Short Sale Buyers and their Earnest Money Deposits

Real Estate Agent with Metro Referrals

Chris Ann Cleland is an outstanding Short Sale Agent in Northern Virginia.  I was surprised when she told me that buyers on her listings are still unwilling, at least intially, to deposit their earnest money up front.  Buying a house is a serious commitment and not depositing your earnest money until the seller delivers short sale approval doesn't show you as a serious buyer.  Read this post for another perspective.

Original content by Chris Ann Cleland VA License # 0225089470

Short sale buyers need to be better informed about their earnest money deposits

In Northern Virginia, there are two schools of thought on short sale earnest money deposits, and both can be accomodated by the short sale contingency addendum (assuming buyers and sellers agree to the terms in writing).  You can have your earnest money deposited at the time of ratification, just like you would with any other sales contract.  The second option, pushed by many buyers agents is to have your earnest money deposited when written short sale approval is received from the sellers mortgage holder(s).

Here are some reasons that the first option make your offer stronger and may cause YOU less headache when it's time to go to settlement.  1) If you allow your earnest money to be deposited upon ratification, you are telling the sellers that you are committed to waiting for the approval.  2) Depositing your money at the time of ratification saves headaches when it comes time to "hurry up and settle."

An example of the latter happened to some anxious buyers on one of my short sale listings.  They wrote an offer with FHA financing, had their earnest money deposited at short sale approval, and wanted to be in the home before the start of the school year.  As always, there was a time crunch.  We had verbal approval from the sellers second mortgage holder, and written from the first.  The second's approval was forthcoming "anyday" and school was set to start in two weeks.   Settlement was set for the Friday before school started.

The buyer took the steps necessary to get the appraisal ordered and complete, and conducted their inspections.  And TWO DAYS before settlement was to occur, we got written approval from the second mortgage holder.  Per the terms of the contract, the earnest money was deposited.  The lender assured all that the settlement would occur as long as we provided a letter from the Brokerage that the earnest money had been deposited.  Turns out, that wasn't good enough.

The buyers, are living out of a hotel room for the four to five days it is taking for the check to show as cleared, are now sorry they didn't have their earnest money deposited at the time of the contract.  They would alredy be in their new home and have the holiday weekend to move.

Think carefully when deciding when you want your earnest money deposited when it comes to your short sale contract.  If the goal is to buy the house, and be in it as quickly as you can, I suggest depositing it upon ratification.



Chris Ann Cleland, Associate Broker- Licensed in Virginia, GRI, SFR, Northern Virginia Short Sale Specialist. Affiliated with Long & Foster, 7526 Limestone Drive, Gainesville, VA 20155.  To contact Chris Ann, call 703-402-0037 or email  Or you can visit her website:

Header is a combination of photos, taken by Chris Ann Cleland, of various listings and neighborhoods in the Bristow-Gainesville-Haymarket area. 

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