Posted by Kristine-CA on July 27, 2003 at 23:05:15:
Ed: thank you for this post. This helps me understand agents much better. I, of course, require that my buyer put down much bigger deposits than I put into my offers when I am the buyer. When I am the buyer, I always try to get away with zero or $100.00. When I am the seller I won’t take any less than $500.00 and get 10% on the better deals…
I never thought about it from an agent’s perspective–that having the money in escrow when a commission has been earned makes it easier to get.
How do you deal with earnest money when buying with a real estate broker who insist that I put up $500 earnest money.I buy as many as 10 properties with realtors a month. This is adding up. Thanks for any suggestions. Demetrius
1 - FSBO’s don’t need earnest money, RE brokers do.
2 - The simplest counter to a RE broker is another RE broker.
Prior to working with my broker, I met her on a deal that went nowhere, but she had showed the courage to submit my offer as I explained it. I came to her office on a Friday when I knew she wouldn’t be there and left a cashier?s check marked “Advance on earned commissions” with her secretary, and made an appointment for the following Thursday. My note only included my first name, so she didn’t know what was going on, or how to contact me. At our appointment I explained that the commissions were paid in advance of the fees she would earn by getting me the information I needed, spending some time roll-playing so she could learn her part in our dog-and-pony show, and going with me to an offer presentation when other agencies were involved. She is smart, and she wanted to believe what I was telling her. She sells 60 houses a year without me so she wasn?t inexperienced. From that point onward, when I told her that the lawyer had the earnest money, she didn’t worry about it because she recalled the commission advance. She didn’t allow the other agent to make a big deal about it either.
All of our offers are written as follows: $5000 earnest money upon acceptance of offer. Our hard money lender requires 15% of our own cash anyway, and it gives us credibility with the banks. Make sure they know you are serious, but only after you get your offer accepted will you fork over your money.
Broker is required to present all offers to the seller. Earnest money is not required by law, so tell him to write it up and present it without earnest money. You have a right to see the sellers signature on any rejection or counter offer.
As a broker I can tell you that we all like to get up front money to cover our commission etc. if we should have to confiscate earnest monies. This would happen in the case where either party just backs out for no reason, and the commission has been earned. It is a lot easier for me to get my commission if I already have possession of it, and I have a contracted right to confiscate it. However earnest money is not required with an offer to purchase, and as a broker it is my obligation to present the offer to the seller.