Home Buying in San Francisco>Question Details

Bd, Home Buyer in San Francisco, CA

My realtor just asked for a "good faith" deposit of $9000 even though I have not requested to put an offer on any houses. Is this?

Asked by Bd, San Francisco, CA Wed Feb 23, 2011

legitimate?

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Answers

50
Bd,

Now that you have 28 answers and all of us saying about the same thing, please provide us exaclty what happened?

Tap
2 votes Thank Flag Link Fri Feb 25, 2011
Following up on Dave's comment, now that you have essentially the same answer 38 times, what actually happened?
1 vote Thank Flag Link Sun Feb 27, 2011
Hi BD,

You should absolutely not be giving your agent a check for $9k. Even when you do submit an offer on a property you can submit a "copy" of your check with the offer - then if the offer is ratified you can send your initial deposit directly to the title company.

Good luck!
1 vote Thank Flag Link Thu Feb 24, 2011
This is not good nor right. Please consider speaking with the agents Broker and then consider contacting the DRE for California (Department of Real Estate). I would also consider finding a new agent or Realtor to work with.
1 vote Thank Flag Link Thu Feb 24, 2011
Say good-bye. You've got some good folks to pick from right here on this thread.

Happy funding, Rudi
Web Reference: http://www.umboc.com
1 vote Thank Flag Link Wed Feb 23, 2011
Nike or Converse, your call, but I'd run for the hills. Sounds awfully odd and out of alignment.
1 vote Thank Flag Link Wed Feb 23, 2011
Bd

This is highly unusual and we need more information from you regarding this situation but I would not do this if I were you. How did you find this agent?


Oggi Kashi
Paragon Real Estate Group DRE 01844627
1 vote Thank Flag Link Wed Feb 23, 2011
If the question you pose is is it legitimate for an agent to ask for a deposit, there isn't a rule that says s/he cannot ask. If, on the other hand, the agent is making it seem that in order for you to "get in his/her car" you need to ante-up some costs, then that is another story altogether.

It has become a standard for some in the industry to want to hedge their bets, so to speak, by requiring legitimate prospects to commit to something, and you can't blame creative agent for doing his/her part to getting that sort of commitment if you in fact want to buy, e.g., invest time with that agent and vice-versa. You see, all agents are on some form of commission pay, and at the end of the day, if you opt to go see 20 or 50 houses on that agent's time, and buy through someone else, you've effectively cost that agent money they would not have spent if they knew you were going to use such a strategy.

That being said, it is not a mandate written anywhere that a buyer has to pay anything given the description you've outlined, dubious, yes, but not totally illegitimate.
0 votes Thank Flag Link Thu May 5, 2011
Devil's Advocate:
While not extremely typical, there are times when an agent will hold trust funds for various reasons but if he used the term "good faith' or "earnest money" and the term deposit there should be an offer involved. The law allows us as agents to hold clients' funds in trust accounts for specific purposes such as paying for advertising, repairs or inspections - but this is different and not considered "earnest money"

I think it is important to understand the difference between legal, legitimate and typical since most of these answers deal with what is typical. From what you have said, it sounds bad - but I can think of at least one scenario where it is legitimate but pushy so I disagree with the wholesale condemnation many of my peers have vocalized.
If your budget is $300k in San Francisco, a good agent may be acting pushy to ensure you get an opportunity to purchase something market rate and attractive and in that price range you will have to act fast against the next buyer trying to get into San Francisco at $300k I am sure you have noticed tics and condos can cost a lot more than that out here - and you said "house." If your realtor wants you to have your money ready I don't blame him: there is room for an ethical realtor to have asked you for the good faith deposit - just not much.
0 votes Thank Flag Link Wed Mar 2, 2011
I don't know all the circumstances, but with the information you have provided, I would find another agent. I would also report them. First of all, you never give your agent money. If you write an offer, you need to have earnest money. That check should be made out to the Escrow company. The amount of earnest money depends on the price of the home. I believe the actuall amount is different in all areas. Good Luck and I'm sure you can find a respectable agent in your area. Start by searching through Trulia.
0 votes Thank Flag Link Wed Mar 2, 2011
Great advice below. The "good faith" you are extending is to the seller, not your agent. You are including teh deposit when making an offer to the seller to indicate you are a serious buyer who has "skin in the game" and thus motivation to get the transaction moving towards closing day.

I've never heard of a circumstance that would warrant a deposit as you described.

