgreen:

The seller has apparently signed the release for my earnest money, but I am just waiting on the Title Company....  

 :zzz

Offline StacyKellams

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Earnest Money
« Reply #5 on: October 08, 2003, 02:00:24 pm »
Tayman,

Hi everyone. Sorry for not posting lately. I've been super busy.

I agree with what the others on this board are telling you. Great advice.

Your broker obviously isn't familiar with very many procedures. Time to find a new broker.

I have NEVER made an earnest money check out to anyone other than a title company. You were smart not to do that.

Your broker is also wrong about having to bid more than the minimum bid in order to get a VA repo. I have actually bid up to 10% LESS than the VA bid and won the bid. It all depends on the property, how much work it needs and how long it's been on the market.

In my experience, the VA usually starts dropping their asking price after a property has been on the market for 90 days.

The rules for VA repo's are very different depending on where you live. I'm assuming Texas.

In Texas, the VA has several office's across the state. Each office has a territory that they cover. Each office also does things a little differently from the next. So its hard to say what the rules really are.  This has been my experience anyway.

The VA contracts with certain brokers and agents in each town to list the properties for the VA. These VA listing agents are the ones who usually know the most about the way their particular VA office runs things.

Since your looking for a new broker anyway, I would suggest using the listing agent for the VA repo you're looking at. By dealing directly with him or her you cut out the extra real estate agent and the VA agent will get the entire 6% commission.

Brokers are just like everyone else, they like it when they get to put more money in their pocket. Tell them you'd like to make an offer through them without the use of another agent and ask them to help you with the process. Be upfront and tell them this is your first VA and you'll need any help they can provide.

They'll make you sign a document stating you understand that they represent the VA...blah, blah, blah. But because you're going to be responsible for putting a 6% commission in their pocket instead of a 3% commission they should be more than happy to tell you everything they know about how the VA operates in your town.

Let us know how it goes.
www.RealEstateCourseReviews.com
"Find out which real estate investing courses will really make you money and which ones won't!"

Offline jhatton

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Earnest money
« Reply #6 on: October 09, 2003, 02:06:18 pm »
Soory to here about your earnest money, but there should be no problem in getting our earnest money back. Sometimes it can take a few days but never longer than a week. As for bidding on foreclosures, it really depends on the area and the condition of the house on whether or not you should bid more. If it is a good home and a good area there more than likely be other bids on the house. There are a-lot of variables when it comes bidding on foreclosures and your agent should tell you all of them. As far as an agent telling you to right a earnest money check in HIS name, that is completely wrong and you did the right thing by not doing so. Feel free to e-mail me with any other questions, I know I was a little vague in your answer so feel free.

 




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