Earnest Money on a Commercial Real Estate Deal

[John Bowen]

What is the normal percent of earnest money deposit on a commercial deal? Agreed offer is $900K and the seller sent their own contract asking for 15% intial deposit for the Title company escrow instead of returning the letter of intent.

[John Bowen]

It was an SBA loan. The whole note is for $900K. $850K purchase price, $50K for improvements. 50% carried by a Texas bank, 15 year at 5.5% fixed. 40% carried by SBA 5.5% fixed, 20 year. 10% equity injection on our part. We will probably spend the $50K and another $50K out of pocket for the remodel and improvements. The place appraised for $1.1 as is and $1.2 after improvements.
Much of that will be equipment for our primary business to function well. Things like overhead cranes and a paint booth.
We may do a few capital improvements to the complex to raise the values (and rents) on the 12,000 feet of rental units.
It has 1 building that is 13,500 sq ft that we will occupy and a 12,000 sq ft building separated into 3 units that is 50% leased.