You may want to consider another agent from the list below.
0 votes Thank Flag Link Wed Mar 2, 2011
before you jump the gun, find out why the realtor is asking for this $9,000.00. The standard formula for downpayments is: 1% at the time of the offer and the balance of your downpayment at the time of the signing of your puirchase contract. I would also reccomend your give that moneyt to your attorney in the form of a bank check / cashiers check which ever is more common and available.
Web Reference: http://www.statefinance.com
0 votes Thank Flag Link Wed Mar 2, 2011
Not a good idea to pay an agent upfront. Sad to say, if they want money in advance they are not very good.
Web Reference: http://kwtyler.com
0 votes Thank Flag Link Tue Mar 1, 2011
Despite what many of these experienced agents are saying, there are situations where you submit a check before the offer is accepted - I worked in new construction for a few years and our clients only considered offers that were accompanied by checks which we held until the negotiations were concluded. As soon as the offer was accepted we communicated acceptance and the checks would be sent to the courrier. BD - who did the Realtor ask you to make the check out to? These checks should be made out to the escrow company.

However you said you have not requested to put an offer on any house. To me, the amound $9,000 implies an offer price of $300k which it is 3% of but without a property how would your realtor know this to be the amount? As many of us have said, this does not sound legitimate or typical. Without knowing the entire story none of us have the information to say for sure. From what you have said, it does not seem legitimate.
0 votes Thank Flag Link Tue Mar 1, 2011
You only put down a deposit if you are putting in an offer. My clients don't turn it in until it is accepted.
0 votes Thank Flag Link Tue Mar 1, 2011
LOL That is insane! Never pay a real estate agent upfront.
0 votes Thank Flag Link Mon Feb 28, 2011
If you have not given an offer you do not give a deposit. Also, if he asked for the check to be made out to him, RUN, RUN, RUN. It should be made out to an agreed upon escrow company for your safety
0 votes Thank Flag Link Mon Feb 28, 2011
I think it's time you find a different Realtor to work with.
Web Reference: http://www.golftobeach.com
0 votes Thank Flag Link Mon Feb 28, 2011
You should not be required to put a good faith deposit on any property unless you have made an offer in writing. Verbal offers are not binding in virtually all areas. Hopfully you have a buyer broker whi si assisting you, that will help avoid situations like this.

you can usually do so at no cost to you, they get paid their commission from the fee advertsised in MLS by the listing agent and paid at closing. This way they can get the information for you and you will have someone assisting you through each step of the buying process.
0 votes Thank Flag Link Sun Feb 27, 2011
As you might guess if you have read any of my answers, my first stop would be calling the local board of realtors. They all have people who can answer these sort of questions as well as take complaints. I would not give any money to a realtor as we get paid out of the transaction. I hope it is eithor a misunderstanding or a scamster (not a Realtor).
Web Reference: http://www.andrewsilfen.com
0 votes Thank Flag Link Sun Feb 27, 2011
Any real estate agent who is asking for a deposit for an unknown reason should be able to answer your question. Did you directly ask them what this deposit was for or who it would be made out to? What was their response?

Are they a Licensed agent?

You can look an agent up by name here:
http://www2.dre.ca.gov/PublicASP/pplinfo.asp

If you can't get direct answers, you should consider seeking help elsewhere with someone you trust. You can cancel out of your buyers agreement for any reason.

I'm all for trying to work it out, but you should not go through with something that is so questionable.

Please reply with the outcome.
Web Reference: http://www.har.com/sboon
0 votes Thank Flag Link Sat Feb 26, 2011
Hi there. I am a bit confused. Could it be that perhaps your agent was telling you what an approximate deposit might be on a house in your price range? If you are asked to provide money and you have not even executed a contract that is obviously a red flag. You should speak with your agent and get some answers. You do not have any reason to give money to your Realtor outside of a contract situation (and frankly the only time you would do that after a contract has been executed is to hand over an initial deposit check...but the standard nowadays is to give that check directly to escrow).

Rachel LaMar, J.D.
LaMar Real Estate, Inc.
0 votes Thank Flag Link Sat Feb 26, 2011
Hmmm... it sounds like he is asking for a retainer. Or perhaps there is a misunderstanding and he is explaining that at the time of the offer you will need to put up a good faith deposit.

If the agent is collecting any up front fees he needs to have authorization from the Department of Real Estate(DRE) and the document must be approved by the DRE.

Get further clarification from the agent.
Web Reference: http://terrivellios.com
0 votes Thank Flag Link Sat Feb 26, 2011
We think something stinks in Denmark etc. I would not give this deposit to anyone except attorney at contract signing.

We can see how signals can get crossed and as others have stated perhaps you were being asked for proof of funds.

