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posted
What is the actual purpose?
I am not giving details to minimize influence, as if this crowd is influenced by outside or inside!


Jim
 
Posts: 1344 | Location: Southern Black Hills | Registered: September 14, 2012Reply With QuoteReport This Post
Go ahead punk, make my day
posted Hide Post
To show that you are serious about locking the house into a contract.

Basically a deposit that could be lost if you decide to walk away - granted there are usually enough clauses in the contract that a buyer can walk with a reason and get the $$$ back, but still it shows that you are actually serious about the transaction and it will (typically) be applied to the cost of the home at closing.
 
Posts: 45798 | Registered: July 12, 2008Reply With QuoteReport This Post
Funny Man
Picture of TXJIM
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To separate the tire kickers from the serious buyer.


______________________________
“I'd like to know why well-educated idiots keep apologizing for lazy and complaining people who think the world owes them a living.”
― John Wayne
 
Posts: 7093 | Location: Austin, TX | Registered: June 29, 2010Reply With QuoteReport This Post
Go ahead punk, make my day
posted Hide Post
Exactly. If someone can't come up with at least $1K cash for earnest money, you really don't need to entertain doing business with them. (obviously earnest money amount can vary along with the price of the property, area, etc but IME it ranges from $500-2000 on residential properties from $150K-550K).
 
Posts: 45798 | Registered: July 12, 2008Reply With QuoteReport This Post
I believe in the
principle of
Due Process
Picture of JALLEN
posted Hide Post
Many times, the offer provides that if the buyer fails to close the sale, the deposit goes to the seller. It is typical to have carve outs, for inspections, title review, appraisal, sale of a property, contingencies which if they do not occur candeld rhe deal, etc. There are some which are usual, some are custom to the needs of the deal. The seller must review these carefully before accepting.

The amount of the deposit bears scrutiny. 2-3% might be most common. $50,000 is a useful starting point for commercial deals.

It serves to soften the blow of buyer default when it happens, as the seller has taken the property off the market.




Luckily, I have enough willpower to control the driving ambition that rages within me.

When you had the votes, we did things your way. Now, we have the votes and you will be doing things our way. This lesson in political reality from Lyndon B. Johnson

"Some things are apparent. Where government moves in, community retreats, civil society disintegrates and our ability to control our own destiny atrophies. The result is: families under siege; war in the streets; unapologetic expropriation of property; the precipitous decline of the rule of law; the rapid rise of corruption; the loss of civility and the triumph of deceit. The result is a debased, debauched culture which finds moral depravity entertaining and virtue contemptible." - Justice Janice Rogers Brown
 
Posts: 48369 | Location: Texas hill country | Registered: July 04, 2005Reply With QuoteReport This Post
Member
posted Hide Post
quote:
Originally posted by TXJIM:
To separate the tire kickers from the serious buyer.


This is how I understand it.

I recall $5,000 on a $500k residential property but I may be off on that.

YMMV.

---------------------------


Proverbs 27:17 - As iron sharpens iron, so one man sharpens another.
 
Posts: 8940 | Location: Florida | Registered: September 20, 2004Reply With QuoteReport This Post
Caribou gorn
Picture of YellowJacket
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It is assurance for the seller who is basically taking his house off the market for a month.



I'm gonna vote for the funniest frog with the loudest croak on the highest log.
 
Posts: 10473 | Location: Marietta, GA | Registered: February 10, 2009Reply With QuoteReport This Post
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Here in the Bay Area where a shitty 2 bed condo can be 1 million or more, i typically see 3% of the contract price go in at the time of the offer. I've seen huge amounts up to including the full purchase price in cash to show the buyer they were legit but reserved the right to obtain financing and other inspection contingencies.
 
Posts: 4736 | Location: Florida Panhandle  | Registered: November 23, 2008Reply With QuoteReport This Post
Rule #1: Use enough gun
Picture of Bigboreshooter
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Not sure of other states, but under Mississippi law (where I was a broker and appraiser for 12 years), three things are required for a contract to be valid:

1) Offer made
2) Offer accepted
3) Consideration (earnest money) changes hands

ie- A real estate contract without earnest money is not a valid contract.



When a strong man, fully armed, guards his own house, his possessions are undisturbed. Luke 11:21


"Every nation in every region now has a decision to make.
Either you are with us, or you are with the terrorists." -- George W. Bush

 
Posts: 14826 | Location: Birmingham, Alabama | Registered: February 25, 2009Reply With QuoteReport This Post
Corgis Rock
Picture of Icabod
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My daughter's house was a rare find. Well kept, updated and priced to move. We saw it at 8 PM and put earnest money down at 11 PM. The next day there were 5 offers. The earnest money and full price is what got it for her. At closing, the realtor commented that she had three other offers ready if ours fell through.
With our current home we put earnest money down on the empty lot. The next Monday the developer tried to raise the price by $5K. He wasn't able to.



