Earnest Money Question - Posted by Joe

Posted by Joe on June 09, 2004 at 17:36:00:

Lets say they accept my offer, how soon do I have to run over there to give them my check? can I stall for a couple of days, or do I have to run over there within 24 hours or something?

Thanx

btw, I put in my offer today on a house that was listed @ 49k for 41k and the comps say that the house is worth 130-150k and needs 20-30k in work. This house has been on the market for over a year, and other investors wont touch it cause it needs so much work. But just incase the house needs more than 25k in work I put a clause in the contract stating “Buyer has a right to a 10 day personal inspection period, if repair costs exceed 25k then the buyer has the right to cancel this agreement.”

Earnest Money Question - Posted by Joe

Posted by Joe on June 08, 2004 at 19:21:51:

If a bank accepts my offer on an REO, When I send them the check, does the bank cash the check right away, or do they just hold on to it until I close or run out of time on the contract.

Also, would it be deemed usual for me to put in the contract a clause that states that they cannot under any circumstances cash the check unless I do not close in time as stated on the contract?

Thanx

Re: Earnest Money Question - Posted by Mike Cheatwood

Posted by Mike Cheatwood on June 08, 2004 at 19:29:35:

Joe,

Standard practice says that as soon as the contract is fully “ratified” the check will be deposited (i.e., placed into an escrow bank account). The EMD funds will then be disbursed at closing as per the way you wrote the contract and as far as the underwriter/loan requirements dictate.

Good luck.

Mike

Re: Earnest Money Question - Posted by Joe

Posted by Joe on June 08, 2004 at 21:22:03:

But would it be a weird thing to do from the banks point of view if I included a clause stating “Do not cash and or disburse the deposit check until a 10 day personal inspection period has passed”?

I’m asking this cause I have little money right now, and I’m sure you guessed this already :slight_smile:

Re: Earnest Money Question - Posted by Chuck Rosenberg

Posted by Chuck Rosenberg on September 05, 2005 at 22:55:10:

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Re: Earnest Money Question - Posted by Mike Cheatwood

Posted by Mike Cheatwood on June 08, 2004 at 21:39:53:

Joe,

You never can tell what a motivated seller will agree to and you should never stop asking until you find their limits or you will wind up paying too much.

Of course, and to be sure that we are talking “apples to apples” here, if you are still working through your “contingencies”, walk through inspections, due diligence period, whatever, then a “ratified contract” does not yet exist and the holder of the check should not cash it. This point is “understood” by the professionals in the business (i.e., bankers, real estate agents, attorney’s, more experienced investors, etc…).

And don’t worry about not having money when you start out, it was the same for me and most investors - isn’t America a great place to live!

Hope this helps…

Mike

Re: One more thing- - Posted by Joe

Posted by Joe on June 08, 2004 at 23:12:16:

Lets say even though I put that clause in the contract and the seller still accepted it, and they cashed the check as soon as they got it anyway, can I tell them that they broke the agreement and the contract is null and I’m wouldnt be in “trouble” for check bouncing?

and if I were to get into trouble for writing them a bad check, what would happen?

Re: One more thing- - Posted by Lee Gartner

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Re: One more thing- - Posted by Ken (Fl)

Posted by Ken (Fl) on June 09, 2004 at 11:32:58:

Joe,

Do you know that earnest money is not required by law to make the deal. Have they asked for a certain amount yet or are you speculating. If they haven’t asked, don’t offer. If they have, try to negotiate the deposit.

God Bless,

Re: One more thing- - Posted by Mike Cheatwood

Posted by Mike Cheatwood on June 09, 2004 at 08:15:38:

Joe,

The short answer is that a “fiduciary agent” (such as a Bank) should not break “the law” by accepting your funds into escrow prior to establishing the basis for their right to deposit the funds (i.e., have the contract ratified first). My guess is that you would not be in trouble with the bank cashing the check prior to their establishing their right to do so. Of course, you may still have an issue (owe a fee probably) with “your bank” for the NSF check…

Generally, if you write a bad check and it is cashed in good faith then you could be held liable for check fraud - a felony in most places. Of course, this is not to be taken as legal advice and your attorney can no doubt advise you better.

Mike