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Earnest money deposits...they aren't required to facilitate a deal in Florida!

Earnest money deposits...they aren't required to facilitate a deal in Florida!

Earnest money deposits are not required, in other words, there is no law in Florida that requires earnest money deposits to make an offer on a property here in Florida.

A promise to buy and a promise to sell are enough consideration to create a valid contract to purchase real property here in Florida.

We as licensed agents must present all offers, with or without an escrow deposit. (NOTE: If there is an escrow deposit, the name, address and phone number must be on the contract of who is holding the earnest money).

Sellers may request a specific amount of money in a counteroffer to ensure the buyer is serious about the purchase, however, with the offer, earnest money deposits are not required.

ARE EARNEST MONEY DEPOSITS REQUIRED IN YOUR STATE?

http://www.KarenMonsour.com, 954-464-4194

Posted by Karen Monsour,REALTOR® Broward,Palm Beach,Miami/Dade! 954-464-4194 anytime! on 08/20/2009 10:36 PM

Comments (44)

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44 Comments on Earnest money deposits...they aren't required to facilitate a deal in Florida!

AUG

Hmmm....can't say if in Wisconsin it is an absolute legal requirement...I can say that if the buyer(s) have no "skin in the game" it is likely they will be countered....

Sally & David,

I think that's the point, to get to an agreeable price, then agree on an appropriate escrow deposit.

Thanks for commenting.

Karen you are completely correct. In the past many agents have demanded a deposit as a show of good will or good faith from the buyer. However, according to contract law and its current interpretation the contract itself and the promise to complete it is consideration.

Robert,

Thank you so much for commenting on my post. Many people feel this is actually necessary to make the contract valid, while it really is not.

So glad you stopped by!

AUG

Not required, but any seller who would accept an offer without one is not getting good advice. How is one to establish the "earnest" intentions of a buyer without "earnest money"?

Karen- You are correct!

The 4 essentials of a contract are:

1) Contractual Capacity

2) Offer and acceptance

3) Legality of object

4) Consideration

Valuable consideration is the money or a promise of something that can be measured in terms of money.

Good Consideration such as love and affection. A Promise to buy or sell is also good consideration

These days, it appears Valuable Consideration is prefered over good consideration particularly among instituitions facing a borrowers default.

I am not certain that earnest money is required in CT. However, practice is, if the offer doesn't come with any money, it usually does not get considered. Lenn is correct in that regard. The earnest money deposit is the sign for the seller that the buyer actually intends to follow through with the terms of the contract.

Nothings higher of good intentions than some "Good Faith" money or the Importance of Being Earnest!

Hi Karen -- Great info to know, no earnest money is not required in Ohio either.

Ours is vague, and emphasizes "good faith". I haven't done a trasnaction without one. I suppose I could take a cow as a good faith deposit.

Very good point Karen. Everything is negotiable. It is not a law.

Interesting...I was trying to remember the basics of a contract, and isn't "consideration" (some money) required to make it a legal, valid , binding contract? Not sure....

So many people get confused about earnest money deposits and consideration. They don't realize that the promise to pay is the consideration.

It is not required in GA, but it does show good faith that the buyer wants to purchase the property.

Most of my sellers would not consider an offer with some good faith attached!

I've received a contract with $50 on a small house so there is no set amount but a seller will not take a buyer very seriously with such an amount on something like a $150,000 house. In fact, prepared to get laughed out the office door.

As Joe Pryor said above, this is "Good Faith" money. The more "Good Faith", the more a seller will take your offer seriously. Believe it or not, $500.00 is very standard here except on new homes where it's usually 1% which is still not much when you look at the risk involved with taking a home off the market.

If it's your home on the market, what would you do?

I absolutely agree that there should be some amount of "earnest money." Reason being is that people don't take real estate contracts as seriously as they should. I know locally that people are always getting their earnest money back even if their reason doesn't require it be returned. The more they have tied up in the transaction the more likely they are to follow through with their contract.

Mom - I guess those broker classes are paying off. I think I'm going to start taking some in October when it slows down some.

I always explain it to my customers as "good faith" money. You are showing that you are serious and not just putting offers in left and right (which unfortunately is happening with all of the short sales...) without any monetary effort. In Massachusetts it is common to put money down - between $500 and $1000 with the offer and another (normally larger amount) at signing of the Purchase and Sale Contract.

Karen - The "no escrow desposit" seems to be coming more common with all the short sales in our area.

Not required in Texas either.

In Maryland an "IOU" or promisory note could be used for "consideration".

Although earnest money is not legally required in Mississippi, I have never run across a seller who would consider an offer without it.

Just my opinion...but I personally would never accept an offer without an escrow deposit and advise my seller's of this as well. Having gone through a very, very long 4 year lawsuit against the contracted buyer of a vacant lot I owned in Florida....had I been smart...would have required more than a lousy $1000. earnest deposit. I eventually did win a specific performance judgment against the buyer (yes...against the BUYER) for close to $250K...however, he has since gone bankrupt and I am out tens of thousands of dollars. Without earnest money held in escrow...there is very little incentive for the buyer to complete the transaction if they start to get cold feet...food for thought.