“ The work of destruction is quick, easy and exhilarating; the work of creation is slow, laborious and dull.
 
Posts: 6060 | Location: Outside Seattle | Registered: November 29, 2010Reply With QuoteReport This Post
Member
posted Hide Post
quote:
Originally posted by RHINOWSO:
To show that you are serious about locking the house into a contract.

Basically a deposit that could be lost if you decide to walk away - granted there are usually enough clauses in the contract that a buyer can walk with a reason and get the $$$ back, but still it shows that you are actually serious about the transaction and it will (typically) be applied to the cost of the home at closing.


AND that you actually have money to pay the down payment.
 
Posts: 21335 | Registered: June 12, 2005Reply With QuoteReport This Post
blame canada
Picture of AKSuperDually
posted Hide Post
quote:
Originally posted by JALLEN:
Many times, the offer provides that if the buyer fails to close the sale, the deposit goes to the seller. It is typical to have carve outs, for inspections, title review, appraisal, sale of a property, contingencies which if they do not occur candeld rhe deal, etc. There are some which are usual, some are custom to the needs of the deal. The seller must review these carefully before accepting.

The amount of the deposit bears scrutiny. 2-3% might be most common. $50,000 is a useful starting point for commercial deals.

It serves to soften the blow of buyer default when it happens, as the seller has taken the property off the market.


Good information.

I'll add that it can vary by market, state, region, etc.

In a seller's market where buyers are paying the predominant amount of the closing costs, it can be an indicator or guarantee that the buyer actually has enough money to cover the closing costs. Important in the decision process of multiple offers or, as Jallen said... to help convince the seller to remove it from the market.

We're typically seeing ~$5k utilized as the average amount of earnest money offered with serious offers on the typical SFR home in this area. Commercial is all over the board.

