This post brought on by a blog reader who asked me a question.
The question was about putting down a Earnest Money Deposit with a short sale and how much that deposit should be. Well in the DC area; an Earnest Money Deposit of 2-3% - or more - is pretty typical.
My issues is with Short Sales. Now I am NOT a Short Sale Expert and I am sure some Short Sales Experts will disagree with me. However, I have a problem with tying up thousands of dollars of a Buyers money in an escrow account for months on end.
We all know Short Sales can take months and months. To make a buyer keep 5 or 10 thousand in an escrow account is just crazy. It may not be a lot of money to some; but to many buyers this is a substantial amount of money.
Instead; I write into my Short Sale offers - Buyers Earnest Money to be deposited with 24 hours of Banks Approval of sale. Has it worked - Yes. Will it work every-time - does ANYTHING work every-time? No; probably not.
Still don't agree? Well what happens when the property gets foreclosed on and the sellers skip town? The sellers and buyers have a contract and (at least in DC); the only way to release a escrow deposit is for the buyers and sellers to sign a release form.
Ever heard of a seller being foreclosed on and then their short sale agent can never reach them again? You bet it happens? Then how does the buyer get their money back? Well I am sure a judge could rule on it - but who wants to go to all THAT trouble?
So buyers - be careful when putting your Earnest Money down on a short sale. Make sure you know what happens if the property is foreclosed and how you get that money back if the sellers can't be found or how quickly you will get it back if the Bank/Lender says 'NO' to the deal.
-As always; consulting your Buyers Agent and/or an attorney is always recommended if you are unclear on the terms of a contract which you about to enter.
Happy Home Buying!
Contact James Downing of the Downing Real Estate Group, if you are selling, buying or have questions!
Office: 202-362-5800 Cell: 703.244.3971
Licensed in Washington DC, Virginia & Maryland.
Coldwell Banker Residential Brokerage - Chevy Chase
5028 Wisconsin Ave NW Suite 100 * Washington DC 20016
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I agree with you. I always write it into the contract that it will be deposited upon final bank approval. I have heard too many horror stories of buyers who have to fight months to get their money released.