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  • Earnest Money Deposit

What If the Seller Wants an Earnest Money Deposit? (and You Don’t Have it)

Earnest Money DepositIf you’re dealing withe the right sellers, then  they’re not going to ask for an earnest money deposit in most cases. By the “right” sellers, I’m talking about MOTIVATED sellers, the ones that NEED to sell their house.

The instances where I’ve seen sellers ask for earnest money is usually either when the sellers are of a more sophisticated nature (usually higher priced houses), or when they consult with their attorney, and the attorney advises them to ask for Earnest Money. 

in most of the 50 United States, and Earnest money deposit is NOT required on a Real Estate Purchase and Sale Agreement. The promise to buy is the consideration that’s required to make the contract enforceable.  So do you know what I did? I completely removed the Earnest Money line item. thats right. I deleted it. Its not even on my contract. The seller doesn’t see it, and therefore they don’t ask for it.  Brilliant!! 

In the event you get one of these sellers that insists on an Earnest Money Deposit, and you want to remain RISK FREE, there are a few things that you can do.

  • Write into your offer that the EMD is due within 7 days after acceptance.This could buy you some time to see if you can get a buyer for your contract (assignee) within that time frame who can put up the money. If you don’t get any takers within 7 days, you can cancel the whole deal. This isn’t the best practice, but an option.
  • Tell the Seller that Since you Close so fast, you typically don’t put up Earnest Money Deposits.
  • Tell the seller that you need to keep your cash liquid, so that you can close on the contracts that are scheduled to close in front of his.
  • Offer the seller $10. Just because the seller asks for an Earnest Money deposit doesn’t mean that they want your arm and leg.  Offer them $10. Some people think that they MUST get at least $1 to make the contract legal.  Crazy, right?
  • Forget the whole thing.  Sometimes you just have to tell the seller to kick stones (in a nice way, of course), if you can’t agree.  I mean, if you write a big check, you may lose a big check. So why would you write a big check?

I’ve closed nearly 900 real estate transactions via assignment of contract, and I can count the number of times that I’ve put up Earnest Money on one hand. I just refuse to give sellers my money.  But I’m a hard headed fool. It hasn’t affected my success in the past, and it certainly wont affect my success to get deals closed in the future. 

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  1. Nadia September 6, 2017 at 9:50 am - Reply

    There is another option: we write in our contracts that an EMD of $100 is held in escrow by our attorney (which is the truth… but it is $100 only and it counts for all our deals, just in case…). I’ve never had anyone who did not agree with that.

  2. Stephanie April 18, 2019 at 5:51 pm - Reply

    Hello my name is Stephanie, I am new to Whole Selling. I have a seller that wants to sell me seven of his properties at one time with back to back closings on each of these properties. The seller is asking for a lump sum for all of the properties. I looked up the market value on each of these properties. Each equation gave the ARV x .70% – Repairs – My Fee, gave me the ( MAO ) The seller wanted me to add all of the MAO’s together to give him an offering price. I couldn’t get the seller to give me a price, so I made him an offer, and it was accepted. Now the seller wants me to give him a non-refundable $10.000 earnest money deposit. The seller will not sign the Purchase To Sell Agreement until I do this. The seller states, he is highly motivated to sell, although four of these properties have tenants living in them. Theses are Single -Family homes with a property B rating. I’m so stuck. What should I do ?

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