One thing to note in some cases where closing is expected to take a long time (6 months or more), a determination of who shall be granted the interest earned (or if the money shall be held in an interest bearing account) is typically written into the contracts. Long closing times can be normal in our markets. Not so sure you guys are seeing 6+ month closing times down there though. With the idiocy I'm witnessing in residential AMC's, I would not be surprised if long times are normal for you all as well. We're seeing an average of ~60 days before an AMC even contacts us for a quote on SFR loans, and often another 2-3 weeks before our fee is approved and the work is engaged. We generally take another 3-4 weeks to fit it into our schedule, and then the AMC loses their minds over Alaskan appraisal practices for another 2-3 weeks before it goes to the lender.


~~~~~~~~~~~~~~~~~~~~~~~~~
"The trouble with our Liberal friends...is not that they're ignorant, it's just that they know so much that isn't so." Ronald Reagan, 1964
~~~~~~~~~~~~~~~~~~~~~~~~~~
"Arguing with some people is like playing chess with a pigeon. It doesn't matter how good I am at chess, the pigeon will just take a shit on the board, strut around knocking over all the pieces and act like it won.. and in some cases it will insult you at the same time." DevlDogs55, 2014 Big Grin
~~~~~~~~~~~~~~~~~~~~~~~~~~

www.rikrlandvs.com
 
Posts: 13939 | Location: On the mouth of the great Kenai River | Registered: June 24, 2007Reply With QuoteReport This Post
I believe in the
principle of
Due Process
Picture of JALLEN
posted Hide Post
quote:
Originally posted by AKSuperDually:
quote:
Originally posted by JALLEN:
Many times, the offer provides that if the buyer fails to close the sale, the deposit goes to the seller. It is typical to have carve outs, for inspections, title review, appraisal, sale of a property, contingencies which if they do not occur candeld rhe deal, etc. There are some which are usual, some are custom to the needs of the deal. The seller must review these carefully before accepting.

The amount of the deposit bears scrutiny. 2-3% might be most common. $50,000 is a useful starting point for commercial deals.

It serves to soften the blow of buyer default when it happens, as the seller has taken the property off the market.


Good information.

I'll add that it can vary by market, state, region, etc.

In a seller's market where buyers are paying the predominant amount of the closing costs, it can be an indicator or guarantee that the buyer actually has enough money to cover the closing costs. Important in the decision process of multiple offers or, as Jallen said... to help convince the seller to remove it from the market.

We're typically seeing ~$5k utilized as the average amount of earnest money offered with serious offers on the typical SFR home in this area. Commercial is all over the board.

One thing to note in some cases where closing is expected to take a long time (6 months or more), a determination of who shall be granted the interest earned (or if the money shall be held in an interest bearing account) is typically written into the contracts. Long closing times can be normal in our markets. Not so sure you guys are seeing 6+ month closing times down there though. With the idiocy I'm witnessing in residential AMC's, I would not be surprised if long times are normal for you all as well. We're seeing an average of ~60 days before an AMC even contacts us for a quote on SFR loans, and often another 2-3 weeks before our fee is approved and the work is engaged. We generally take another 3-4 weeks to fit it into our schedule, and then the AMC loses their minds over Alaskan appraisal practices for another 2-3 weeks before it goes to the lender.


What is an "AMC?"

I thought you were an A&P.




Luckily, I have enough willpower to control the driving ambition that rages within me.

When you had the votes, we did things your way. Now, we have the votes and you will be doing things our way. This lesson in political reality from Lyndon B. Johnson

"Some things are apparent. Where government moves in, community retreats, civil society disintegrates and our ability to control our own destiny atrophies. The result is: families under siege; war in the streets; unapologetic expropriation of property; the precipitous decline of the rule of law; the rapid rise of corruption; the loss of civility and the triumph of deceit. The result is a debased, debauched culture which finds moral depravity entertaining and virtue contemptible." - Justice Janice Rogers Brown
 
Posts: 48369 | Location: Texas hill country | Registered: July 04, 2005Reply With QuoteReport This Post
I believe in the
principle of
Due Process
Picture of JALLEN
posted Hide Post
quote:
Originally posted by Bigboreshooter:
Not sure of other states, but under Mississippi law (where I was a broker and appraiser for 12 years), three things are required for a contract to be valid:

1) Offer made
2) Offer accepted
3) Consideration (earnest money) changes hands

ie- A real estate contract without earnest money is not a valid contract.


Some consideration must be given and received, but not at the outset where there are contingencies to performance, some of which I mentioned above.

If you promise to sell your house to me, and I promise to buy it, at an agreed price and all the other terms, those promises are consideration. So called earnest money is never delivered to the seller, that I've ever heard of anyway, but is held in escrow pending the closing.

The deposit to the seller on default is liquidated damages, a species of forfeiture which the law abhors. In Whackyland, a statute provides that a deposit may be lost if the special provisions are included in the contract and initialed, and the amount is no more than 3% of the sale price.




Luckily, I have enough willpower to control the driving ambition that rages within me.

When you had the votes, we did things your way. Now, we have the votes and you will be doing things our way. This lesson in political reality from Lyndon B. Johnson

"Some things are apparent. Where government moves in, community retreats, civil society disintegrates and our ability to control our own destiny atrophies. The result is: families under siege; war in the streets; unapologetic expropriation of property; the precipitous decline of the rule of law; the rapid rise of corruption; the loss of civility and the triumph of deceit. The result is a debased, debauched culture which finds moral depravity entertaining and virtue contemptible." - Justice Janice Rogers Brown
 
Posts: 48369 | Location: Texas hill country | Registered: July 04, 2005Reply With QuoteReport This Post
blame canada
Picture of AKSuperDually
posted Hide Post
quote:
Originally posted by JALLEN:
quote:
Originally posted by AKSuperDually:
quote:
Originally posted by JALLEN:
Many times, the offer provides that if the buyer fails to close the sale, the deposit goes to the seller. It is typical to have carve outs, for inspections, title review, appraisal, sale of a property, contingencies which if they do not occur candeld rhe deal, etc. There are some which are usual, some are custom to the needs of the deal. The seller must review these carefully before accepting.

The amount of the deposit bears scrutiny. 2-3% might be most common. $50,000 is a useful starting point for commercial deals.

It serves to soften the blow of buyer default when it happens, as the seller has taken the property off the market.


Good information.

I'll add that it can vary by market, state, region, etc.

In a seller's market where buyers are paying the predominant amount of the closing costs, it can be an indicator or guarantee that the buyer actually has enough money to cover the closing costs. Important in the decision process of multiple offers or, as Jallen said... to help convince the seller to remove it from the market.

We're typically seeing ~$5k utilized as the average amount of earnest money offered with serious offers on the typical SFR home in this area. Commercial is all over the board.

One thing to note in some cases where closing is expected to take a long time (6 months or more), a determination of who shall be granted the interest earned (or if the money shall be held in an interest bearing account) is typically written into the contracts. Long closing times can be normal in our markets. Not so sure you guys are seeing 6+ month closing times down there though. With the idiocy I'm witnessing in residential AMC's, I would not be surprised if long times are normal for you all as well. We're seeing an average of ~60 days before an AMC even contacts us for a quote on SFR loans, and often another 2-3 weeks before our fee is approved and the work is engaged. We generally take another 3-4 weeks to fit it into our schedule, and then the AMC loses their minds over Alaskan appraisal practices for another 2-3 weeks before it goes to the lender.


What is an "AMC?"

I thought you were an A&P.

Jack of all trades, master of few... I'm actually an A&P/IA. I'm also a licensed minister, nonprofit director, suicide/crisis counselor.....and a real estate broker in training (up here agents are called brokers). One thing I'm not...is ever bored.

My wife pulled me away from my nonprofit habits to help her start a Real Estate Appraisal company a few years ago (2015). Back in 2008 I was trained as a licensed appraisal trainee (certified general), which just meant that I took the basic courses to qualify for the 36 months of on the job training to become licensed. I do my best to stick to aircraft (personal property) appraisals, but I generally conduct the market research, and front-end report creation for the commercial valuations we conduct. I'm 49% shareholder in the company...and do all the business management side of things. I'm also in charge of the cool stuff, like aerial photography and final editing of all reports. I review the residential work. I take out the garbage and make the espresso also.

To your question...

AMC is "Appraisal Management Company". The creation of the residential financial industry following the mortgage fraud brought to light a few years ago. In the end, most are still owned by the primary mortgage lenders...but an "appearance" of a disinterested separate party was created to try and convince people that mortgage/lending fraud and bad practices don't happen anymore. It isn't true, its just as prevalent as ever, just different. Some states are regulating AMC's, many are still not. There is nearly zero oversight of AMC's currently. Their practices and involvement on lending is a serious concern. Some of the shenanigans we see them pull is even scarier than the stuff seen in the movie, "The Big Short". Someday they'll perhaps make a hollywoodized movie about the AMC shenanigans...




Link to original video: https://www.youtube.com/watch?v=PgGLgygsqus


