Home Buying in Raleigh>Question Details

lesbontemp, Home Buyer in Raleigh, NC

First time Home buyer not willing to give Earnest money

Asked by lesbontemp, Raleigh, NC Sun Feb 23, 2014

Sat down with seller who asked for earnest money. Quite frankly, my financing (VA) is guaranteed and my loan is guaranteed. My wife LOVES the home, and the saying goes..."happy wife, happy life."
Should I be worried if another buyer presents earnest to the seller?
Because I am 'guaranteed,' What are chances seller will back off of earnest?

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Answers

10
Sounds like you're doing this on your own without an agent? If so, that's a big mistake. You need to be represented. Earnest money shows the seller you have "good faith" the proceed with the transaction. Otherwise, anyone can just write an offer, then back out for any reason and not lose anything.

Most contracts are written to protect the buyer, and you should get your earnest money back, should you decide to terminate for a valid reason --- inspection, title issues, appraisal, financing, etc.

Do everyone a favor and hire a REALTOR.
1 vote Thank Flag Link Sun Feb 23, 2014
Let give this a moment of thought......
If the VA backed loan is GUARANTEED you will have a 'Clear to Close' indicating the buyer has passed all the requirements of the underwriters for the loan. Does the buyer have this guarantee in hand?

And of course the buyer does not, underwriting has NOT happened. The GUARANTEE is worthless.

A purchase offer without 'consideration' is not a contract. So the purchase offer is WORTHLESS. It is not a contract. (Note: That does not mean it does not happen)

The seller accepting such an offer will find themselves recovering from a situation where the RED FLAGS were waving but ignored buy the seller.

Offer such at that offered by Les should be kicked to the curb without further consideration or response.
0 votes Thank Flag Link Wed Apr 23, 2014
First the earnest money is what seals the deal. It shows a buyers good faith. Without it, there is NO guarantee. Yes VA loans are guaranteed, but a mortgage is not automatically approved for VA, you still have to go through processing and underwriting and then the appraisal has to come in perfect with the value and no repairs noted. It is risky because of how picky they are. Your agent should be explaining this to you and if buying without one, the listing agent should at least be able to inform you why it is needed. All buyers must put down a deposit. No deposit, no contract. No contract, no sale.
0 votes Thank Flag Link Wed Apr 23, 2014
Dear Lesbontemp,

Are you working with an agent that represents you? VA guarantees or backs you in lieu of a down payment up to a certain loan limit. This is one loan type that offers more benefit for the purchaser than others. However, lets look at it from the seller's side. Seller is looking at what you are putting in the game like Tom said below. How serious are you? First question is, you are not coming to the table with any money down, potentially no due diligence fee, and in addition, don't want to pay Earnest Money. Lets say you both are under contract. He takes his house off the market in hopes that it will go to closing. However, you or your wife decide to walk. What about the seller?

The main thing is that when purchasing property, the buyer offers EMD money to be held to indicate their sincerity and intent to go through with the purchase process. Here are the key points: the money is usually held in an escrow company account, title company account, buyers' broker trust account, or sellers' broker trust account. It is always the buyer's money in a transaction that goes through to closing. On the settlement statement it is used to offset the BUYERS' costs in the transaction.

Certainly the amount of EMD is negotiable as is to the deposition of funds when breaches occur. Please seek a Realtor® for more explanation and representation.

Diana Watson, Realtor®,SFR
Coldwell Banker Advantage
4salebydiana@gmail.com
910.728.3003
Military Relocation Professional®
0 votes Thank Flag Link Wed Apr 23, 2014
Les,

If you haven't closed on the VA loan yet. Give me a call.
I can help with your questions.

Jeff Gay
Integrated Funding
Raleigh, NC
919-847-2766 x102
jeff@integrated-funding.com
0 votes Thank Flag Link Tue Apr 22, 2014
Hi lesbontemp
Thank you for your service to our country.
If I were the Listing agent and you were not willing to give earnest money I would have them accept the offer but would continue to market the house. If the home is taken off the market and you decide to back out for any reason there is no concession for the seller or the agent to gain for taking the home off of the market. I am suprised that they accepted the offer with out a deposit. No loan is guranteed until the papers are signed at the closing table. Hope this helps.
0 votes Thank Flag Link Sun Mar 2, 2014
What is that saying? "Skin in the game,". Putting up $1,000 EMD shows YOU are serious buyers. Plus the strong qualification letter.

More buyers than seller here in the Raleigh area. Do you really want this home? Put up the EMD.

Best of luck
0 votes Thank Flag Link Sun Mar 2, 2014
I also have VA loan eligibility, and yes the VA "guarantees" my loan. However, there are many other things that have to happen for the VA to approve the loan. They (the VA) still needs to verify all of your personal and financial information, the builders community, the house, etc. as a realtor I have heard horror stories where VA loans were not approved for various reasons.

Two things; the first being that you really should have a Buyers Agent helping protect you and promote your best interests through out the home building process. The Buyers Agent is at no cost to you and the builder is already expecting to pay this Buyers Agent cost and has it built into his pricing/marketing costs for the neighborhood. The second is that most builders use "proprietary builder contracts" and will not begin to build with no earnest money. Of course it never hurts to ask, but just want you to be prepared.
I would be happy to help, please feel free to call me. Representing buyers building a new home is a unique skill set to have and I am proud to say that I am very good at it! :)
Web Reference: http://www.TeamAbshure.com
0 votes Thank Flag Link Sun Mar 2, 2014
I saw your answer to Phil so understand the seller is a new home community. Having worked new homes for about seven years, many builders do have pretty firm requirements and every builder is a little different. The vast majority of sellers, including builders are going to want to see some form of good faith before taking the home off the market. Here in NC, it includes Due Diligence ( primarily resales) and earnest money for both. The amount for both are typically negotiable. Having a Realtor represent you can help you through this process. My son went VA and all the seller was interested in was the due diligence and didn't care if we put earnest money down or not.
If I can be of any personal assistance to you, don't hesitate to contact me using the link under my picture. Feel free to also visit my website using the link below.

Good luck with your home search!!

Ernie
Northside Realty
0 votes Thank Flag Link Sun Feb 23, 2014
Your VA is guaranteed if the property appraises, if the property passes VA inspection, if the property clears title, and if you can get homeowners insurance.
A lot of ifs.
Your escrow is refundable if your contract covers the ifs; so, if your wife likes the home, put something down. If you were the owner, you probably would want something down.
0 votes Thank Flag Link Sun Feb 23, 2014
Thanks Phil. Its new construction in a new development. Learned more in the past 2 hours that I have in 40+ years....well, wasnt looking before now. Thanks.
Flag Sun Feb 23, 2014
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