Did you guys have to pay any earnest money for your (recent) house purchase? I hear that, due to the market, that this is pretty standard now... Usually 1%-2% of the offer/asking price.

To me, it looks to be more of a "good faith" deposit. Thoughts? I honestly didn't think it was "required" until my agent brought it up. They said putting something down may entice the seller moreso than if I decide otherwise, and can actually be "the dealbreaker" if I opt against it. I called other agents (non-affiliated to the transaction) for their opinion and they all agreed.

While this isn't a deal breaker for me, this is, ironically, the first unexpected "cost" to me owning my first home

1/19/2010 1:46:54 AM

It gets deducted from closing costs at closing, its not any additional money you'd have to spend

1/19/2010 2:05:51 AM

^

1/19/2010 2:15:40 AM

Quote :

"It gets deducted from closing costs at closing, its not any additional money you'd have to spend"

CC are already going to be covered by seller, so it's money against the principle that reduces the overall cost of the house, thus resulting in a lower loan request.

[Edited on January 19, 2010 at 2:17 AM. Reason : .]

1/19/2010 2:16:47 AM

Quote :

"To me, it looks to be more of a 'good faith' deposit."

That's exactly what it is--it gives some indication that you're a serious buyer. But there's no set amount--just write an earnest money check for $1,000 to $2,000 and you'll be fine.

1/19/2010 5:38:11 AM

i did that when i bought my house back in feb 2006

1/19/2010 8:17:47 AM

I've done it with both houses i've purchased, and the buyer for my first house also put down earnest money. definitely common.

1/19/2010 8:24:16 AM

Quote :

"CC are already going to be covered by seller, so it's money that reduces the overall cost of the house, thus resulting in a lower loan request"

Yeah so it's applied to your down payment making your down payment lower at the time of closing. Unless you are getting 100% financing + fully paid closing costs:

Quote :

"its not any additional money you'd have to spend"

1/19/2010 8:25:34 AM

*unless of course you change your mind for some reason

1/19/2010 8:32:30 AM

I had all closing costs paid by the seller and put down $1000 earnest money. Money went straight to the seller and I financed $1000 less.

1/19/2010 8:59:52 AM

Thanks for the responses folks.

1/19/2010 10:59:18 AM

I'm also in the process of buying a house right now. Don't go more than $1000 for earnest money. Some realtor will tell you to do 1%, but most of the time $1000 is more than enough.

1/19/2010 11:00:46 AM

If you are this upset with the earnest money, maybe you should rethink things...

[Edited on January 19, 2010 at 11:03 AM. Reason : ]

1/19/2010 11:03:07 AM

I had to pay $1500 earnest money. I was buying new so there were a lot of people in the office and I was surprised at the number of couples debating amongst themselves how the hell they were going to come up with this sum. If you can't swing $1000-$1500 earnest money you should probably reevaluate buying a house.

1/19/2010 11:14:35 AM

^^I'm not upset by any means. It was just something I was unfamiliar with and my parents as well as a couple other friends did not pay earnest money, so after asking them I was a little

The house I found will go pretty fast, no doubt. A house very similar to this was sold within 3 days after being listed. I put down $1,500, which I feel is a very good portion, so we'll see how that goes.




[Edited on January 19, 2010 at 11:17 AM. Reason : ^]

1/19/2010 11:16:14 AM

good luck on the house, I've been waiting for about a month now after I put my offer in.

1/19/2010 11:29:13 AM

Quote :

"That's exactly what it is--it gives some indication that you're a serious buyer."

This sums up the spirit of Earnest Money pretty well. It's tangible proof that you're a ready, willing, and able buyer. Earnest money deposits also provide an 'incentive' to the buyer to complete a contract for sale, as it shows you've got some skin in the game.

My concern is your ignorance of this fact...at what point during your talks did your agent educate you to this? Ensure that your agent explains to you all of the mechanics of a real estate transaction, from the Working with Real Estate Agents card you sign at the very beginning of your first contact all the way to the closing paperwork.

Also, its a good idea to confirm what loyalties your agent owes you in terms of representation and disclosure, and what kind of agency agreement you're signing if you're not already aware.


[Edited on January 19, 2010 at 11:42 AM. Reason : http://www.ncrec.state.nc.us/publications-bulletins/WorkingWith.html]

1/19/2010 11:31:26 AM

^ We immediately discussed the mechanics and structure of how a real estate transaction works. We also signed the REA card the day we met, which is odd because when my wife and I have gone to a dozen or so other houses, the realtor never mentioned this. Anywho, the buyer agent working for us is a family friend for over 3 generations, so they are most definitely looking out for our well being as well as educating us through the transaction.