~~~~~~~~~~~~~~~~~~~~~~~~~
"The trouble with our Liberal friends...is not that they're ignorant, it's just that they know so much that isn't so." Ronald Reagan, 1964
~~~~~~~~~~~~~~~~~~~~~~~~~~
"Arguing with some people is like playing chess with a pigeon. It doesn't matter how good I am at chess, the pigeon will just take a shit on the board, strut around knocking over all the pieces and act like it won.. and in some cases it will insult you at the same time." DevlDogs55, 2014 Big Grin
~~~~~~~~~~~~~~~~~~~~~~~~~~

www.rikrlandvs.com
 
Posts: 13939 | Location: On the mouth of the great Kenai River | Registered: June 24, 2007Reply With QuoteReport This Post
I believe in the
principle of
Due Process
Picture of JALLEN
posted Hide Post
quote:
Originally posted by AKSuperDually:
quote:
Originally posted by JALLEN:



What is an "AMC?"

I thought you were an A&P.

Jack of all trades, master of few... I'm actually an A&P/IA. I'm also a licensed minister, nonprofit director, suicide/crisis counselor.....and a real estate broker in training (up here agents are called brokers). One thing I'm not...is ever bored.

My wife pulled me away from my nonprofit habits to help her start a Real Estate Appraisal company a few years ago (2015). Back in 2008 I was trained as a licensed appraisal trainee (certified general), which just meant that I took the basic courses to qualify for the 36 months of on the job training to become licensed. I do my best to stick to aircraft (personal property) appraisals, but I generally conduct the market research, and front-end report creation for the commercial valuations we conduct. I'm 49% shareholder in the company...and do all the business management side of things. I'm also in charge of the cool stuff, like aerial photography and final editing of all reports. I review the residential work. I take out the garbage and make the espresso also.

To your question...

AMC is "Appraisal Management Company". The creation of the residential financial industry following the mortgage fraud brought to light a few years ago. In the end, most are still owned by the primary mortgage lenders...but an "appearance" of a disinterested separate party was created to try and convince people that mortgage/lending fraud and bad practices don't happen anymore. It isn't true, its just as prevalent as ever, just different. Some states are regulating AMC's, many are still not. There is nearly zero oversight of AMC's currently. Their practices and involvement on lending is a serious concern. Some of the shenanigans we see them pull is even scarier than the stuff seen in the movie, "The Big Short". Someday they'll perhaps make a hollywoodized movie about the AMC shenanigans...



