Posted by aaron on August 08, 2002 at 20:25:09:
Well, there has been quite an exchange of thoughts on this issue:-) That’s great because we get a chance to learn from each other and that is so important.
Earnest money can be anything really. It can be a car, a refrigerator, a hug, something that shows good faith. I exaggerated a little but I hope that you got the idea.
It is important to understand that the markets can differ greatly in different areas. Although in one area you may only get away with putting $1000.00 down, in another area you could get away with putting $5.00. (I operate in the D.C., Baltimore, and Montgomery County areas. The most I’ve put down, as earnest money, on a house has been $1,000.00. The least has been $5.00. On one occassion my partner and I were able to do a Subject-to deal for $1.00 to the seller)
Although I was able to put that little down, that doesn’t mean the deals went through. I would be more than happy to share those situations with you if you like:-)
One also has to see with whom these offers/ deals are being made with. It is very correct that when dealing with financial institutions and government agencies such as HUD, that there does have to be an earnest money deposit of anywhere between $500.00 and maybe more. I have not personally dealt with any institutions so I may not be that accurate.
That makes a huge difference. Who you deal with. If it’s with an agent you better have some money to put down. Agents don’t play this low or no money down game. As far as I know:-) It is there job to get as much money down as possible and to pre-screen you.
Now, if you were dealing with a seller directly, there really shouldn’t be any reason why you’d put a big number down. There just shouldn’t. Even if the market is hot. (and I know I might get some opposition on this) Whether the market is hot or not doesn’t really matter as much as their motivation factor does. If someone is really motivated, I mean seriously motivated, then the deposit isn’t going to be that big of a deal as you being able to solve their problem for them.
If you were doing a lease-option on the other hand then the deposit may be a factor. Again though, the motivation of the seller is critical. As long as you can solve their problem, they’ll work with you. Don’t take it from me though, I’m limited in my investing experience.
Read the other wonderful informational posts and how-to’s on here.
I hope that this helped. I also appreciate other investors putting their 2 cents in. It’s very helpful:-) God Bless!!