I appreciate the link. Good info.

1/19/2010 5:52:03 PM

Also if two people bid the same amount on a house but one puts down earnest money and the other one doesn't the bid with earnest money looks more appealing to the seller. This is how i got my house

[Edited on January 19, 2010 at 6:08 PM. Reason : ,]

1/19/2010 6:07:55 PM

realtors are blood-sucking leeches.

1/19/2010 6:09:51 PM

+1 to everything already mentioned. I think I put up $2k in earnest money. The only thing I'll add is I didn't sign anything retaining my realtor until we were at the closing table.

1/19/2010 6:11:08 PM

We did our home buying March of last year through craigslist and my family's lawyer. We offered the seller earnest money but he wasn't interested.

1/19/2010 6:11:37 PM

^^^you can make offer without earnest money? I was always under the impression that all offers come with earnest money.

1/19/2010 6:42:24 PM

^ An offer can be anything you want it to be. Without earnest money, you can basically walk away from a signed contract.

Quote :

"from the Working with Real Estate Agents card you sign at the very beginning of your first contact all the way to the closing paperwork. Also, its a good idea to confirm what loyalties your agent owes you in terms of representation and disclosure, and what kind of agency agreement you're signing if you're not already aware."

As soon as we close on the house we're trying to buy I'm going to be filing a complaint on a real estate agent down here on the coast.

I was hoping to do all my own buyers research and ask a selling agent to reduce his commission by the amount that would go to the buyers agent (typically 2% down here). I had the selling agent show me his listing but didn't tell him of my plans up front. He didn't offer me a working with REA disclosure to sign or discuss conflict of interests or anything like that.

We liked the place and I called him when we got home to discuss this and he asked me why I would want to do that (ask for reduced overall commission) and said that I had everything all wrong. I'm like, dude, I can offer your seller what amounts to full price, you get basically the same amount of commission as if I had an actual buyers agent, I get a slightly better deal on the home, everyone is happy. He tries for about 2 minutes to convince me I don't know what I'm talking about and I shouldn't be concerned about what commission he has negotiated with his seller. At some point I told him he was greedy to which replied he was just trying to earn a living (tax records show he and his REA wife own ~5 million in properties down here, though he might be cash flow poor). I told him I called because I thought he would be reasonable but since he isn't I'm just going to go get a buyers agent and he can deal with them. He tells me he isn't going to accept any offers from me at this point (something he can't legally do) and I just hung up on him.

He is the 4th of 6 real estate agents I've worked with or dealt with that have either been outright idiots, mostly incompetent, or shady greedy crooks. The entire cottage industry that is real estate and their agents needs a vast reworking. It's all done under the guise of helping consumers, but the reality is, it helps to keep real competition from working properly and to guarantee a minimal level of income for agents.

[Edited on January 19, 2010 at 6:48 PM. Reason : .]

1/19/2010 6:47:24 PM

I just bought a house. Got a call back and they accepted my 2nd offer. I'm closing Feb 26th.

Massive debt, here I come!

ps. Besides the fact that we know the sellers (not personally, we we just know who they are and visa versa. We're acquaintances if that), the earnest money really set us apart from the other person bidding on the house. +1 would recommend.

[Edited on January 19, 2010 at 7:39 PM. Reason : .]

1/19/2010 7:39:23 PM

I paid $2500 earnest money for a new home, but that was required by the builder. They did, however, pay closing costs up to 3% or 6k, whichever came first. I didn't really have any trouble coming up with that money earnest money. Like others have said, if you are you may not want to buy a house

[Edited on January 19, 2010 at 7:57 PM. Reason : ^ hey congrats by the way!]

1/19/2010 7:54:04 PM

i did

but it was $500 and felt like more of a formality than anything

[Edited on January 19, 2010 at 11:12 PM. Reason : 1-2% would have been more on the $1750-$3500 range, so, dont assume that it has to be that]

1/19/2010 11:12:10 PM

Not reading through the rest of this thread, but BobbyDigital basically posted what I would have posted:

Quote :

"I've done it with both houses i've purchased, and the buyer for my first house also put down earnest money. definitely common. "

1/20/2010 2:07:42 PM

Quote :

"I was hoping to do all my own buyers research and ask a selling agent to reduce his commission by the amount that would go to the buyers agent (typically 2% down here)."