Interesting. Let me suggest you avoid using movies to illustrate situations in real life. Movies are always fiction, and unimpressive. Real life is bad enough.

There is no doubt the whole industry is corrupted by government regulation. Lenders make fees for generating loan packages complying with rules, instead of making loans based on an evaluation of the likelihood of repayment. It's nuts, and will ever be. Until lenders are lending their own money, taking the risk instead of foisting it off in someone else, it's going to be a cheaters paradise.




Luckily, I have enough willpower to control the driving ambition that rages within me.

When you had the votes, we did things your way. Now, we have the votes and you will be doing things our way. This lesson in political reality from Lyndon B. Johnson

"Some things are apparent. Where government moves in, community retreats, civil society disintegrates and our ability to control our own destiny atrophies. The result is: families under siege; war in the streets; unapologetic expropriation of property; the precipitous decline of the rule of law; the rapid rise of corruption; the loss of civility and the triumph of deceit. The result is a debased, debauched culture which finds moral depravity entertaining and virtue contemptible." - Justice Janice Rogers Brown
 
Posts: 48369 | Location: Texas hill country | Registered: July 04, 2005Reply With QuoteReport This Post
Member
posted Hide Post
Thanks guys, I appreciate your insight.
Helps confirm my limited thoughts on the matter.


Jim
 
Posts: 1344 | Location: Southern Black Hills | Registered: September 14, 2012Reply With QuoteReport This Post
Member
posted Hide Post
Earnest money deposits are typically "soft" during the earlier stages of the contract, meaning the money is refunded if the buyer backs out. During that time it really is just to show they are serious (or earnest). After a time the money will go "hard" meaning the buyer has to forfeit it if he walks (and the seller has fully complied with his obligations). At this later stage it protects the seller from a protracted negotiation period that does not lead to a sale.

Keep these ideas in mind when buying or selling real estate. If you are a seller, a significant deposit that goes hard can go a long way toward avoiding last minute issues.
 
Posts: 988 | Location: Tampa | Registered: July 27, 2010Reply With QuoteReport This Post
I believe in the
principle of
Due Process
Picture of JALLEN
posted Hide Post
quote:
Originally posted by DaveL:
Earnest money deposits are typically "soft" during the earlier stages of the contract, meaning the money is refunded if the buyer backs out. During that time it really is just to show they are serious (or earnest). After a time the money will go "hard" meaning the buyer has to forfeit it if he walks (and the seller has fully complied with his obligations). At this later stage it protects the seller from a protracted negotiation period that does not lead to a sale.

Keep these ideas in mind when buying or selling real estate. If you are a seller, a significant deposit that goes hard can go a long way toward avoiding last minute issues.


This is certainly true, very often if not always.

There is a segment of the population that believes that the signing of a written contract is the signal for negotiations to commence.




Luckily, I have enough willpower to control the driving ambition that rages within me.

When you had the votes, we did things your way. Now, we have the votes and you will be doing things our way. This lesson in political reality from Lyndon B. Johnson

"Some things are apparent. Where government moves in, community retreats, civil society disintegrates and our ability to control our own destiny atrophies. The result is: families under siege; war in the streets; unapologetic expropriation of property; the precipitous decline of the rule of law; the rapid rise of corruption; the loss of civility and the triumph of deceit. The result is a debased, debauched culture which finds moral depravity entertaining and virtue contemptible." - Justice Janice Rogers Brown
 
Posts: 48369 | Location: Texas hill country | Registered: July 04, 2005Reply With QuoteReport This Post
Member
posted Hide Post
quote:
Originally posted by DaveL:
Earnest money deposits are typically "soft" during the earlier stages of the contract, meaning the money is refunded if the buyer backs out. During that time it really is just to show they are serious (or earnest). After a time the money will go "hard" meaning the buyer has to forfeit it if he walks (and the seller has fully complied with his obligations). At this later stage it protects the seller from a protracted negotiation period that does not lead to a sale.

Keep these ideas in mind when buying or selling real estate. If you are a seller, a significant deposit that goes hard can go a long way toward avoiding last minute issues.


Our state approved contracts read that Buyer and Seller must both sign a release before earnest money can be disbursed in the event of contract failing to close...quite a few states have this same clause if you read the contract carefully.
Been a Broker for 17 year and wrote an offer yesterday on a 385k home with 2k earnest and it was accepted...about the norm for around here
 
Posts: 1890 | Location: Lake of the Ozarks, Missouri | Registered: August 03, 2010Reply With QuoteReport This Post
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