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Ok… so i have drafted up a good Purchase contract. And in order for that contract to be legally binding it must include an earnest money deposit of about $1 -$100. Do i have to include in the purchase contract a line that states that i gave them the earnest money deposit… i get a bit confused on this part. And also do i have to include a section in the Assignment of contract form ???

Most state-approved RE purchase agreements have a line that discusses the EMD - amount, when due, etc. If you’ve drafted your own purchase agreement, then yes, make sure to include the EMD, including the amount, when its due, what happens to it if the deal doesn’t close, who holds the money, etc.


You are not required to have a earnest money deposit in a purchase contract to make it binding.

What makes it binding is you are giving a promise to buy in exchange for a promise to sell. The contract where consideration of say a buck is required is in an option because there is no promise for a promise and the buck, or something, is required to make it binding…


I never heard this put like this. It seems like I’ve heard other investors say that you need to put up some money the make the contract binding?..

Boston MA


Basic contract law, there needs to be consideration but that consideration does not need to be money.

You see it every time you pass a Realtors for sale sign. The seller gave a promise to sell and the Realtor gave a promise to market, and that is what made the listing contract binding. The two promises were the consideration.

In an option there is a promise to sell but there is no promise to buy, so the lack of that promise to buy means some other form of consideration must occur so the easiest form is a piece of paper with a dead president on it.

From my experience of about $14,000,000 in real estate, I would just say something to the effect of: “$100 Earnest money to be paid upon release of inspection contingency” or “Upon acceptance”…

This keeps you from writing out checks all the time when you start writing a ton of offers.

If you decide to start working with REO’s, which is where alot of the money’s at now days, you will need between $500 and $1,000 and in 95% of cases those figures are non negotiable.