All Forum Posts by: Ashley LeBoeuf

I've seen varying amounts. In Arizona someone wanted $3k earnest for an $80k property, in Virginia I did a $135k deal with $100 deposit, I've done $0.00 for a $215k deal in Florida. 

I would take the recommendations from the investors in your market. But I would caution from overtly high earnest deposits. Read the contract.  Make damn sure the deposit is NOT non-refundable. If that's the case, run, because even if there's a title defect; the courts have determined non-refundable means just that. No matter what happens you earnest deposit is gone. Buyer beware. 

The amount of EM is only one consideration.

Who is holding it and how many outs you have is key.

Is only 2,000 EM better than 8,000 when the seller is holding it and you have no outs? NO

Sellers could put a right to continued marketing clause in the contract so they are not tied to a buyer who wants to put little money down. I still wouldn't like that as multiple parties might put the property out at different prices and confuse the marketplace.

Not a fan of wholesalers posing as real buyers. If the property is a great deal you want to put up EM to show you are serious but as mentioned the seller does not hold it. Contractually or not the seller could blow through the money and you never see it again. Another question to get answered in writing is that the seller has no affiliation or ownership interest in the title company or attorneys office holding the EM.  

 Annette:

An EMD of $1,000 - 2% in your example - offers the Vendor little assurance as it a moderately painless amount to forfeit. I am interested on why you see a more substantive EMD as unnecessary and risky? Unless you fail to perform as a buyer, your deposit is refunded {unless you agree to make a portion of it non-refundable}.

So as long as you enter into an agreement, particularly as a cash buyer, with the intention to perform then there is no increased risk with a larger EMD.

investor, but as far as I have seen 10% is pretty high. Most of the time the earnest

deposit is right around 1%-2%, but the real estate here in my city is not as expensive.  If 

your in ATL you should check out Rick Knight ( money talk with Rick Knight)

local radio show in your city on Fridays.

I work as a full time Realtor in Southeast Michigan where rent ready investment property market is hot. I use many of the same practices for investors clients. Generally, if purchasing an income property under $100K, I would recommend $500 Refundable EMD. Anything $100K and over is $1000 refundable EMD. I always specify "refundable" to protect my clients interests. All EMDs are made out to my brokerage but for those not working with Realtors, I would recommend you make checks out to closing attorney escrow or to title agency only.

However, cash buyers can pluck down slightly more to place their offer on stronger footing. I just recently helped a cash buyer secure a $52K income property with Proof of Funds and $1000 EMD. I would never recommend an EMD higher than that because not only is it unnecessary and risky, as Ashley already pointed out.

Seller's only want proof of three things: 

1. You have the money or access to it.

2. You're serious.

3. You have everything in place and intend to close in a reasonable amount of time.

There was also a mention of someone losing an EMD because deal closed one day after contract date, well you can easily protect yourself (and your clients) by having both parties sign an Addendum that would extend the date to close when you know there will be a delay.