Is $4000 acceptable for Earnest money on a 115K loan?

Buying & Selling Real Estate
9yFollow

Is $4000 acceptable for Earnest money on a 115K loan?

Tamara Batsell
Dallas, TX · Member since 2016 · 28 posts · 2 votes

Reading over Contract for buying a home and amount of earnest money is $4000. Is this a fair amount for a loan of 115K? That is over 3% of loan amount. I'm in Dallas, TX

Thanks for any feedback.

0Reply
163 views

Most Popular Reply

Daria B.
Rental Property Investor · Gainesville, FL · Member since 2015 · 1k+ posts · 432 votes
9y
Originally posted by @Tamara Batsell:

Reading over Contract for buying a home and amount of earnest money is $4000. Is this a fair amount for a loan of 115K? That is over 3% of loan amount. I'm in Dallas, TX

Thanks for any feedback.

For me yes that is a lot of money for a $115k note. I only put down 1% of the offer. Others do more because they say it shows the seller you are serious. If you have a well protected contract and things don't go the way you want then you should get your EMD back. I still say it's a lot and would rather have that money to go towards repairs or rehab or just stay in my pocket.

2Reply
See this reply in the discussion

32 Replies

Jump to latestLatest
  • Todd Plambeck
    Agent/Investor · Murphy, TX · Member since 2013 · 542 posts · 304 votes
    9y

    Earnest money is whatever you can negotiate with the seller. If it's a bank or an auction site they are going to very firm on it. Also, in this market the higher EMD you have the stronger your offer looks to the seller.

    1Reply
  • Jesse StephensonPro Member
    Property Manager · Chapin, SC · Member since 2014 · 71 posts · 43 votes
    9y
    Are you the buyer? And what kind of purchase is this? Is it an auction or short sale or is it just a normal purchase on the market through mls. If just a normal home purchase and you have a realtor than tell them you want to put as little em down as possible to get the deal done. If something goes sideways in the middle of this deal that earnest money could become in dispute and you may not get it back for a long time.
    0Reply
  • Daria B.
    Rental Property Investor · Gainesville, FL · Member since 2015 · 1k+ posts · 432 votes
    9y
    Originally posted by @Tamara Batsell:

    Reading over Contract for buying a home and amount of earnest money is $4000. Is this a fair amount for a loan of 115K? That is over 3% of loan amount. I'm in Dallas, TX

    Thanks for any feedback.

    For me yes that is a lot of money for a $115k note. I only put down 1% of the offer. Others do more because they say it shows the seller you are serious. If you have a well protected contract and things don't go the way you want then you should get your EMD back. I still say it's a lot and would rather have that money to go towards repairs or rehab or just stay in my pocket.

    2Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    9y

    I prefer EM of 10k or higher to show I am a serious buyer.

    0Reply
  • Brandon Richards
    Investor · Wasilla, AK · Member since 2016 · 160 posts · 78 votes
    9y

    why didn't your realtor discuss this before giving you the contract is my question. 

    2Reply
  • Tamara Batsell
    OP
    Dallas, TX · Member since 2016 · 28 posts · 2 votes
    9y

    Im trying to be informed in my negotiations so I just wanted to see if over 3% of asking was standard for earnest.

    Thanks Todd

    0Reply
  • Tamara Batsell
    OP
    Dallas, TX · Member since 2016 · 28 posts · 2 votes
    9y

    This is a regular purchase off market... first time home buyer for me. Thank you 

    0Reply
  • Tamara Batsell
    OP
    Dallas, TX · Member since 2016 · 28 posts · 2 votes
    9y

    Thank you so much everyone for all the feedback. The contract is not signed I will be negotiating a lower earnest price.

    1Reply
  • Courtney King
    Real Estate Broker · Houston, TX · Member since 2016 · 159 posts · 86 votes
    9y

    @Tamara Batsell I agree with @Daria B. with the 1%, however in some investment situations (wholesale and cash deals that often want more than 1%). Good luck with negotiations!

    0Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    9y

    I rarely do anything beyond a grand, but I generally purchase cash deals. Leaving out a financing contingency usually means you can bring that number way down. 

    Podcast Guest on Show #243
    Skyline Properties
    View Page
    0Reply
  • Will Chamberlin
    Rental Property Investor · San Rafael, CA · Member since 2015 · 190 posts · 90 votes
    9y

    I am with @JD Martin, I always put down $1k (only 4 deals, though). Have not had a seller complain or come back and ask for more. This is for financed deals in upstate NY between $55k - $120k. 

    1Reply
  • Randall Brown
    Investor · Santa Cruz, CA · Member since 2016 · 71 posts · 39 votes
    9y

    Earnest money deposits vary by location. And the standards evolve over time.

    In neighboring Santa Clara County (California), it has been 3% as long as I have been involved (20 years)

    Here in Santa Cruz County, the standard used to be 1% upon acceptance of the offer and increase the deposit when the first contingency is removed to 3%.

    I write "used to be", because at some time between 2007 (when I did my last contract with the 1% increased to 3% deposit) and 2012, agents in Santa Cruz adopted the Santa Clara style of full 3% upon contract acceptance.

    I suspect that your agent calculated 3% = $3000 and change, and he rounded it up to $4000, to show financial strength.

    That can make a difference.

    I recall writing an offer in 2012 on a fixer upper that was listed for $540k (worth $800k after $100k repairs). My offer of $550k came with $16500 (3%) earnest money, with a photocopy of a check, and I expected to be countered, and was willing to go to $620k.

    I never received a counter.