These buyers were addressed in the mandatory ce earlier this year. If a company has a policy against this, they build it into their listing agreements with the seller, which does allow the refusal of an offer (or the seller could make up the diffence to the agent I guess, if he wanted the transaction bad enough). I'm not saying what you're doing is wrong, I'm explaining the possible reasoning behind his response

[user]Shimorri2[/user] Sounds like you have a good thing going then if you know the agent. And yes, each agent is supposed to have you sign the REA before any substantial conversations take place

1/22/2010 12:34:58 AM

^ Yes, I'm quite fortunate to know her. She's definitely a hardcore, all business woman who is VERY professional, courteous, and thorough about her job. I'm like a child/older grandchild to her so this feels more like family helping family then a referral, so I get special treatment She can be a overwhelming at times (due to blonde moments lol), but I would recommend her for you potential future buyers out there.

If all goes as planned, I close in 36 days. Wow.

Wait a second... You know what? I should collect some of her commission. I'm the one who found the house listing



[Edited on January 22, 2010 at 1:20 AM. Reason : .]

1/22/2010 1:19:27 AM

It's taken every ounce of self control I have to not post a picture of Jim Varney ITT.

1/22/2010 1:45:59 AM

buyer's agents are basically there to screw you, I would never sign an agent agreement as a buyer

1/23/2010 6:57:11 PM

what agreement are you guys talking about? i haven't signed any paper with my buyer's agent.

1/23/2010 7:15:29 PM

So, do most buyer's agents make you sign an agreement? I just visited an agent today that I'd been exchanging e-mails with and he wanted me to sign this like 9 page long agreement before he'd show me anything. Is that normal?

And...does anyone know what options I have for getting out of the agreement if he turns out to be terrible?

1/23/2010 9:25:19 PM

i wouldn't sign anything at least until you got to know the guy. as i noted above, i didn't sign anything until we literally were at the table signing the closing documents. even then, he was just like "oh here, sign this thing saying i helped you" and that was that.

[Edited on January 23, 2010 at 9:48 PM. Reason : .]

1/23/2010 9:47:59 PM

you dont have to sign a damn thing and shouldnt until closing. any agent telling you otherwise is full of shit.

1/23/2010 10:35:02 PM

^ Spoken like someone who has true knowledge of real estate sales. Good job.

http://www.ncrec.state.nc.us/publications-bulletins/WorkingWith.html

This is something every agent should have you sign prior to substantial conversations. Its to help you understand your rights, its a form of consumer protection and its required by law for the agent to have you sign it.

Talking with an agent about your financial situation, for example, without signing an agency agreement, allows the agent to disclose your conversations-which can seriously affect your ability to negotiate- to whomever he wishes: another agent, firm, seller, Whatever. If you haven't contracted his loyalty, he doesn't owe you shit.

Anyone not thinking that loyalty isn't worth the contract signature, and on a more broad scale, doesn't read the agency agreement before signing so that they know what they are or are not signing away, deserves whatever happens to them.

The OP has been addressed, its time to let this thread die without meandering bullshit cluttering up the legitimate replies.

1/23/2010 11:39:26 PM

^ agreed.

I do agree that you shouldn't sign something with someone before you ever look at anything or get to know them, but not signing one until closing isn't helping you at all. In fact you are just leaving the door open for them to negotiate in their favor instead of yours.

1/24/2010 1:15:35 PM

Quote :

"Talking with an agent about your financial situation, for example, without signing an agency agreement, allows the agent to disclose your conversations-which can seriously affect your ability to negotiate- to whomever he wishes: another agent, firm, seller, Whatever. If you haven't contracted his loyalty, he doesn't owe you shit. Anyone not thinking that loyalty isn't worth the contract signature, and on a more broad scale, doesn't read the agency agreement before signing so that they know what they are or are not signing away, deserves whatever happens to them."

So, now I'm confused. How are you ever supposed to be shown a house without first divulging information? Because the way it usually works, you tell an agent a series of criteria you're interested in and they start searching MLS for you. I guess you don't have to reveal your ability to pay or your financial details, but presumably they could glean details about you that could be used against you.

1/24/2010 9:15:01 PM

1/24/2010 10:01:29 PM

even if you sign an agreement with an agent, you can fire that agent at any time.

my $.02 is that you should always use a buyer's agent. the seller has an agent working for them, who, by law, MUST act in the seller's best interest.

plus, the seller pays commissions. why would you not want a buyer's agent?

1/24/2010 10:08:35 PM

The assumption that the agent is in fact knowledgeable and worth a damn, which simply isn't always true.

