What do I do when seller ask for a large EMD?

Question

I'm a new investor starting with little to no money. I agreed to buy a house for 95k but then seller wanted a $1000 deposit. How do I convince him to lower deposit ?

Richard C. · Answer

The seller has sniffed you out as a wholesaler, and realizes that it is unlikely that the deal will close.  That is why they are insisting on a real EMD, and why they are unlikely to waver on it.

Go find a less savvy seller, I guess.

Account Closed · Answer

It was standard to give $1,000 earnest money deposit way back when I bought homes in the 1980's and 1990's.  The seller will think you are not serious or won't get funding, and if the seller is worried about those things, they aren't likely to take the property off the market for you - unless they can't sell it to anyone else.

Richard C. · Answer

If you don't have any money, how are you buying a $95k house?

Let me guess:  By "New Investor" you mean you read a book or website about "Wholesaling"?

Chances are you cannot convince the seller to accept less.  $1000 is less than I would accept for a property at that price range (I want to see 2-3%).

Natasha M. · Answer

@Fantasia Bowser

maybe you might want to bird dog for a few investors to get enough funds for an emd.

Patrick L. · Answer

That's a very small EMD, 1% of the offer?  As a serious buyer I'll usually put 10% down on my offers.....but then again I'm not a wholesaler.

If you're seller isn't completely desperate they probably won't take a rubber band and some string from your pocket as the escrow deposit.  Any halfway knowledgeable seller will want a reasonable amount of money so there's some consequence if you bail at the last second.

One option would be to write a 10-14 day inspection period into the contract and give the seller the $1k deposit and if you can't move in in that period then cancel the contract, get your money back, and don't waste any more of the seller's time than you need to.

Joe Villeneuve · Answer

Just say no.

Peter K. · Answer

$1k is nominal on a $100k property.  I certainly wouldn't accept an offer on a property in that price range without EM of more than that.

Corey Demuth · Answer

Some wholesalers might suggest that you try to pay them a smaller amount for an "option" contract giving you the exclusive right to buy the property for the next X number of days.

Fantasia Bowser · Answer

@Richard C. I should've included that I planned on wholesaling it. You are correct I did read a book and have been attending local meetings for a while. So this is not something I'm jumping into.

What do I do when seller ask for a large EMD?

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