I recently had an interesting experience. I was working with an investor who flat out refused to put earnest money down when presenting an offer. He did however think that a compromise was to pay earnest money after the appraisal came in. The seller already had an appraisal so we had no issue yet for some odd reason he just felt earnest money was no necessary. Needless to say that deal did not move forward and I do not think that I will continue to work wit this investor. His thinking was very far off from reality when it comes to the process of using a Realtor and buying property with Texas promulgated forms.
Most of us think that you must have earnest money to have consideration but in all actuality this is not true in Texas. My husband and I argued this point for some time. He was right. In Texas the consideration is the monetary amount you plan to purchase the property with. So the promise to purchase is the consideration. We research this in all the sources you ca reference to review Texas law. He was very indepth with his research. In the end me learned that this is just a bit of a Realtor myth. You do not have to enter money into escrow at title. Call your local title company and they can confirm. Of course this is not the customary way we practice real estate in Texas.
Yes we all know that NO SELLER will accept this offer. Earnest money goes to the heart of the buyers true intent to purchase the property. In this day and age an option period help to protect the buyer while they are working to see if the property is just what they want by using inspections. Our option period also gives the buyer the chance to walk away for ANY reason under the sun. Just because they have a bad feeling. In Texas the normal time frame for an option period is 7 to 10 days. This period is negotiable and paid for by the buyer. The option money goes directly to the seller. My investor also would not pay for an option period yet he felt he should be guaranteed, in writing, the comforts to walk away AT ANY TIME due to inspections and just a bad feeling. Hello!!! That is what the option is for but it does not lat the entire length of the deal. The seller is taking the property off the market and giving the buyer the exclusive right to purchase from them for a set number of days. The option period was created to give the buyer a chance to walk away if the property does not appear to be what they perceived. The added bonus in regards to option is that again you can walk away for ANY REASON.
I thought this earnest money topic was interesting. I was told in my contracts class that you MUST have an earnest money deposit as consideration. My husband learned the above but not until his GRI class. I have noticed a thread on this before. I am not sure about other stats but in Texas almost 60% of the agents who commented would have been incorrect. You do not have to have earnest money to have an offer for purchase. Quite interesting. It just makes you realize that sometimes a little research can be worth the time.
Have a great day.
Christina Stevens
409-515-9542
Considering Galveston Tx real estate? Give us a call for yourself or to facilitate your referrals. Yes we do recommend earnest money and an option.
Comments(7)