Home Buying in 10012>Question Details

r m, Home Buyer in New York, NY

Is "Earnest Money"a common practice requirement when making an offer? Region-specific?

Asked by r m, New York, NY Tue Feb 5, 2013

I'm reading a lot about "earnest money" and it being required when making an initial offer to buy a home. I'm curious to what extent this is common practice when purchasing a home.

Is it region-specific? Or more generally, is it common practice in all regions?

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Answers

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While common in many parts of the country it is not practiced in Manhattan, NYC. A buyer can offer anything they want with their offer but it is not legally binding. In NY an offer, a counter offer and an accepted offer mean absolutely nothing legally.

In NY neither seller or buyer have any legal obligation toward each other until a contract is signed by both buyer along with a 10% of sale price deposit and counter signed by seller and "delivered" to buyer's attorney. The deposit his held in an escrow account administered by seller's attorney.

While often confused a deposit is not always a down payment. A down payment is the amount not being financed.

Mitchell Hall
Lic. Assoc. RE Broker
The Corco0ran Group
347-921-4255
mhall@corcoran.com
http://corcoran.com/mhall
http://nycblogestate.com
3 votes Thank Flag Link Tue Feb 5, 2013
Mitchell Hall, Real Estate Pro in New York, NY
MVP'08
Contact
'Consideration' or Earnest Money is one of four components required to establish a contract.
It not a good idea or a suggestion...it's a REQUIREMENT!

How much is based on prevailing practice.

Best of success,
Annette Lawrence, Broker/Associate
Remax Realtec Group
Palm Harbor, FL
727.420.4041
http://RealEstateMadeEZ.us
1 vote Thank Flag Link Tue Apr 8, 2014
HI rmadhok,

Earnest money has different meanings and uses in different areas. In many areas, earnest money is used prior to contract signing to lock up a property. Often this is called a Binder. In NY state Binders are non-binding. In NY State, earnest money is only considered binding when it accompanies a fully executed contract and is used as consideration towards the purchase of the property.

If an agent in NY State tells you that you need to put down a binder or earnest money prior to contract signing, you would do well to walk away from that agent. Get yourself a knowledgeable and respected buyer's agent as well as an attorney well versed in the transfer of the type of property you are purchasing (i.e. Co-op Condo, Townhome,etc...).

I hope this is helpful,

Please feel free to contact me if you have any further questions.

Sincerely,
Joe Greene
Broker/Owner
WEICHERT, REALTORS - House & Home
joegreene@weichert.com
http://www.WeichertWorks4U.com
(718) 432-5000 (Office)
(917) 974-2600 (Cell)
609 Kappock Street Suite 1A Bronx, NY 10463
1 vote Thank Flag Link Tue Feb 5, 2013
In California, it is very common to require a copy of an EMD check when submitting an offer. Also, it is common practice to send proof of funds (e.g. a bank statement showing that the buyer has the ability to pay for the deposit and down payment) with an offer to purchase a home.
0 votes Thank Flag Link Tue May 6, 2014
It is not required but it is considered good form to make an escrow deposit to show you are sincere
0 votes Thank Flag Link Tue May 6, 2014
The way it's done in NY is you put your money down when signing the contract. This is after the attorney reviews them and you've done your inspection. Some areas work with a good faith deposit when the offer is actually submitted to the seller.

Chris
0 votes Thank Flag Link Tue Apr 8, 2014
Putting down an "earnest money deposit" is extremely common in many states when drafting an offer to purchase real estate or a real estate sales contract. Depending on region the amount of this earnest money deposit and when it is collected in its entirety can differ greatly. Many times a $1000 earnest money deposit is put down upon submitting a sales contract and then once the contract is moved through an "attorney review" process the remainder of the earnest money deposit is put into one of the attorney's trust accounts until closing at which point is is credited to the seller.
0 votes Thank Flag Link Tue Apr 8, 2014
As you can see the practice itself is common but how it is practiced varies from area to area. In MA we have an additional step titled "offer to purchase real estate" which will move to the next step "purchase and sales agreement" following discussions and negotiations. These answers conform the importance of selecting an experienced realtor in your area. A referral from a family member or friend is often a good source. I would recommend that you meet with and interview several agents. You are most likely going to spend quite a bit of time together and it is important that you have a "connection".
0 votes Thank Flag Link Sat Feb 8, 2014
This practice may vary from area to area or company to company. With this said, when I present an offer, I want my customer presented in the most positive light. In my opinion this includes an aggressive closing date, a proof of funds letter or bank pre-approval letter, and a legitimate earnest money consideration. Anything short of this will likely see you well behind other buyer interest.

