Earnest Money? It was all the rage during the bubble. What percentage a buyers put down ernest money today.?

Asked by Tim Masterson, Portsmouth, VA Sun Feb 1, 2009

What is the range of money as a buyer that I should have access to for this?

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6
Tina Merritt, Agent, Blacksburg, VA
Sun Feb 1, 2009
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Just like everything else in a contract, the earnest money amount is negotiable. While important, I've never known a seller to say, "Well, it's a low offer, but I'll take it because they have a substantial earnest money deposit".

Also, it depends on your area. In some parts of the country, a 1-2% EMD is expected, where in others, it can be as low as $100. Bottom line is, get a knowledgeable buyers-agent to advise you on what is low enough to show your "significant interest" - don't just haphazardly throw a large amount into the transaction as there is always the possibility that the contract will go south and your EMD could get tied up.

Beware of agents who tell you, "if your loan is denied, you get your emd back". Yes, per most contracts, you get it back; however, the seller must release it. If you have tied up a seller's home for months and then have your loan denied, they may decide to tie up your EMD in return. If a seller won't release the EMD, you have to go to court to have a judge release it.
0 votes
Dp2, , Virginia
Sun Feb 1, 2009
Actually, Penny IS correct. By law, a contract only becomes effective after an exchange of something of value, and that something of value can be as little as $10. An EMD doesn't even have to be money; it could be a promissory note, ring, boat, or something else of value.

I typically will NEVER deposit more than $100 for an EMD, because an EMD is NOT a down-payment. Yet, sometimes if a seller protests and asks me for a larger deposit, then I'll still use a $100 EMD along with an additional deposit (typically less than 1% of the purchase price). I invest in VA (including in the Hampton Roads area), and $100 EMDs work there too.

Again, an EMD legally has absolutely nothing to with a down-payment. Some EMDs get applied to the purchase, and some are returned after closing.
0 votes
Frank Bigans…, Agent, Newport News, VA
Sun Feb 1, 2009
I have to add that our local real estate market here in Hampton Roads is nothing like Vegas. Short sales close within fairly quickly, and a $5 EMD would have the buyer looking for another property. With all due respect Penny, the buyer’s questions is regarding EMD on an investment property, and not a short sale.

Our local market has been somewhat immune from the preverbal bubble mostly because our local economy is powered and stabilized by our dozen-plus military bases, vast technology, and dozens of other businesses. Our economy is driven by many blue collar jobs, and not predominantly tourism or gambling.

Regarding the property in question in Portsmouth, the answer is the same. The “pre-approved” buyer could perhaps purchase this property with as little as $500 down, but the seller is asking for $1,500.

Frank Biganski, Realtor
0 votes
Penny O'Brien, Agent, Las Vegas, NV
Sun Feb 1, 2009
Earnest Money deposit it's just not what it justed to be. I have buyers who when writing an offer put $5 down for the EMD. yes, $5.... The reason for that is if you are putting an offer in on a short sale which takes about 3-4 months on average to close and there is really no guarantee that it will close I ask my clients to put minimal money for the earnest money.. Why tie up so much money for such a long time.. That's the new way for short sales. With foreclosures and regular home sales offer what you want if the seller doesn't like it they will counter it.. I have cash buyers who will not tie up their money. It works everytime.
0 votes
Frank Bigans…, Agent, Newport News, VA
Sun Feb 1, 2009
Tim,

In this area, as little as $500 will suffice as earnest money deposit however after reviewing this listing, the seller is asking for $1,500. But this isn’t always set in stone, especially since this property has been on the market since October!

If you present an offer along with a non-contingent approval letter from your bank, verifying the loan amount, type of financing, and proof of funds to close, will weighs heavily in this type of transaction. Some of my clients have placed less than what the seller desired, but presenting a strong bank letter with the offer would consummate the deal.

If you are not yet working with a buyer’s agent, then please give me a call and I'll be happy to schedule a time for you to preview these properties, and I can also put you in touch with one of my preferred lenders as well.

Frank Biganski, Realtor
(757) 303-0517
0 votes
Bill Eckler, Agent, Venice, FL
Sun Feb 1, 2009
The importance of a fair deposit still remains an important factor for most buyers today. The larger the deposit amount, the perception on the part of the seller, is the greater the degree of seriousness by the buyer.

It is one of the ways in which buyers can strengthen the appearence of their offer, along with limited contingencies, quick closing, and a cash deal.

Good luck
0 votes
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