Earnest Money/Option Fee & Period

Hi all! A few newbie questions for ya! I’m about to make my first run of offers tomorrow. These are on properties I hope to wholesale, but if I can’t wholesale them, I’m going to rehab and flip them myself.

  1. Earnest Money… how much? $100?

  2. Option Fee… how much? how long?

Among all the investor books and online message boards, there seems to be inconsistency on these items. What’s typical in the Austin area?

Lotso thanks and wish me luck! :fingerx

On who your dealing with…

If your dealing with homeowners… $10 bucks is sufficient…

If your dealing with institutions… $100 - $1000…

Depending on how serious you want to come across…

Options… I would use those for buying notes from homeowners, commercial type investments, and land…

Otherwise use a well worded contract…

How long depends on how your going to fund them… or how long it will take whoever you flip to… to fund…

David Alexander

I don’t use earnest money on my contracts. I buy mostly subject to and when I sign a house up :deal it is with a motivated seller. :banana :dance

I look at it this way, if I get a house signed up and me and the seller get into a :argue :F what good is it going to do to try and take it to court? :banghead I may if the equity is good enough but with homestead laws it is going to be a tough battle if they do not want to sell.

I would rather go on to the next deal.

Now, If I have to go through a realtor, they expect you to have some earnest money :banghead As if the fact that you don’t have a ton of other ways to get out of the transaction and get your money back.

Just some thoughts.



I noticed in your post that you do Sub2 mostly. Did you go to the RICH club meeting in Feb? I did and stayed thru every last minute of the afternoon session with Charlie, Randy and Bob. But there was one thing Ididn’t have in my notes. Charlie said that they get money from the sellers. How do they do that and what is the reasoning? Do you also do that?


Yes I get money from SOME sellers!

If their equity is not very great then I ask for about 3 payments from them. This is their PITI.

If they can’t do it then I try to see what else we can work out. If they7 have a ton of equity I won’t ask for anything.

You have to ask them for it to receive it. Do a break down on what it will cost to sell through a realtor. I am talking about everything, holding cost, marketing, closing cost etc… then get your payment from them for less than that.

Does that help?