Larger Earnest Money Down on A Short Sale (agent, mortgage, accept)

[Wahoo72]

Hi. We are considering making an offering on a short sale and have been told that putting more earnest money down will show that we are serious.
An agent recommended that we put down earnest money of 10K for a house that we want to offer possibly 325-350K.
Now if something goes wrong...I certainly want to get my money back and dont want to have to eat it. Is there a possibility that I wouldnt get my earnest money back if the deal doesnt work out?

Thanks,
Wahoo

[MikeJaquish]

Originally Posted by Wahoo72

Hi. We are considering making an offering on a short sale and have been told that putting more earnest money down will show that we are serious.
An agent recommended that we put down earnest money of 10K for a house that we want to offer possibly 325-350K.
Now if something goes wrong...I certainly want to get my money back and dont want to have to eat it. Is there a possibility that I wouldnt get my earnest money back if the deal doesnt work out?

Thanks,
Wahoo

"Is there a possibility..."

Absolutely, there is always a possiblity. You cannot write a check and give it to someone else without putting that money at risk.

[Wahoo72]

Originally Posted by MikeJaquish

"Is there a possibility..."

Absolutely, there is always a possiblity. You cannot write a check and give it to someone else without putting that money at risk.

...and does it make the offer any more attractive to the bank with a larger earnest money down ??

Thanks

[sPlat]

Originally Posted by Wahoo72

Hi. We are considering making an offering on a short sale and have been told that putting more earnest money down will show that we are serious.
An agent recommended that we put down earnest money of 10K for a house that we want to offer possibly 325-350K.
Now if something goes wrong...I certainly want to get my money back and dont want to have to eat it. Is there a possibility that I wouldnt get my earnest money back if the deal doesnt work out?

Thanks,
Wahoo

Yes there is, especially if, in the eyes of the Seller, you breached the terms of the contract.

In that event they will hold you liable for all or a portion of the deposit (earnest money). Also pay special attention to the words 'liquidated damages', as in "Seller may keep the deposit as liquidated damages in the event, blah, blah, and blah...." Pay attention as in get it cross it out.

Or, they can delay returning the escrow, that is to say not authorize it's release, for a long period of time, months maybe until all issues are resolved, like paying seller's mortgage, hotel room, loss of revenue, whatever (you get the picture).

I personally think the concept of putting down a higher deposit (above the norm in your area) for any reason sends up red flares. I'd think twice, but that's just me.

[sPlat]

Originally Posted by Wahoo72

...and does it make the offer any more attractive to the bank with a larger earnest money down ??

Thanks

You're confusing the initial deposit with your cash payment at closing.

Banks want to see more cash, so yes it will help you get a loan, but you don't have to put that cash into the initial deposit at the beginning of the transaction. It can be brought at closing.

In other words it should not matter to the Seller how much you are borrowing. They get a check from the title company/attorney and it makes no matter to them where the closing agent is getting the funds. At closing, your initial deposit can either be paid directly to the Seller from the escrow account along with the balance (loan and cash proceeds) from the closing agent's account, or it can be deposited into the closing agent's account and one check cut to the Seller.

[KonaKat]

You could, for instance, put the traditional $1000 to $2000 down with your offer and include with the offer you will put an additional amount into escrow upon acceptance of the offer and approval by the Bank. But I would definitely not tie up $10K in a short sale.

[palmcoasting]

The buyers I work with put NO money in escrow on a short sale when they make the offer. The offer comes with the stipulation that a certain amount of funds will be put into escrow within 48 hrs of written acceptance by the sellers bank. There is no reason, IMO, for a buyers funds to be tied up for anywhere from 30 days to 6 months waiting on a bank to give an answer as to whether they will or will not accept the deal. In addition, depending on where you are located, there may need to be a release form signed by both the buyer and the seller in order to have the funds released, as in Florida, if the funds are held by a title company. What if the seller won't sign for some reason or can't be found? That creates another whole issue and would cause delay of getting the funds released.
I've found the bank doesn't really care if the buyer is 'serious'...they are looking more at the sellers situation and their own losses long before they worry about the buyer.

[rjrcm]

I agree with palmcoasting, in fact, our standard short sale addendum has a similar requirement that earnest money is only deposited after bank acceptance. However, some listing agents modify it to require at least a portion of the EM be deposited for a minimum time like 60 days to insure the buyer remains committed long enough for them to negotiate with the bank.