Bonnie Chernin and David Rogoff
Fillmore Real Estate Branch #19
2926 Avenue J
Brooklyn NY 11210
917-593-4068 (David’s Cell)
646-318-5031 (Bonnie’s Cell)
davidrogoff@fillmore.com
0 votes Thank Flag Link Fri Feb 25, 2011
@Bd - I concur with everyone below as well. Will you please give further details?
0 votes Thank Flag Link Fri Feb 25, 2011
First time for every thing. What would the "good Faith" accomplish?. Perhaps he wanted you to bring a bank proof, that the funds will be available upon making an offer. It is very possible that you had a communication problem. He most likely meant, proof of funds.
Ask your agent to explain it clearly, and better yet , in writing.
Good Luck.
Anna Hershey
Prrudential California Realty / La Jolla.
0 votes Thank Flag Link Fri Feb 25, 2011
Why pay a deposit IF you don't have an executed contract ! I would not recommend to do so makes no sense

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
972-699-9111
http://www.lynn911.com
0 votes Thank Flag Link Fri Feb 25, 2011
No, this is not ok. If they are offering a flat fee for helping you to buy a home this should be put in an agreement, and you'd not be wise to take it as usually the seller pays the buyer's agent a fee for bringing the buyer to the table and managing the buyer side of the transaction. If it to see if you really have the money to buy a home, they should have had you meet a lender to get you pre-qualified so you know what you have to work with. If this is for a deposit on a home you might buy, then contact your local licensing board as this is a violation. We don't even hold deposit checks any more - we have the buyer deposit it at escrow within one business day of acceptance. All in all a very bad move and one I'd be asking their broker about while I looked for another Realtor.
0 votes Thank Flag Link Fri Feb 25, 2011
No, No, No, No! Depending on the state, usually a title company can hold your deposit. Do you have a Realtor representing you? You should not be giving your agent a check. If you do submit an offer on a property you can submit a "copy" of your check with the offer - then if the offer is ratified you can send your initial deposit directly to the title company.
0 votes Thank Flag Link Fri Feb 25, 2011
No way. Make sure your agent is indeed a Realtor and bound by the Code of Ethics. Although I cannot possibly understand why he or she wants $9,000 in advance of you making an offer, even if funds are collected, a Realtor is bound by Article 8 of the Code of Ethics which reads:

"Article 8
REALTORS® shall keep in a special account in an appropriate financial institution, separated from their own funds, monies coming into their possession in trust for other persons, such as escrows, trust funds, clients’ monies, and other like items."

If they persist, point to the Golden Gate and suggest the agent take a leap! Consult an attorney or report the agent to the local Association of Realtors in you area.

Best of luck!
0 votes Thank Flag Link Fri Feb 25, 2011
Bd, clearly you need a new agent. Let me know if you want a referral for one in the city. I know the best of the best!
0 votes Thank Flag Link Fri Feb 25, 2011
Wow that is highly unusual! Please do not give him or her the check. Only give a agent a check when an offer has been accepted. Case close.....tell the agent you will pass this by your lawyer! :) Good Luck Bd
0 votes Thank Flag Link Fri Feb 25, 2011
No way , deposit when offer is made. In this case buyer beware.
0 votes Thank Flag Link Fri Feb 25, 2011
Bd:

If anything your agent is acting in bad faith!

Without any specific property in mind the only possible way money could be held by anyone apart from an escrow company would have to be by a broker (not an agent) and there are strict guidelines for that circumstance too.

As an aside don't fall for it if your agent says the 'deposit' is akin to a lawyer's retainer fee. Even if it was legal retainer lawyers are also required to abide by an explicit contract with the client that directs the lawyer to deposit retainer monies into a segregated/trust account that can only be drawn upon when work is actually done.

Is the agent's company called Cheetam and Hyde? Lame joke aside, check out what the DRE says about it with the link below. Hope this helps!

Kevin K. Ho, Esq.
Broker Agent Vanguard Properties
http://www.kevinho.org
DRE 01875957
Office: 415.255.6606
Cell: 415.297.7462
0 votes Thank Flag Link Fri Feb 25, 2011
Hi--The only time a Realtor should be receiving a deposit check is if he or she is temporarily holding it en route to delivering it to the title company (after logging the check with his or her office). And you would not need to provide a deposit check unless you have written an offer and will potentially be putting that check into escrow upon having your offer accepted.

