No Earnest Money
I've been working on this deal for awhile and I finally got the owners to go down on the price. Here are the details:
FSBO
Asking Price $139,900
Appraised for $156,000
My goal is to flip this property to a retail buyer. However, they are asking for a $2,500 earnest money deposit. Does anyone have any ideas for me to get around this because I don't have the funds. Could I offer a promissory note for the $2,500 to be paid at closing?
You can include whatever you want in your offer. It may not get accepted. This is just like any other term in the offer you give. I don't like to give earnest money because it ties up funds. I might give a copy of my bank statement or such with account numbers blacked out if they want to see money available for the down payment or such.
More information might help us give you a better answer.
Also keep in mind that apprasials typically come in above fair market value. Make sure you are comfortable with what the home will sell for in the area.[ Edited by myfrogger on Date 11/03/2003 ]
Yeah, you can definitely give a promissory note or you can put something for collateral that the seller will accept.
Christian "The Solutions Kid" Beebe
[addsig]
First question would be when and why was the property appraised?
Second question would be how/why can you sell the property retail when they couldn't? What are you going to offer a potential retail buyer that the current seller can't/won't?
Third question, how exactly are you planning on "flipping" it to a retail buyer?
As far as the earnest money, the seller requesting it is not uncommon. It is their insurance that you'll follow thru with the deal. The amount seems a little high. Common for that price range would be about $1000. Could you manage that amount or borrow it from someone until the property resells?
Roger
The property was appraised becaue the sellers found a buyer but they didn't qualify a mortgage. In fact, they found several buyers but all had the same problem.
I was going to offer the property with "seller financing" because I have a private investor that will buy the mortgage note.
You could put in the contract clause " Earnest money deposit will submitted upon ractification of contract"
That way you only have to cut a checks for the accepted offers. or
"that my attorney would hold the check for me unti the offer will accepted". And
during this time you could find someone to buy your property.
Good Luck
Elynda
Let me throw some numbers out so that you'll be aware of them.
If sell for $156K and find a buyer that has $6K for a down payment (+closing costs), you'll have a $150K loan to sell. IF your note buyer only discounts it by 10% (highly unlikely on a new, unseasoned note, 20-30% on average) you'll get about $135K for it. Add the $6K down = only $141K or about what you paid for the property (or less than depending on your closing costs).
Just the way I see it.
Roger
Hey Yhagood,
Listen to RAJ, he's on the right subject in this conversation! Take a step back and make sure that this deal is a win and not just someone who said yes to you. This is when I would decide to sit down with a pencil and a calculator and make it extremely simple before spending money...just to be certain that I'm not getting emotional about it (always the death of you).
hope this helps,
clear2close
[addsig]
Way to go Roger, you are over this one!
I would agree that the exit strategy may not be a very good exit, especially at the discount the buyer would require to purchase the note.
In addition, the earnest money is extremely strong in this situation. The subject property doesnt excite me enough to put out those kinds of funds.
It is always good to continuously review properties, but be certain that you have a sound and profitable exit strategy!
Best of Success!
BAMZ
[addsig]
ja gut,
make sure that you dont become a motivated buyer is the advice i got from someone. just because he says yes, dont jump on it right away and try to get all down and hit a homerun. everyone is right, and i beleive they know better.
[addsig]
Thanks everyone for your advice. I have been looking at properties for awhile and this was my first potential deal. Therefore, I became emotional. I'm going to pass on this way, unless I can get the owners to come down on the price.
Thanks again,