When should I put earnest money down on short sale when I make the offer or after approval?
Here’s the real answer for here in Arizona. If the Arizona Association of REALTORS Short Sale Addendum is used, there is language that says that the earnest deposit does not need to be given to title until the lender approves the short sale. (Actually, it says upon receipt of the “Agreement Notice” but we can deal with that syntax later.)
Without that language, the earnest deposit needs to be made once the buyer and seller agree on the contract just as would take place with any other contract.
And for a third possibility, many listing agents have addenda that not only asks the buyer to deposit the earnest deposit but makes it non-refundable for a set period of time if only to make sure they buyer doesn’t flake out later. Non-serious buyers are a serious problem on short sales.
How many words was that to sum up more or less any normal situation?
Sadly, the simple question is being turned on its ear by agents who aren’t licensed in Arizona and likely never have seen an Arizona real estate purchase contract.
To wit …
Earnest money is required to be deposited when you have a contract, not just an offer. To have a contract in a short sale requires the bank to agree to the terms and price. Until you get a signed letter from the bank you have just an offer which does not require the deposit of earnest money.
Sorry, my North Carolina friend, but you’re dead wrong. Once buyer and seller both have signed the contract, you have an executed contract and not just an offer. The Arizona Department of Real Estate even requires agents to send these contracts to our brokers for approval ahead of bank approval.
Why? Because, at least here in Arizona, bank approval is nothing more than a contingency no different than contingencies that say a buyer needs to sell his house before he can buy.
You should have made the offer without an earnest money offer, but if you already made the offer its okay to retract before signatures have been made and make a new offer that does not offer earnest money, or at least earnest money to the least amount,
Punctuation aside, Florida … really? You can write offers in Florida that do not include an earnest deposit? Neat trick. Won’t work here in Arizona, though. At least, I’ve never seen a seller that accepted an offer where the buyer didn’t offer something for an earnest deposit.
(And just in case what you meant to write was an offer that didn’t include making the earnest deposit up front, see above to find out how to do that. Just don’t ask North Carolina.)
From Washington …
It is generally deposited once the contract is ratified, but it should be negotiable.
Good answer! Oh, hell, there’s more …
You will need to write the check, but you may be able to put a clause in the contract that the earnest money deposit is only deposited once the bank ratifies the short sale.
“You will need to write the check.” Why, to prove that you as the buyer do in fact own a checkbook? That makes absolutely no sense. I’m sure there still are agents who collect an earnest deposit check with an offer; actually, it may not be rare at all. I’m not one who does only because I don’t want to handle your money for any longer than necessary. If I’m not taking that check straight to the title company, I don’t want it.
More to the point … the point Mr. Washington is making already is covered in the standard paperwork, not that he knows this because he’s in Washington and not in Arizona.
This isn’t uncommon whatsoever. Agents around the country seem to have no issue opining on real estate law in other states without the slightest clue what the law or local custom may be.
And it’s really your fault, Mr. Consumer. Sorry to tell you that. Stop using silly toys like Trulia Voices, find an actual agent and ask them your questions, and you’re more likely to get the answers you need without sifting through the Greek chorus of agents from other lands who simply don’t know what the answer is but still want to defend their Trulia “VIP” badges like the badge really means something.