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Old 05-11-2009, 07:07 AM
 
16 posts, read 150,972 times
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I’m a first-time home buyer and I don’t have an agent so I need as much help as I can get. I really love this particular house but there have been several offers so I don’t want to hire a realtor because I think that might just give me the edge in this buying competition.

My question is this: How do you make an Earnest Money Deposit? I’ve read that it should be about $1000 or 1% of the purchase price and that it should be a check made payable to a third party or an escrow account. However, I want to know WHERE do you do this depositing process? At a bank in front of an agent? Who should be there when I make the money deposit and contract besides the seller’s realtor and myself?

Who should this third party (to make the check payable to)? If the realtor is from Remax, should I make the check payable to the Remax company? Or should I ask the realtor? Can you give me some example of a title company or who the check should be made payable to (specific and proper names of companies would make it easier to understand). I don't really understand the term "escrow account." What if the realtor told me to give the money directly to his/her or the seller?

I have that happened to me before, the seller’s realtor told me to deposit in cash and I didn’t know any better then. I know not all realtors are like that but I’m afraid I might be fooled again.
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Old 05-11-2009, 07:39 AM
 
Location: Maine!
470 posts, read 1,717,447 times
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How is not having a realtor going to give you an edge? As a first time homebuyer, it would behoove you to have an advocate in this major purchase. Hire a buyer's agent.
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Old 05-11-2009, 07:43 AM
 
16 posts, read 150,972 times
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well, if I don't have a realtor, the seller's realtor wouldn't have to share her benefit, so I think she might persuade the seller to go with us. That was what I meant.
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Old 05-11-2009, 07:49 AM
 
Location: Central Texas
20,790 posts, read 39,688,484 times
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Quote:
Originally Posted by featheroflove View Post
well, if I don't have a realtor, the seller's realtor wouldn't have to share her benefit, so I think she might persuade the seller to go with us. That was what I meant.

What this means is that the seller has representation and you don't, in what will be one of the major purchases of your life, most likely. The seller's agent is required, by law, to represent the seller's interests, NOT yours, and has a fiduciary responsibility to the seller, NOT you. You have no one with experience representing your interests and make sure that everything goes correctly on your side of the deal.

However, to answer your question, it depends on how things are done in your state (what the real estate laws dictate, among other things). Here, a check would be given to the title company with which the contract is placed, and they would receipt it on a page that is attached to the contract. It's their responsibility to keep track of the money.

In some states, an attorney holds the money in an escrow account.

In others, the seller's broker holds the money (that would make me nervous, as I'd prefer a really unbiased third party holding the funds, but it apparently works for them).

Write a check if at all possible. That way you have evidence of who cashed it and that you gave it. You can also wire it to the title company, with their permission and wiring instructions, and that way your bank has evidence that it was deposited.
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Old 05-11-2009, 07:56 AM
 
Location: Maine!
470 posts, read 1,717,447 times
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Are you going to risk getting hosed over again at the risk of not taking the time out in interviewing agents to help you? we are also first time homebuyers scheduled to close next month. with everyday stressors that my DH and i already deal with, it is nice to know that my realtor is there to help walk us thru steps of our purchase and answer any questions of the process that we don't understand. the sellers agent isn't looking out for you. they are hired by the seller. you need an advocate on your side to look out for your interests. commissions is part of the cycle and part of the sellers arena.
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Old 05-11-2009, 08:11 AM
 
Location: Martinsville, NJ
6,162 posts, read 11,742,206 times
Reputation: 3970
Quote:
Originally Posted by featheroflove View Post
I’m a first-time home buyer and I don’t have an agent so I need as much help as I can get. I really love this particular house but there have been several offers so I don’t want to hire a realtor because I think that might just give me the edge in this buying competition.

My question is this: How do you make an Earnest Money Deposit? I’ve read that it should be about $1000 or 1% of the purchase price and that it should be a check made payable to a third party or an escrow account. However, I want to know WHERE do you do this depositing process? At a bank in front of an agent? Who should be there when I make the money deposit and contract besides the seller’s realtor and myself?

Who should this third party (to make the check payable to)? If the realtor is from Remax, should I make the check payable to the Remax company? Or should I ask the realtor? Can you give me some example of a title company or who the check should be made payable to (specific and proper names of companies would make it easier to understand). I don't really understand the term "escrow account." What if the realtor told me to give the money directly to his/her or the seller?

I have that happened to me before, the seller’s realtor told me to deposit in cash and I didn’t know any better then. I know not all realtors are like that but I’m afraid I might be fooled again.
First, and I mean no disrespect by this but your post makes it obvious that you are not experienced in purchasing real estate, and will need to learn many things as you go through the process. Not having an agent to guide you, provide you with the info you need, is likely to cost you more than that agent would be paid.

That being said, the escrow procedures differ from state to state. THL has it fairly well spelled out, so I won't repeat it.

You should NOT make an escrow payment to the seller. If the deal falls apart, your money can be held hostage by that seller. You don't want to take that risk.
I'm a little confused about the last part of your post. Are you saying that a Realtor told you to give cash to a seller as an escrow deposit on a house purchase? Would you mind clarifying what happened there?
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Old 05-11-2009, 10:07 AM
 
16 posts, read 150,972 times
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Quote:
Originally Posted by Bill Keegan View Post
I'm a little confused about the last part of your post. Are you saying that a Realtor told you to give cash to a seller as an escrow deposit on a house purchase? Would you mind clarifying what happened there?
It was something that happened a few years ago when my parents tried to buy a house. The seller's realtor suggested my parents to deposited in cash (just gave the cash to the seller's realtor) and they did, not knowing that they're not supposed to do that. That was all in the past. My parents are the one buying the house then and now, not me, I just wanted to simplify that so let's just say I'm the buyer. I wasn't involved in any buying process then but now I'm doing some research to help out my parents.

