I am in the process in submitting an offer, and the Realtor has told me that the REO-property holder is requesting earnest money of [b][/b]$1000.00 for a short sale before I place an offer. This can’t be right. Please advise.
An REO and a Short Sale are two entirely different things, a Short Sale is done before the actual Foreclosure on the Court House steps and an REO (Real Estate Owned) property is a property that did not sell at the Foreclosure Auction and reverted back to lender which now owns it as an REO.
A request by a bank or lender for a $1,000 (One Thousand US Dollars) is fairly common as most selling agencies want a strong Earnest Money Deposit to show the buyer is serious.
Earnest Money goes with your contract offer to open escrow. Just make sure you have contingencies in your contract to ensure you have a way out, provided you find reason to need to do so!
Earnest Money is deposited to the Escrow / Title Company and is part of your down payment at closing!