Bill Eckler
Michael Saunders & Company
941-408-5363
0 votes Thank Flag Link Wed Feb 5, 2014
It is common practice here in Oklahoma but not a requirement.
0 votes Thank Flag Link Wed Feb 5, 2014
It is not required in the state of Illinois, however, it is almost a key element in the contract.
0 votes Thank Flag Link Sun Feb 2, 2014
It's almost always required to secure the contract.
0 votes Thank Flag Link Sun Feb 2, 2014
Hi RM,

In some parts of the country, but not the New York City metropolitan area, you make an offer and sign a contract simultaneously. The seller accepts the offer by signing the contract. That is the reason you see references to earnest money being paid at the same time as you make the offer. In the New York City metropolitan area, first you negoyiate the terms of the transaction, then sign the contract. The earnest money, or downpayment, is paid when you sign the contract.

Michael Richman
Licensed Real Estate Associate Broker
KIAN Realty
450 7th Avenue Suite 1501
New York, NY 10123
212-757-8268 x220
917-991-2528
mrichman@kianrealtynyc.com
http://www.kianrealtynyc.com
0 votes Thank Flag Link Thu Feb 7, 2013
On the Hudson Valley NY region, your down payment is given to your attorney when you sign contracts. It goes over to the sellers attorney who holds it in escrow until closing.
0 votes Thank Flag Link Tue Feb 5, 2013
Madhok,
These things vary by location. In NYC, we do not have "earnest money." In NYC, when a seller accepts a buyer's offer, the buyer's attorney conducts their due diligence. After the attorney has completed this, the buyer signs the contract and gives a 10% deposit. The contract and the deposit go to the seller's attorney. No money passes hands until a signed contract.

Best,
Jenet Levy
Halstead Property, LLC
jlevy@halstead.com
212 381-4268
http://jenetlevy.halstead.com
0 votes Thank Flag Link Tue Feb 5, 2013
Offering "earnest money" with an offer generally gets the seller's attention. On the other hand, no earnest money creates the position of not being a serious buyer. There are a few approaches that include: including earnest money. offering earnest money after your offer is accepted, offering earnest money in stages, offering earnest money on a specified date.

It is my recommendation to customers that if they want to be considered a serious buyer that all offers should include the following:

1. a deposit amount with the purchase offer

2. a letter of pre-approval for funds or a proof of funds letter

3. an aggressive closing date

4. minimal contingencies-nothing kills a good deal faster than conditions.

With this approach and making a reasonable offer, you should be in the hunt....

Hope this is helpful.
0 votes Thank Flag Link Tue Feb 5, 2013
Hi rmadhok,

Earnest money deposits are common - not sure if they're 'required'. However, if you don't submit an earnest money deposit with your offer, the seller most likely will not accept it. So sellers do instruct their listing agents to ask for one (I guess this could be considered 'required'). From the seller's point of view, if the buyer submits an earnest money deposit, it shows the seller the buyer is serious.

Shanna Rogers
SR Realty
http://www.RealtyBySR.com
0 votes Thank Flag Link Tue Feb 5, 2013
Hi Madhok

In NYC you put a 10% deposit down when you sign the contract. It remains in escrow until closing.

Jennifer Roberts
Halstead Property LLC
212-381-4229
0 votes Thank Flag Link Tue Feb 5, 2013
Its typical for a buyer to put earnest money down at the signing of contract, this amount varies depending on the price and how your attorney negotiates this amount.
0 votes Thank Flag Link Tue Feb 5, 2013
I think some form of "earnest money" (or consideration) is pretty typical, here in the states.
0 votes Thank Flag Link Tue Feb 5, 2013
Alan May, Real Estate Pro in Evanston, IL
MVP'08
Contact
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