We are going to see the house and meet the seller's realtor for the first time today. If all goes well today, my parents are very likely to make an Earnest Money Deposit same day. So I'm doing research beforehand in case we'd really make a deposit on the spot. I know that the money deposit can be in form of personal/certified check or money order and that it should be $1000 or 1% of the purchase price.

What I don't know is if I need any witnesses (bank agents?) and who to make the check payable to. If I ask the seller's realtor, would she likely to give me an honest answer? Or should I just make the check payble to her company, REMAX in this case?
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Old 05-11-2009, 10:24 AM
 
28,461 posts, read 75,173,060 times
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Default PLEASE call an attorney!!!!!!!!!!!!

Quote:
Originally Posted by featheroflove View Post
It was something that happened a few years ago when my parents tried to buy a house. The seller's realtor suggested my parents to deposited in cash (just gave the cash to the seller's realtor) and they did, not knowing that they're not supposed to do that. That was all in the past. My parents are the one buying the house then and now, not me, I just wanted to simplify that so let's just say I'm the buyer. I wasn't involved in any buying process then but now I'm doing some research to help out my parents.

We are going to see the house and meet the seller's realtor for the first time today. If all goes well today, my parents are very likely to make an Earnest Money Deposit same day. So I'm doing research beforehand in case we'd really make a deposit on the spot. I know that the money deposit can be in form of personal/certified check or money order and that it should be $1000 or 1% of the purchase price.

What I don't know is if I need any witnesses (bank agents?) and who to make the check payable to. If I ask the seller's realtor, would she likely to give me an honest answer? Or should I just make the check payble to her company, REMAX in this case?
Honestly there is basically no attorney that does real estate closing that would not answer this simple question FOR FREE in almost any state. I bet if wandered into any real estate office in town, in my stinkiest "I just mowed the grass and hit a skunk" clothing and blurted out "Who should I call for advice on a closing?" at least five business would be handed to me.

I go home and phone each, then I'd ask the question of each very succinctly: What is standard practice in our area regarding "earnest money"? My guess is that they'll tell you that banks can or cannot act as trustee, that real estate agents can or cannot and the attorneys generally do or do not.

Five minutes time, and you'll get an inside line on an attorney that you may choose to help your folks review the contract and commit to maybe a fee of only a few hundred dollars.

Time and money well spent!
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Old 05-11-2009, 11:04 AM
 
Location: Martinsville, NJ
6,162 posts, read 11,742,206 times
Reputation: 3970
Quote:
Originally Posted by featheroflove View Post
It was something that happened a few years ago when my parents tried to buy a house. The seller's realtor suggested my parents to deposited in cash (just gave the cash to the seller's realtor) and they did, not knowing that they're not supposed to do that. That was all in the past. My parents are the one buying the house then and now, not me, I just wanted to simplify that so let's just say I'm the buyer. I wasn't involved in any buying process then but now I'm doing some research to help out my parents.

We are going to see the house and meet the seller's realtor for the first time today. If all goes well today, my parents are very likely to make an Earnest Money Deposit same day. So I'm doing research beforehand in case we'd really make a deposit on the spot. I know that the money deposit can be in form of personal/certified check or money order and that it should be $1000 or 1% of the purchase price.

What I don't know is if I need any witnesses (bank agents?) and who to make the check payable to. If I ask the seller's realtor, would she likely to give me an honest answer? Or should I just make the check payble to her company, REMAX in this case?
Ohh ok. That clarifys some things. For the record, if yoru parents aren't any better versed than you are on the process, you may want to recommend to them that they hire their own agent. I can't stress enough how disadvanted they are if they have no one on thier side with the information, experience, and possibly skills of a professional. And if they simply refuse to hire a real estate agent, have them call a real estate attorney, so that even if they get no advice on the purchase process, they at least will get the proper LEGAL protections.
As to the deposit...
Here in NJ (and it may be differet where you are, but I suspect the process is very similar all over the U.S.) the first deposit of roughly $1,000 is given over with the initial offer, and is written to an escrow account specifically. For instance, if my company is holding it, you would make it out to Weichert Escrow Account. There are all sorts of rules about co-mingling of funds, and those excrow funds must go into an account that holds none of the escrow holders other funds, such as operating capital, commissions, etc. You might HAND the check to the sellers agent for delivery to the escrow holder, but you will have made it out to the escrow holder, (which might be a title company, an escrow company, the sellers real estate brokerage company, or the sellers attorney.) If you don't like the escrow holder they have said they will use (maybe it's the seller themself, or the sellers personal bank), let them know that's unacceptable to you. As long as it's a professional that handles escrows all the time, it's probably nothing to worry about. (This is one of those things a local agent would be able to help you with, of course. So will a local real estate attorney)
If the offer get's negotiated to an agreed contract, then the funds get held until closing, where they are credited toward the total purchase price. If you never agree to a contract of sale, you will get your escrow money back, of course pending whatever legal procedure is in place in yoru area to make that happen.
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Old 05-11-2009, 11:22 AM
 
45 posts, read 271,645 times
Reputation: 43
Dont be stupid; Get a Buyer's Agent.

You're a first time homebuyer and have NO clue how the rest of the journey will be like.
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