Required by law versus what is expected are two different subject matter as the other commenters have mentioned. One with NO earnest money - I guess it would be "difficult" to gauge how much back to counter. On a $500K home, 0 money definitely doesnt show alot of GOOD FAITH.

We did a deal where the earnest money deposit was $100. I didn't sleep during the whole escrow. (It wasn't my idea to accept the offer that way but the buyers were receiving grant money from the local rural housing development program.) I lost sleep worrying if it didn't close, who was going to pay the inspections. I knew the buyer had no money. Never again.

As always, everything in real estate is negotiable. But I don't believe a seller would consider an offer without an earnest money deposit. If my client is going to take their property off the market, the buyer should show some "good faith" with an earnest money deposit.

Hi Karen~ I have had many homes close even when there was NO earnest money, and I have had some NOT close that did have earnest money. The law doesn't require it. It is up to the seller if and how much they require to feel comfortable with the deal. Everyone is different and usually base it upon prior experience.

May not be required, but my sellers are not going to accept an offer that does not have one. And if two offers come in that are similar, the one that has the deposit will likely get the sellers approval. I do however, now put that the deposit is to be paid within __ days of the effective date now, unless I know the title company. Had too many title companies holding deposit checks on dead deals until the check cleared, 30 days! So unless the offer is accepted, the buyer puts no money up. If accepted, they have one or two days to get that check to me.

Interesting post today. thanks for sharing.

Patricia Aulson/portsmouth nh

Karen,

In most common law jurisdictions, historically, a seal will replace consideration to make a binding agreement.

In Toronto, a $20,000 deposit is usually required. Anything over a $500,000 deal, then you better have a $50,000 deposit in a bidding war.

In other smaller jurisdictions outside of Toronto, a $1,000 (good faith) deposit is the norm. That hardly seems worth the effort.

Brian

Consideration does not necessarily equal money. It can also be some material item. I saw a jet ski as a deposit not long ago. :)

Earnest money is just what it is - to show earnestness on the part of a buyer. It's not required in AZ but it's sure a bad idea for a seller to take 'a pig in a poke' from a buyer with no dough . . . ;)

To all who have commented so far:

Thank you all for your opinions! It is not my policy to write a contract without some sort of an earnest money deposit!

This is just Florida law! It had occurred to me that many people feel that earnest money is required to make an offer valid which it is not here in Florida.

Thank you for also stating what is the law in your specific states. That is very important information that I was looking for.

Good faith - escrow deposits always present a stronger deal in my experiences.

Keep on talking to me...

WOW, thanks for the feature as well, I just noticed that gold star!

Earnest money isn't required but it shows good faith to the seller.

Jen,

You are correct. However, some customers prefer to negotiate the deal then agree on an escrow deposit...at least sometimes.

AUG

Earnest monies aren't required, but, I couldn't advise a seller to accept an Offer To Purchase w/o one. Or, as you say, if a Contract Price is agreed on than have Earnest Monies forthcoming with a "time is of the essence clause" added to the Contract. I think buyers need to be willing to show some "earnestness" in a Contract or it is just too easy to get buyers remorse and walk away after tying up the sellers on market time.

Sue of Robin and Sue

Not required by law, but I'd never advise a seller to take a deal without some money!

Robin and Sue and Erica...

This is not my rule nor do I think that it's right, what happens on occasion is that the escrow deposit is negotiated with the acceptance of the contract.

AUG

Hey Robin,

Just swinging back by to read the numerous and excellent comments you are receiving on this post. Congrats on the feature too :-)

Fort Collins RE...I am Karen and this is my blog...sorry if you were confused. :-)

Hi Karen:

Interesting blog post and congratulations on the feature. I have practiced in 3 states now and earnest money is not required in any of them. If I represent the seller, I would never advise them to accept an offer without some glue to hold it together.

AUG

Hi Carol,

Like I have said above. It's not my rule, it is the states. I always get some earnest money - (glue)...I agree...thanks for commenting on my post and thans for the congrat's on the feature!

AUG

Karen,

I brought a contract to the attorney and he noticed that there was no earnest money deposit. He yelled at me. I told him that promise to pay is also a consideration. He told me that he is doing it for over 40 years, and that he could not care less about what i bring to him, and he said that he will not sue for the promise, as that would cost a lot of money and not guarantee that you get anything.

So he told me to get the deposit, and not bring him $1,000, as it is as useless as nothing. It is not worth fighting for.

So, yes, legally you can say that the deposit is not required. Practically you are then in the hands of the buyer, and the hands maybe not clean. Been there, done that.

AUG

Jon,

The point is that it is not required initially. After verbal negotiations an agreed upon escrow is given.

The reason that I wrote this is partially is b/c at one point in time, I believe you told me that no escrow money means that there is not a valid contract. Remember the situation?

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