Personal SEO ~ Website Marketing and Content Writing: Have You Actually Told a Buyer They Don't Need to Have an Earnest Money Deposit?

Have You Actually Told a Buyer They Don't Need to Have an Earnest Money Deposit?

 

Have You Actually Told a Buyer They Don't Need to Have an Earnest Money Deposit?

It's one of those passing rules you hear the robot voice say in your continuing education class but somehow you pass over it like nothing and move on to the new tax laws and equal housing rules.

But in most states buyers don't actually have to have real money to put down as an earnest money deposit. Have you ever told a buyer that? Probably not.

What would Mr. or Mrs. Seller think if you brought an offer with absolutely no money down to secure the offer? What would they say? Several years ago, sellers would laugh in your face if you offered them a no earnest money buyer. What security is that? But now?

Would a buyer's offer be accepted if there were no earnest money deposcan you get away with no earnest money deposit?it but a full and solid offer to back it? In this market, possibly.... probably.... YES!

But what about banks? I have been out of the actual real estate industry to know too much about how banks view this. Is this even done? Would a bank laugh in your face - in their ever so business like fashion? How many sellers have come back and asked, "Can they even do that?"

How important is that earnest money deposit? It's not even the seller's money but buyers showing a sense of validity and sincerity can offer the seller some assurance that the buyer is not a "fly by nighter". Don't we tell all the buyers this? Putting down a 1-3% earnest money deposit shows the seller you are a serious buyer willing to risk your own money should you back out.

But there are a lot of serious buyers that choose not to put any money down. They may hold onto it for the larger down payment for the lender. They may need that $500 for the inspection or appraisal costs. What would they all do if they were told they didn't have to put down that earnest money deposit?

What has been your experience? Have you ever let a buyer not include an earnest money deposit? What about something else in exchange for the collateral?

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ActiveRain and SEOTammy Emineth is an expert in custom content and original articles for blogs, website, press releases and more. Contact me anytime and feel free to subscribe to this blog to stay up to date on my latest blogs and informative information. Email me or contact me for Real Estate Website Marketing and SEO Content Writing.

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Comment balloon 12 commentsTammy Emineth • December 28 2010 04:38PM

Comments

NEVER~ NEVER would I do that Tammy! I think my buyers understand and know that you are in a contract and you should always have a deposit to open escrow. Otherwise, I think that Buyers would think they have nothing to lose. It will be interesting to know what others say...

Posted by Lauren Selinsky Broker CRS, "Your California Real Estate Broker" TM #oclauren (California Coastal Estates) almost 8 years ago

I am hoping to get some interesting replies. Is it still legal though to do so?

Posted by Tammy Emineth, Content Marketer, SEO Teacher, Website Fixer (Personal SEO - Website SEO and Real Estate Marketing) almost 8 years ago

I have never done that Tammy - and I don't think I would. You know how some people shurg off a free show ticket because they didn't pay for it ... I too think buyers would think they could walk away too easily.

Posted by Joyce Herr, Lancaster County & Beyond (Prudential Lancaster Real Estate) almost 8 years ago

We are embarking on a forms changeover for 2011 in North Carolina, where EMD may not be required.

It is going to be interesting.

Posted by Mike Jaquish, 919-880-2769 Cary, NC, Real Estate (Realty Arts) almost 8 years ago

Tammy: I believe in order for an offer to be valid there needs to be consideration in the form of earnest money or the like here in iowa. Buyer could offer a motorcycle, pig, gold bar etc. but it needs to be something.

Posted by Matt Grohe, Serving the metro since 2003 (RE/MAX Concepts) almost 8 years ago

Joyce, and thats exactly why many sellers decline such an offer.

Mike,  Oooo that is going to be interesting. Curious to see how that plays out.  I wonder how many sellers would actually take such a deal? Then again, if I had been sitting on the market for a year, I would entertain any offer.

Matt, Doesn't a contract in iteself offer a type of legal I.O.U. so to speak? It would probably hold up in court and a seller always has the option of declining it.

Thanks guys, have a productive day! :)

Posted by Tammy Emineth, Content Marketer, SEO Teacher, Website Fixer (Personal SEO - Website SEO and Real Estate Marketing) almost 8 years ago

I'm with Lauren on this one.  I'm going to be reading to see what others have to say.

Posted by Christine Smith, Exclusive Buyer Agent & Attorney, Canton, MA (Buyers Brokers Only LLC - www.BuyersBrokersOnly.com) almost 8 years ago

Gosh Christine!! I WANT there to be more posts on this! I am so curious to see people's thoughts and responses... grr... hate it when a plan comes together......   then doesn't go on to fruition! HA

Posted by Tammy Emineth, Content Marketer, SEO Teacher, Website Fixer (Personal SEO - Website SEO and Real Estate Marketing) almost 8 years ago

Hi Tammy - never, nada, nyet ---- in the interview process with a buyer I always discuss the earnest money deposit and let them know about how the percentage of the deposit may vary depending on location of the property and the customs in that area but that they will need to have $$$ available when they find their home.  If I am representing a seller and received such an offer, I doubt it would be highly considered without addressing the deposit in a counter offer and a lot of careful scrutiny of the offer.   I look forward to coming back to see other comments you receive on this post as we know all real estate is local as are the customs in each market.  

Posted by Michael Jacobs, Los Angeles Pasadena Area Real Estate 818.516.4393 (Coldwell Banker Residential Brokerage) almost 8 years ago

There is no set amount that the earnest money must be, but there must be some consideration. I suppose a $1.00 would suffice but that is as tacky as leaving pennies for a tip in a restaurant.  I wouldn't advise a buyer to do that as the earnest money is just a prepayment of the purchase.  Why risk offending your seller for funds you are going to be paying at closing anyway.

I have had a deal fall through, because the seller didn't trust the buyer and the buyer would not agree to a higher earnest money amount.  Looks like the seller was right!  

Posted by Beverly Carlson, Abilene's Staging Realtor (Carlson Properties 325-721-2429) almost 8 years ago

Michael -  you're probably right about it being addressed in a counter offer. The deal would have to be verbally discussed to say the least.

 

Beverly - It would be like pennies for a tip. It's funny though that it;s not required in many states. Begs the question of why? It seems like such a "duh" thing that not requiring it would open a whole can of worms.

Posted by Tammy Emineth, Content Marketer, SEO Teacher, Website Fixer (Personal SEO - Website SEO and Real Estate Marketing) almost 8 years ago

I have written offers with no E.M. It's always fun to see the other broker's reaction.

Besides, my experience is when people want to terminate escrow there is usually a valid reason for it and virtaully no amount of EM is going to make them by the house if it's next to the sex offender or if they've lost their job or if the septic system doesn't pass inspection.

To those commentor who say there has to be consideration I'd relay that I have been told by a local RE attorney that there does not have to be any E.M. 

Posted by Rich Cederberg, eXp Realty Agent Albuquerque (eXp Realty) over 7 years ago

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