    I found out that the winning offer had attached a cashier's (!) check of $100k (!) made out to the title company. He got the house for asking price of $540k.

    The seller had received 20 offers and never bothered to talk to anyone else.. they were too impressed with the big EMD.

    So they accepted his $540k offer and later gave up another $20k because of termite damage!!

    My $550k offer had been 100% non-contingent..

    What a joke this deal was!

    No dual agency!

    1Reply
  • John CasmonPro Member
    Cincinnati, OH · Member since 2013 · 1k+ posts · 1k+ votes
    9y

    A higher EMD shows the buyer is serious. Buyer has leverage to negotiate other concessions in my experience. I actually just lost a buyer who only put down $1k in EMD. Will require 3% or more going forward.

    0Reply
  • Jeff B.
    Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
    9y

    ONE percent is typical.  Have your agent submit an Offer to Purchase with 1% EM and expect it to be accepted - - if the PRICE is right!  The EM should not be a factor and if it is be suspicious!

    Not using a Buyers Agent, do it anyway and use the same guidelines!

    0Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    9y

    In the zero to $200k range I typically ask for a $5,000 EMD. $200-$500k I ask for $10,000. $500k-$750k I ask for $15k. $750k and above I ask for $25k.

    [email protected]301-893-4635Podcast Guest on Show #192
    District Invest Group545 Reviews
    WebsiteView Page
    0Reply
  • Matthew A.
    New Haven, CT · Member since 2016 · 90 posts · 99 votes
    9y

    I usually pay 2.5% when the contract is signed, then another 2.5% 5 days after under 200k homes. Probably go to 3% up to 500k.

    Just purchased a condo last month $166,000 loan. put a check in for $4,000 with the contract then another $4,000 5 days after.

    0Reply
  • Levi T.Pro Member
    Rental Property Investor · Tucson AZ / Nice FR / Washington DC · Member since 2016 · 1k+ posts · 1k+ votes
    9y
    Originally posted by @Tamara Batsell:

    Reading over Contract for buying a home and amount of earnest money is $4000. Is this a fair amount for a loan of 115K? That is over 3% of loan amount. I'm in Dallas, TX

    Thanks for any feedback.

    People start asking unreasonable numbers, I start questioning their intent. The EMD is intended to cover any legal cost and time if the deal goes sideways on your part, not make someone a small mint if something goes wrong if you breach the contract.

    If an attorney/agent tells me I should put down a percent that I don't agree with, they can pound sand. It's my offer/contract, not theirs. Same applies for you. You should offer what you want to offer, not what the agent want's you to offer. Make a good EMD offer, but don't hurt yourself.

    2-3k would be normal in this part of the woods for something like that. Heck, I make offers a little less than that daily without a EMD. So anyways, offer what you think is right, because that's all that matters.

    Best,

    0Reply
  • Account Closed
    Investor · Denver, CO · Member since 2016 · 736 posts · 582 votes
    9y

    As a buyer, it's the least amount of cash I can shell out.  As a seller, it's the most amount of cash I can receive.

    Personally, I would negotiate at that amount.  I'm not willing to tie up that amount of money for that amount of loan for 30+ days....but that's just me.

    I would offer $500.

    0Reply
  • Roy N.Pro Member
    Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
    9y

    If you are buying the property and your down payment is going to be 10% - 20%, then I do not understand the problem folks have with putting up 5% as EMD.

    We rarely offer <5% - unless the deal is very harry  - and I've submitted an offer with 100% before {I knew I would not be among the highest offers, so I wanted to be certain I was the least complicated}.

    0Reply
  • Al Wilson
    Investor · Daphne, AL · Member since 2014 · 1k+ posts · 242 votes
    9y
    Yes. Good luck.
    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    9y

    It's fairly typical, and I personally would question someone not willing to put down 3%.  It has no effect on your "repair money" since it gets applied to your down payment anyway, and you'll need at least 3% down.  I really don't understand the issue with it.

    0Reply
  • Tamara Batsell
    OP
    Dallas, TX · Member since 2016 · 28 posts · 2 votes
    9y

    The great advice keeps rolling on!! Thank you guys so much for all this great info. 

    Your advice is really very helpful.

    Tamara

    0Reply
  • Scott England
    Rental Property Investor · OK · Member since 2015 · 316 posts · 216 votes
    9y
    Tamara Batsell Your earnest money has nothing to do with your loan, but is part of the purchase contract. But, yes, $4,000 is quite large for a $100,000 - 150,000 deal
    0Reply
  • Paul AmegatcherPro Member
    Rental Property Investor · Brookville, OH · Member since 2016 · 488 posts · 363 votes
    9y

    In my neck of the woods $500-$1000 is typical unless the seller specifies that they want more.

    0Reply
  • Mike Lightcap
    Philadelphia, PA · Member since 2016 · 37 posts · 3 votes
    9y
    As a realtor the earnest money deposit I tell my clients in PA 1 or 2 thousand, regardless of purchase price. Putting that much money down at least let's the seller know that you aren't just throwing in a ton of offers and seeing which one hits. However, say you go in at the same price as someone else does but the other buyer puts a 5k ED as opposed to your 2k ED, the other buyer with the 5k ED has a stronger offer given that all other variables are equal (credit score, money in the bank, type of financing etc). The buyer with the 5k on the line has more skin in the game and therefore is less likely to back out of the deal and risk losing 5k. I would say put down 1 or 2k, if they want to negotiate and have you put more down as an ED that's your call. There are always other ways to back out of the deal while keeping your ED such as the home inspection
    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free