Buying REO Property with Cash - Large Earnest Money Deposit?

Hello everyone,

I’ve got a great opportunity to purchase a rehab house at 50% ARV, and have already been preapproved by a great hard money lender that’ll front money for purchase and rehab up to 75% LTV. Everything seems ready to go. I’ve talked to the agent in charge of the property, and told her I’d like to make an offer on the property. Since I’m working with a HM lender, it’ll be an all cash purchase.

Now, the issue is this: she states that if I’m purchasing the property through conventional financing, that my earnest money deposit is roughly 1% or so, as expected. But since I’m paying cash, that it’ll likely be around the 10% mark (which kind of blows my mind). In other words, I need to send in a check for $8k, in order to make an offer for the house.

Why is this so? Is this normal? And why would the bank not be doing everything possible (like a lower earnest deposit) to have their property purchased via cash, intstead of financing?

Any help would be greatly appreciated. I need to get the offer in soon, as it’s getting looked at very frequently (I’m sure many of you know the pressure).

Thanks again,


I know 1 thing you could try. You could tell the agent you’re going to get financing, but in the end, you’re actually paying with cash. So, you can get away with doing the 1% now, and then you all of sudden tell the title company, “Oh, I found extra cash. I would like to buy this home with cash now, is there a problem with that?”

buying with hard money is not buying with cash, which is probable why they put the 10% earnest if buying with cash (its common),to keep people from saying its cash if its not

Normally if its a cash offer they also want to see proof of funds, which means the money sitting in your account

You will still have a lender on the paperwork,its common for people to think they should say its a cash offer, but its not,I wish it were, I have lost properties to the same or even lower cash offer, and I use hard money,

i want to buy an reo asking price is 215000 i want to offer them 140000 but i have no cash to put down but lock in the deal for 30 days until i find a cash buyer, this hous needs 40%percent work into it siding floors etc. each floor can rent as much as 1200 per month i have bad credit is the bank willing to offer me a loan to fix, or should i call private lender which is the right way to do this