I’ve heard of people who can get a property under contract for $0 to $20. Is this true? If so, how do you convince the seller to go for it? I had a deal I was trying to wholesale before, and the seller wanted $500 earnest money. Now, a lot of the newbie’s including me don’t have $500 to give up, since our wallets are tight. It’s kind of discouraging for them to want that big of a deposit, if you ask me.
How do you work around this problem? Thanks in advance.
no you don’t need $500 to tie a property up. If you give a seller $500 to tie a property up on your first deal without any money, you will get what you ask for. You don’t even need $20. The entire property up with 5 to 10 bucks. And that’s a fact. If you don’t believe me… sorry. :elephant
Thank you so much for your reply. :biggrin
I tried to get a house under contract for $10 last year, but the seller laughed at me and wanted $500. I had a hard time trying to come up with the money, and he basically canceled the contract because his mother was moving back with them and she needed a place to stay. This home was out of state (in Texas), by the way, and the numbers were there.
What's the best way to explain how much earnest money you are giving the seller, without offending them (in hopes they will agree to it) ?
If they are requesting a certain amount of money its because they are either listening to what others are telling them, or need to go out and get that new riding lawn mower they have been looking at. A seller should care less about the binder deposit. You tell them its only to get the paper work done. If they have a problem, walk away, and say thanks for your time. A distressed house is not worth putting that much down. $500 is a lot of risk. But if you have your numbers tight, so tight that you see a fat profit, and you are confident in your skills, and your buyers list, go for it.
I’ve been a full time investor for over 15 years with well over 1,000 deals to my credit (not bragging, just stating I’ve been around the block a thousand times). I did the first 450 deals with $10 earnest money. I was dealing with individuals. Don’t ask…just put $10 in the blank on the contract. On the rare occassion that someone debates the amount you’ve offered to put up, say this…
“With all due respect Mr. Seller, I’ll be happy to put up some more money once I find out from the title company that you are actually the soul owner and that their are no other extraordinary liens or encommbrances not disclosed in our discussion.”
If the Seller ever contacts you with a title commitment in hand and asks you to come up with more earnest money (which hardly ever happens), just say,
"If I’m going to make another trip to the title company with money, why don’t I just come down and give you all your money and close the deal. What day is good for you?
This is hard to do with institutions or when their is a realtor involved who doesn’t understand RE investing. If this is the case, make the earnest money part of the responsibility of your money partner.
–Mitch Stephen–
I use $20 dollars as earnest money. It’s just my chose, the seller could care less. I have yet to encounter a seller that has questioned me on my earnest money. When that day comes, I will simply say, “that is my company’s policy” and that is that. If you are dealing with MOTIVATED sellers, then this shouldn’t be a problem. If a seller won’t balk, then just move on to the next seller who is actually more concerned about getting their property sold then the amount of earnest money you put down.
And this earnest money is in the form of a check, I assume? Is it made out to the seller or the title company? And do we put that in escrow, or give it to the seller? =O (I’m full of dumb questions, I know, haha).
I am taking a guess, and I am going to say to make the check or money order (I prefer money order) to the title company, and in the “For:” section, put something like, “Earnest Money Deposit”. Or, you may be able to make it out to the owner, but give it to the Title company and have them hold onto it.