Re: Earnest Money - Posted by JPiper
Posted by JPiper on January 09, 1999 at 02:41:26:
A few comments on earnest money.
You can get a lot of misinformation about earnest money. Realtors are one of the biggest sources of misinformation. Chances are that the information you are working with regarding your state comes from that source, or one like it. There is no requirement in ANY state that I?m aware of that the earnest money be $1000 or any other amount.
There are usual and customary amounts that Realtors sometimes suggest, or expect, or the especially misinformed ones may even try to require. But there is no minimum.
There was a time when I used to use $1 as MY standard earnest money amount. I once tied up about $400K in property with a rumpled one dollar bill that I pulled out of my pocket and made the seller sign a receipt for. Many of the times I would use $1 I would get an objection, which I had to learn how to handle. That?s what you need to do. But whether you use $1 or $1000 the contract is no less binding.
Over the years I have raised my earnest money amount. I first raised it to $10. Now I typically use $100. But I vary the amount depending on the rest of my contract and the general situation. Sometimes I use no earnest money?.but I insert a provision in the contract that once my inspections are complete I will deposit an earnest money amount. Sometimes I make this particular amount a large amount?.and use that as a selling tool to indicate my seriousness?and to make up for the insufficiency of the contract in other areas (like price). I?m always amazed when sellers go for this?but they quite commonly do.
Just understand that this is a game. Everything is negotiable. Once you understand that the game becomes easier.
By the way, a contract DOES NOT require earnest money to be valid?.not even $1. Earnest money is not an essential element of a contract.