i’m about to do my FIRST deal!!!
but, the realtor is asking for me to put up earnest money.
she says 500.00 is customary. Do i pick how much to give?
and does the more you give look better…i know that if the deal doesn’t go through then they keep the money but, what happens if it the deal gets done?..where does the money go then???
wish me luck,
RHeebaby
Tell the Realtor that if $500 is customary then she should pay it – that’s your custom…then put up what you feel comfortable with.
Remember, the bigger the earnest money deposit, the stronger your offer looks, but for a contract to be binding, there must be some compensation (and actually, it doesn’t even have to be cash – it can be anything of value including a promissory note).
$250 is “customary” here…it’s the small-town deep-South. We have only actually put money down on one property (our first). After a while, you get a reputation (hopefully for honesty!) and your word is good. When we cashed out in Washington, DC area, the market was very much over-heated. The buyers put down a $10,000 certified check – I guess they were serious!
The money goes into open an “Escrow account”. If the deal doesn’t get done, then the earnest money becomes “liquidated damages” for the seller. If the deal goes through, it will be applied to your closing. There will be a line reflected on the HUD-1 showing the deposit money, so it’s not like you’re losing the money.
Keith
Howdy Rheebaby:
One thing to add:
The earnest money can also be put up subject to certain actions. For instance if you are not approved for a loan you may to able to receive a refund of the money or other conditions like inspections.
RHeebaby,
Is this a bank owned property? What is the purchase price? What city is the property in? I almost fell out of my chair when I found out how much E$ was required on a $470000 townhouse in Brooklyn. Chicago plays for keeps too. Although it’s customary to put contingencies in your contract, some Sellers will counter them out. HUD for example, gets $1000 on sales prices over $50k and $500 under that. It’s non-negotiable. If you buy from HUD as an investor and don’t close, for whatever reason, you’re out the earnest money. FNMA owned properties are requiring as much as 10% of sales price for earnest money. For most properties in my market, we’re giving 1-2% of sales price. Although larger deposits should be more appealing to listing agents, CASH OFFERS still rule.
Good luck!
-housebroken