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I've bought a few FSBO properties, and have NEVER had the seller hold escrow. Never even had them request it. It's always a title company. Always.
If a seller wanted to hold it, and was firm on it, I'd run like the wind. Maybe it works for you, but for most sellers, this is a huge red flag.
I might give a FSBO seller $100 EMD. Maybe. Maybe $20.
And, I sure would want to see the resulting contract dictate deposit into a trust account and to outline disbursement of those funds therefrom.
Ironically, before I became a realtor, I was looking to buy a home in the same community that I live in currently. The seller was attempting to do a FSBO and he insisted that I needed to provide him the escrow up front. I offered to place escrow with the title agency or his attorney. When he refused, I told him no thanks.
About 2-3 months later, my current home became available at a similar price but a bigger property. I bought my current home and was directly across from the first house. Turned out that the first homeowner had earned an interesting nickname in the neighborhood, "Psycho Sid". We never got to the point of signing a contract, only verbal at that time. Glad that I didn't buy from him.
Question for FSBO sellers. When your home went under contract and the buyer provided an earnest money deposit - who held the deposit?
I have done a lot of these. Always the title company.
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