Home Buying in 60661>Question Details

Jesse, Home Buyer in 60661

Who determines the amount of the EMD Broker or buyer?

Asked by Jesse, 60661 Sun Mar 28, 2010

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Wayne nailed this one. Typical in Chicago is 5% of the purchase price. Having said this I have negotiated transactions with level amounts that were below this threshold. The amount is an expression of several things - sincerity and capacity. So a closing tomorrow for a $1.325m purchase had a flat amount of $50k and one set to close today for $282k had 5% down.

Most contracts express earnest money in two payments. You have the amount put down upon executing contract (often $1k). The second amount typically is expressed either at a time specific or, as I prefer, two business days after attorney review is completed. And now that I think of it, since attorney review for the larger purchase didn't complete until last Friday the remainder of earnest money will simply be expressed in a wire transfer to the title company for closing.

There are different explanations as to what earnest money is - some say it is a down payment and others say it is escrow. Both are pretty true. You also may look to it through the prism of what the words mean - this is money in earnest establishing a bridge to certainty on the seller's part as to you, the buyer's, sincerity to make and follow through to purchase.

It is also part of the legal contract and is something you might discuss with your attorney. In terms of who sets the amount - it is part of the negotiation and stems from your conversation with your real estate professional and then cobbled together with the seller and his/her real estate agent.

Best of luck,
Tom McCarey
The Real Estate Lounge Chicago of @properties
Expertise in Contract Negotiation, Buyers' Representation and Luxury Home Marketing
2 votes Thank Flag Link Mon Mar 29, 2010
You, as the buyer determine what amount of Earnest Money you will be comfortable with risking balanced with providing a motive for the seller to seriously consider your offer. A seller may counteroffer on all terms, including earnest money. Once agreement is reached between both parties in writing, earnest money will be due to be held by the escrow agent directed on the contract. Earnest money may only be released from escrow with the direction of both parties (e.g. at closing, or mutual contract termination), or under direction of a court with jurisdiction. Your agent may have an opinion as to amount of earnest money, but it is simply a recommendation, not a requirement.

Best of Luck

Wayne Beals
Keller Williams
2 votes Thank Flag Link Sun Mar 28, 2010
0 votes Thank Flag Link Mon Sep 23, 2013
They Buyer Determines what they will offer for their Earnest Money Deposit. The Seller Determines what they will Accept for an Earnest Money Deposit. This amount ranges from Zero to the Full Sales Price. Basically it's whatever Buyer & Seller Agree on in their Contract. Some Sellers (typically REO / Bank Owned) will not even consider an offer without a specific EMD already submitted by the Buyer.
0 votes Thank Flag Link Mon Mar 29, 2010
The buyer does. How earnest are you should be the determining factor of what that amount should be. If you really want the house I suggest you show the seller by making it sufficient for them to take your offer vs. any others. It can be used as a tool if your offer can not be structured as what your agent thinks would probably beat out the competition.
0 votes Thank Flag Link Mon Mar 29, 2010
The Earnest Money Deposit differs from transaction to transaction, If it is a bank owned property, the bank will mandate whta they will accpet for a minimum deposit and in most cases it needs to be a cashiers check so buyers cant put a stop payment or have it bounce. In an ordinary sale it is part of teh negotriation process. In most cases it is 1% of the sales price. In some transactions the listing broker will request 3-5% of teh sales price depending on the transaction and the risk of the buyer backing out. For most cases stock with the 1% of sales price formula. good luck with your purchase.
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Mon Mar 29, 2010
Amount of earnest money is determined by buyer and seller. They both need to agree what is accaptable for the seller and reasanoble for the buyer..
0 votes Thank Flag Link Sun Mar 28, 2010
you do. How much do you want to risk losing if things go badly?

$5 is sufficient EMD for a transaction. Actually, $1 is. It is just a legal amount paid to hold the seller from selling to someone else. Offer as little as you feel comfortable offering that you could walk away from.
0 votes Thank Flag Link Sun Mar 28, 2010
Like most items on the contract, it's negotiable. Sellers tend to want more and buyers tend to want less, but it's really not a big deal since the buyer can get it all back if he cannot get a mortgage and for most other things that come up as long as the attorney has covered him.
Sellers often think that it goes to them, but that rarely ever happens. It will go to court before that and then the attorneys get it.

0 votes Thank Flag Link Sun Mar 28, 2010
By EMD, I assume you mean Earnest Money Deposit? If that's it, it's determined in the negotiation between buyer and seller. The buyer makes an offer, via their agent, and the seller can counter that. You agent should have a recommendation based on their experience, but in the end, it's something agreed to between buyer and seller.
Web Reference: http://www.footeteam.com
0 votes Thank Flag Link Sun Mar 28, 2010
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