Eileen
Web Reference: http://insidesfre.com
0 votes Thank Flag Link Thu Feb 24, 2011
Bd,

The only reason I can think of that an agent/broker should be asking for a deposit is because you have made an offer on a property that was accepted. Additionally, the check should be made out to a title company. Who was this check supposed to be made out to?
0 votes Thank Flag Link Thu Feb 24, 2011
As you have already seen, this is completely unethical and illegal. The only time a "good faith" or earnest deposit is submitted is when you are submitting an offer. And the check is written to a title company, NOT a Realtor.

My suggestion is to find a different Realtor to work with. You want someone who has your best interests in mind.

Hope this helps!

Lisa Cartolano
Alain Pinel Realtors
0 votes Thank Flag Link Thu Feb 24, 2011
BD: Are you sure that the agent wanted a Good Faith deposit or was he/she just preparing you for the fact that you may need one?

Never give a good faith deposit without an offer. And when in question, make it out the the escrow company that the seller is using. Seller usually picks services, so ask the agent to find out which escrow company is being used for the home you are interested in.

If you are really concerned you can take the check to the escrow company yourself.

~~~
0 votes Thank Flag Link Wed Feb 23, 2011
Bd:

You definitely need an explanation regarding this abnormal request (please let us know what you find out).

In the meantime, just for "fun", see if you can find your agent on any of these sites:

Check the status of a DRE Licensee and their Broker (and past violations) here:
http://www2.dre.ca.gov/PublicASP/pplinfo.asp

Check for Desist and Refrain Orders, and Unlicensed Activities here:
http://www.dre.ca.gov/cons_DandR.html#licensing

Best, Steve
0 votes Thank Flag Link Wed Feb 23, 2011
Since we're all in agreement it sounds like you should report this agent to the DRE. dre.ca.gov
0 votes Thank Flag Link Wed Feb 23, 2011
No, it's not legitimate. Please ask your agent why you need a good faith deposit if you are not writing an offer and also ask him/her who they wanted you to make the check out to? If it's anyone other than a title company, find a new agent.

Are you sure they didn't say, if you make an offer?

Tap
0 votes Thank Flag Link Wed Feb 23, 2011
My mouth fell open. My thought was "WHAT???" First I would ask your realtor what the deposit is for? Also ask if the realtor has a license! Send an email and get it in writing. There may have been a mistake on your part and on your realtor's. Maybe he/she heard you wanted to make an offer? If this is not so, I would also call his/her Broker immediately about this and forward the email.

If I were you, I would say goodbye to the realtor and get another. This is unheard of in my opinion. If there is not some error on what you heard you need to get out of that relationship.

Good luck Bd,

Sally
Web Reference: http://sallyrosenman.com
0 votes Thank Flag Link Wed Feb 23, 2011
In Texas, the contract should state the requested Earnest money be made to theTitle company. Things may be different in Ca. but only upon contract offer
0 votes Thank Flag Link Wed Feb 23, 2011
Did you ask your agent why the deposit is needed....you may wish to contact his/her broker owner and or office manager and express your concerns regarding the unusual request...
0 votes Thank Flag Link Wed Feb 23, 2011
Most times you do not put up an earnest money deposit unless you are writing up an offer to show your interest.

I haven't heard of giving the real estate agent funds upfront.
0 votes Thank Flag Link Wed Feb 23, 2011
Hi Bd,

A 3% "good faith" deposit is customary in San Francsico WHEN you are putting an offer on a home. Who does he/she want the check made out to? A good faith deposit would only be made out to the titel company.

Good luck!

Lorraine Meier Realtor®
DRE #01439005
Zephyr Real Estate
2523 California St, S.F., CA 94115
415.596.9362 Direct/Text
415.277.3864 Efax
http://www.LorraineMeier.com
0 votes Thank Flag Link Wed Feb 23, 2011
Get another realtor. This is not normal protocol.
The deposit is made to a title company at the time the offer is written.
Web Reference: http://dipali.net
0 votes Thank Flag Link Wed Feb 23, 2011
There is no reason for a deposit unless you're making an offer, I hope you didn't give him/her one.
0 votes Thank Flag Link Wed Feb 23, 2011
Where exactly is your Realtor going to deposit this $9,000?

I've never heard of such a thing but I'm not from California.

Often after you have written an offer, it may be necessary to show 'proof of funds' for cash offers. But this only involves providing a letter from your lender that you have the money in your account.

I'm confused as to why they would need this money even before you have written an offer.
0 votes Thank Flag Link Wed Feb 23, 2011
I wouldn't normally ask for a deposit without an offer involved what did the realtor say the deposit was for?
0 votes Thank Flag Link Wed Feb 23, 2011
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