Earnest Money

[Lashinda Winters]

Hello All,

I am a new wholesaler and have my first deal under contract. I've been contacted by someone responding to my online marketing identifying themselves as a cash offer closing in 30 days. They've seen pictures of the house but no tour of the house. They've offered full asking price but only $150 in earnest money. Should I be sceptical? Should I push for more earnest money and risk losing the deal?

[Belinda Lopez]

Yes! It's very possible they are also trying to wholesale it - which is fine but, you need to make sure they can close so you can get paid. If at all possible I ask my end buyer to put up at least $1k (for deals up to $50k) and usually at least $2k for larger deals of "non-refundable" partial assignment fee payment that is only refundable is a clear title cannot be produced. This weeds out others who just want to tie up the property and kick the tires.

I had a similar deal recently and my potential end buyer was not familiar with wholesaling and he wanted to write a contract, get the property inspected, appraised, etc. but I explained what the situation was and he backed out immediately. Ended up with a new buyer who took his contractors over, did the full inspection and scope of work that day then paid me $1k partial payment and then the rest I get at closing which should be next week.

Also, be careful with the terms 'earnest money' as that is what you should have put up in the original contract. They can put additional earnest money but in reality you are flipping the contract for an assignment fee, so your documents should reflect that.

Good luck!