10K EMD for a foreclosure home?

Question

Hello, I found a listing on Craigslist for 180K and I offered 160K and they were very interested. I find it kind of strange that they were so eager. It’s a foreclosure home so they need a fast closing. They wanted a 10K EMD just in case I don’t perform. I’m sending someone out for an inspection. What are your thoughts because it feels kind of weird to me being out of state and my first investment home!

Charlie MacPherson · Answer

I might be wrong, but this sounds like a scam, partially because you found it on Craigslist which is ground zero for scammers. As @Marshall Leipprandt said, you need local help. An agent to see the home. A title company / closing attorney to run a title report. A home inspector to go through the house.$10K EMD isn't necessarily out of line, but who are they suggesting holds it? If they want to hold it themselves, that raises the scam alert even higher. It should be in escrow with YOUR attorney or title company, not theirs - because I'll bet that theirs is a complete fabrication. That'll be the end of your $10K.You say it's a "foreclosure home". What does that mean? Pre-foreclosure? Actually foreclosed?If it's pre-foreclosure, you might be on to something. If it's already foreclosed and bank-owned, you can only buy it from the bank.You don't say where the property is, but maybe do a Google street view and see what the neighborhood looks like. Then do some searching to see what local values are. If this property is in reasonably good shape and priced very low, that's another clue that it's a scam.In other words, if the deal looks too good to be true, it probably is.Proceed with extreme caution.

Account Closed · Answer

Danger, Danger. Make sure you understand when the sale date is, if they own the property, how much to bring the loan current, if it is a Deed of Trust or a Mortgage, are there any other liens on the property, has someone else already signed an agreement with them and a few other things.

Eliott Elias · Answer

Few tips for you 1. Shoot for no on every first offer you make 2. Never put heavy earnest money on a foreclosure, you never know what kind of liens the owner holds 3. Get a good attorney who deals with these kind of transactions

Caroline Gerardo · Answer

Danger Will Robinson!Nothing wrong with ten grand EMD but craigslist sends signals emails to get that Nigerian Prince's gold chest out of hock.If Notice of Default is filed, it is a county public record- look up now. Choose your own title company- First American or Old Republic. Be super careful about incoming emails that change the bank account for wires- is fraudsters favorite scam.Who are all the lenders for payoffs/ liens/ taxes/ insurance?Are you using a traditional lender and agent? Get an interior inspection. Who is in the house: names and emails and phone. How are you getting them out? What is value of the house if you have to put a new roof, all new interior?

Mohammed Rahman · Answer

Hey @Dillan Mamou - congrats on finding your first deal, I would proceed with cautious optimism.

Reid Ferguson · Answer

@Dillan MamouMake sure you’re EMD is always going to a title company. Make sure that the title company is legit and that any wiring info matches the company’s online information. Also, give yourself an inspection period that allows you to take your EMD back for any reason. This gives you time to find a buyer and have a title company check title, etc. before your EMD goes hard. If you can find an end buyer in that inspection period, then your money never goes hard and is always protected. End buyer’s EMD must be equal to or exceed yours. Theirs goes hard immediately. Holler if you have questions or want paperwork that helps with this.

Bill B. · Answer

If there’s a title company involved and holding the EMD you’re fine. Assuming you’re planning on closing I’ve offered $20k emd. If there’s not a title company involved, no thanks.

Marshall Leipprandt · Answer

@Dillan Mamou Do you have an agent helping you? I would definitely proceed with caution if you are not there in person, have no agent, and this is your first investment home.They may seem eager because there are issues with the property or they might just want to get it out of their hands since the seller's market has cooled off. You 100% need a boots on the ground advocate (agent, family, or friend) for you who is going to see the property in person and ensure that it's a suitable investment. If it feels weird, that is usually a sign to be extra cautious!