My first deal, question about earnest money

[Abel Gomez]

Hello everyone, love this site. I'm proof up by my lender to do my first investor so I'm the exit buyer, and my best friend found a great deal at $22/sqft on a home that's 4000 sqft of living space, and place the home under contract with an option to assign. My lender now wants $400 for an appraisal to be done but also wants $1000 as earnest money. I get the $400 for an appraisal but shouldn't my best friend who is asking 10k for his assignment fee be the one to determine the earnest money or is it the original seller, certainly not my lender am I correct? I was told earnest money can be as little as a dollar to make the deal binding, I like to give$100 instead. Need help ASAP, don't want to see this deal slip through my fingers.

Thanks,

Abel

[Account Closed]

Lender's don't determine earnest money amounts. Sellers determine if they require EMD and the amount. Are you sure the lender is asking for EMD and not some kind of up front fee. Is there an agent involved? Agents will want to make sure there is earnest money.

Find out who is requesting the $1K and what it's for. In a wholesale deal it can be either the wholesaler or the end buyer that puts EMD into escrow.

BTW: Earnest money does not make a contract/deal binding. Earnest money is often refundable and a contract can be binding without it. "Consideration" is what makes a contract binding. Consideration can be many thing besides money, including the promise of the seller to sell and the buyer to buy (at least in California).