When using promisary notes for the earnest money to purchase a home do you have to get it notarized? Or can I just use a check and state that when we go to closing I want my check back? Are tehre any other ways to get past the earnest money problem some of us have?
A promissory note does not need to be notarized, unless you plan on recording it for some reason.
It is a contract if it meets the general requirements of contract law.
Be careful using this strategy. Most Realtors® will think that you are a flake, or a seminar grad by using a promissory note for earnest money, and they won’t take your offer seriously. You might get a FSBO to take one, but it cuts down on your odds.
In the early days, I had better luck with getting offers accepted by writing a check to the title company that will be handling the escrow and attaching it to my written offer. On the face of the check I wrote,
" This instrument is not to be cashed or deposited until closing." It was seldom challenged. At closing, we destroyed the check since we had all the funds necessary to close.
Now, I have learned better. I get the sellers to put up the earnest money to bind the agreement. I like this much more! If they’re motivated enough, they will. It’s customary, but not required that the buyer puts down the earnest money. (Remember that the Realtors® are almost always agents for the seller.)
how do you go about asking the seller to put up the earnest money
I am usually face to face, or on the telephone with the sellers while we are negotiating the deal.
As we are writing it up - after the main details have been agreed to - I just ask them, “How much are you prepared to put up as earnest money to bind this agreement?” And I shut up. Most of the time they tell me a number. If they hesitate, I tell them that it doesn’t have to be a lot to make the contract legal. Ten dollars will do. This is usually enough to get them to agree, and we move on.
I don’t care how much the amount is. I just want to shift them away from having me put down any money. If they balk at this, maybe they are not sufficiently motivated to do the deal. It’s a motivation test. And it is a negotiating point. If they insist on me putting down the earnest money, then I will get some other consession from them in return. You know the drill, “If I can do this for you, what can you do for me?”
Of course, this is hard to do if you have a Realtor® in the middle of your negotiations. For some perverse reason, they would rather kill the deal than let me negotiate with the sellers, even if they are still getting paid. I seldom make offers through Realtors® any more.
Sounds Great to me but Ill be using a realtor b/c this will be my first home and investment property, but Hell Ill give it a try what can they say? No well ill try something else. persistant persistant persistant and thats what ill do…lol thanks alot i had no idea I could ask the seller to put up the earnest money…why do most people say to put 500 or more in eascrow if you can get by with say 10? is it so realitors know ur seriouse or the buyer…I tell all realitors my plane to get involved and the run but today i think i found one that will help me b/c he was giving me some inside information with out a client/ realtor contract or what ever they call it…
The Realtors® don’t want to waste their time with a buyer who won’t perform. And they don’t want to look bad to their sellers and other agents by bringing in an offer from a buyer who is a flake. I can’t blame them for this. I wouldn’t either.
They know from long experience that the more that a buyer has on the line, the less likely that the buyer will bail out of the deal for some reason, hence the pressure to get as big of an earnest money deposit from the buyer as possible.
Remember, unless you are dealing with a Realtor® who has signed a buyer representation agreement with you (a Buyer’s Broker), then the Realtor® is representing the seller’s interest and has a fiduciary responsibility to the seller - not to the buyer. This also goes for a Realtor® who you asked to help you find a house. Without that buyer representation agreement, they are just a subagent for the listing Realtor®. The are bound by law to put the seller’s interest above your interest as the buyer.
The seller has got the property that isn’t going anywhere, but the buyer who has cash and credit can buy any house he wants to. The buyer is more mobile, so to speak. He has more options available.
But there is no legal requirement that the earnest money be paid by the buyer. It’s just the custom and the expectation. I call it their “Tribal Rites.” Of course, their contracts are drawn to reflect this custom, so be prepared for the resistance if you try to get the seller to put up the earnest deposit on your offers through a Realtor®.