A bad buyers agent can be just as detrimental as not having one at all if you are the kind of person to do all your own homework.

[Edited on January 24, 2010 at 10:23 PM. Reason : .]

1/24/2010 10:21:30 PM

the buyers agent doesn't do shit. anybody with some simple research can do that. I understand if you're far away and can't physically do the homework but for a local purchase its nonsense. some of the biggest get-over-ers in society...

1/24/2010 10:31:16 PM

How many homes have you purchased?

1/24/2010 10:33:25 PM

Quote :

"So, now I'm confused. How are you ever supposed to be shown a house without first divulging information? Because the way it usually works, you tell an agent a series of criteria you're interested in and they start searching MLS for you. I guess you don't have to reveal your ability to pay or your financial details, but presumably they could glean details about you that could be used against you."

you just have to be smart about what you say. Divulging some information that is only meant to help you narrow down you search like "I'm only considering houses on a crawl-space" can hardly be used against you. What CAN burn you if you have a shady buyer's agent with no signed agreement is this scenario:

You find a house you love, listed for $250. You and the agent are deciding on a first offer of $230, but the agent asks you what is the most you are willing to go if they keep countering the offer and you spill that you might be willing to pay full price but are hoping to get it in the $230s. They have no legal obligation at that point not to talk to the listing agent and tell them "hey look, this guy is willing to bid up close to full price."

^^ Yes and no. I have been looking at houses online for months. I know how to pull up the current and past tax records, check what adjacent land is zoned for/who owns it, etc. but I am still going with a buyer's agent. If we get a house, we owe her $0 and she is doing some extra legwork for us like analyzing the local houses similar to this one we really liked to see if it is priced fairly. Yes I could do similar research myself but it is saving me a lot of time. Also, I didn't have to bother setting up appointments to go see these houses. On top of that, the house we looked at that we liked the most this weekend...it wasn't even in any of the public databases until today. It went on the market on Friday technically, but wasn't going to show up in the listings until today. She found out about it Friday and we got to be the first people to look at the house on Saturday.

I just can't see a reason not to go with a buyer's agent, especially if you can get one that is highly recommended.

1/25/2010 7:55:23 AM

For the sake of clarification before I reply, let's clear up a few of technical points:

1)I am not an attorney. If you're looking for official legal advice on the ins and outs, look one up.

2) The Working with Real Estate Agents brochure (WREA) that you sign is not an agency agreement. It is legal disclosure of your rights and what different agency representation options are out there. An agency agreement (whether seller's or buyer's) is an exclusive form of representation that you both agree to, which also covers how the agent is to be compensated for their work. The latter can be an oral agreement, but those agreements must be reduced to writing prior to making an offer to purchase.

3) Agents (buyer's and seller's), have an obligation to look out for their client's best interest, even if that means the agent winds up working for no compensation. This rule is part of the reason agents are licensed in NC: the NCREC can revoke their means of making a living if it is discovered that an agent's greed superseded their client's interest. (It is also essentially the rule that another post was referencing in circumventing buyer's agent commission).

Quote :

"How are you ever supposed to be shown a house without first divulging information? Because the way it usually works, you tell an agent a series of criteria you're interested in and they start searching MLS for you."

By the time the agent is showing property, they should have had you sign the WREA. As a buyer's agent, they can show you property at any point....in practice, some agents will show property before signing an agency agreement, and some after. Which agents do this depends on what kind of agent you hire, if you do**.

Quote :

"plus, the seller pays commissions. why would you not want a buyer's agent?"

Confirmed: It is not unusual to have the buyer's agent's commission paid through the seller or seller's agent.

Quote :

"The assumption that the agent is in fact knowledgeable and worth a damn, which simply isn't always true. A bad buyers agent can be just as detrimental as not having one at all if you are the kind of person to do all your own homework."

And

Quote :

"the buyers agent doesn't do shit. anybody with some simple research can do that. "

As is true in many things, you often get what you pay for. If you think you can do it better than a professional however, I encourage you to do so. As for checking the validity of the agent's work, its a good idea to ask them about their previous experience and references...just like you would comparison shop anything else. Remember, you're hiring someone for a job...you want to ensure they're competent, competitively priced, and that they will respond promptly.

**Coming from industry experience, I would have my clients as my contracted clients before I invest any significant amount of my time and money working for them, but that's just one person's perspective. If you can get someone to do free work for you and then walk, then so be it if that's your goal.




[Edited on January 25, 2010 at 11:22 AM. Reason : .]

1/25/2010 11:13:00 AM