Earnest money standard for private deals (or any deals)

[Asher Carr]

I'm planning on closing a deal with the seller and we agree to the whole contract except for the earnest money. He wanted $1000 in earnest money at signing while I want (and really can afford) only $100. He came back and said it was a standard is 1% of purchase or minimum $1000. How should I approach this? Is that a true standard in business? I thought earnest money is to just bind the contract until closing.

[James Call]

@Asher Carr,

That can be a little troublesome.

When I purchase a property, I usually have to bring some money to the table.  The earnest money is just part of this.

Like @Mike Cumbie and @Guy Gimenez have mentioned, the earnest money is negotiable and can be different for every deal.

I don't think 1% is excessive.  If I am going to ask someone to take a $100k property off the market in today's market, I need to show them that I have the resources to close the deal. 

If I were selling today, with a 30 day to close, I would ask for a generous earnest money payment because I want to make sure that the buyer can easily close the deal, and I don't want to have my property under contract right now unless it is with a buyer who has some funds. 

If it is a slow market and the property has been sitting there a long time, then you can probably get them to lower that.  

I would see about getting a small loan from someone of break into your savings or whatever to see if you can get that money if this is a great deal for you.  

You may also want to speak to your lender and make sure they know exactly how you are doing financially and make sure they are going to loan you the money you need to complete your transaction. 

Good luck with this deal.... Let us know how it goes.