earnest money

Got An Offer? Know What’s A Solid Escrow Amount

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There is no standard as to the amount of money you should receive in escrow when getting an offer. But when representing a seller, I usually want the amount to be somewhere between 3% and 5% of purchase price.  Why? The more money there is on the table, the more motivated a buyer will be to close the deal.  Off course, we know the buyer would want to close simply because they want the house.  But knowing there is money at stake without them yet being the owners…trust me…it elevates motivation.

Its kinda like what Tony Robbins says. What’s stronger than wanting something so bad? The fear of loosing it. And no one likes to loose money.

As far as the escrow agent. Again, when representing the seller, I let the buyer make the choice. I’ve heard other real estate agents say that it is in the interest of the seller to pick the escrow agent so they have control of the money. Not true.

As long as the buyer’s money sits in a title or escrow company created in the State of Florida, the money cannot go anywhere unless both buyers and sellers agree to where it goes.  If the title company or escrow agent does not follow the latter, they are breaking the law.

A real estate contract also allows control of when to make such escrow deposits. And you basically have three option.  Say you got an offer for $500,000 and the escrow deposit amount is $20,000.

  1. You may get the deposit all up front when the contract is executed.
  2. Or split in two…say $10,000 when the contract gets executed and the remaining $10,000 “X” numbers of days after the contract is executed.
  3. Or you may get the entire deposit “X” number of days after the contract is executed.

(What is an executed contract?)

What’s my advice? I always negotiate to get 50% of it upon execution of contract and the remaining 50% no later than when the inspection period ends. Say the offer you get allows the buyer 10 days inspection period. For the above example, I would demand $10,000 up front and $10,000 on the 10th day. Why?

Because the inspection period gives the buyers absolute discretion to cancel deal.  Yup…they don’t have to even give you a reason. Get the logic?

However, once we get passed the inspection period, things change. That’s when things get a lot more serious and the fun begins.

Got an offer? And want a second opinion on the escrow amount you are being offered? Contact me today!

How To Loose Your Escrow 101

Mario AvalosLeave a comment

It’s so much simpler than you think! Scary isn’t it?

I’ll write this post from a buyer’s perspective. To be more precise, am writing this post due to a recent closing where I represented the buyer for a home located at Encore / Panache, a community in West Kendall. And NO…my buyer did not loose his deposit. We closed…yeeeah!

So get ready. Any sellers reading this post? Smile…heck…you’re the one that stands to get the money 🙂

The possibility of loosing your good faith deposit when buying a home is tied up to several financing contingencies. But none of them are as important as the letter of commitment contingency (LOC). And the date when you are to provide this LOC to the seller is determined during contract negotiations.

This date should be as important as your wedding anniversary (or divorced date) or your child’s birth. YES…it’s that important considering deposits range in the thousands of dollars.

The obvious reason is because you forgot the date or didn’t even know you had to provide this letter.

WRONG! There is only ONE way to loose your deposit. And the answer is: your real estate agent and mortgage broker f##ked up. Pardon my language, but am very “passionate” about this type of negligence.

Simply put. During contract negotiations…it is when this LOC date is established. Who writes the contract? Your real estate agent. Once you have an executed contract, it gets delivered to your lender to start financing process. Who’s in between you and your lender? The mortgage broker.

So what’s the moral of the story here? Always inquire about the safety of your deposit. And keep asking verbally and in writing until the deal closes. During the purchase process, there are too many balls you have to juggle to be on top of everything. And you should not have to.

When To Dump Your Lender

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When To Dump Your Lender? Or why would you?

If you are buying a home through financing, the process of asking and getting documents between each other (you and the lender) must be like syrup and pancakes: amazing! (noticed am a fan of pancakes with syrup?). SO…what does that mean?

Simple things like getting the application out of the way within 48 hours from the moment you enter contract with a seller. And ordering the appraisal within 24 hours after completion of application. And these are just a few examples.

If your lender drags their feet on the above, DUMP THEM. If within the first 72 hours, your lender has not pro-actively gone after you for the application and fee in order to get the appraisal going…DUMP THEM. It’s that simple.

Why? The hurdles involved in financing a deal can be complicated not just because of what the lender may demand from you the buyer, but what they may ask from the seller. If the lender is not on “the ball” from the get go…95% for sure that you will not meet the deadline to provide seller loan commitment (or LOC) and or not close on time.

And that is no light issue as your good faith deposit may be at stake.

The average financing transaction takes about 30 to 45 to close. And trust me…you will need every single day at your disposal. And the truth of the matter is that 30 days is just about the right amount of time needed to close a deal so as long as your loan representative is not only competent, but is also able to push the right buttons on the lender’s back end to make the deal run smoothly.

What about forty-five days to close? I would dare to say that 45 days is way too long to close a deal…but it’s not outside reasonableness.

As a matter of fact, within the first 15 to 20 days, you should know if you will be closing on day 30 or 45…whichever you and the seller agreed. UNLESS…there are title issues…but that is a seller problem…not a buyer’s problem.

Short Sales Suck? Not So.

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Short selling a property in today’s market is a whole different ball game than what it used to be a year go or so. For the better. A combination of a dried-up-inventory-market and quicker negotiation turn-around is making short sales (aka: underwater homes) that much more attractive.

Back in the day it was normal to work with a buyer’s offer without collecting earnest money upon execution of contract. The bad part about this old way to handling a short sale was that 6 months down the road, once a short sale was approved, most buyers would go MIA (missing in action). This created a mess in terms of having to re-approve the short sale with a new buyer’s name often delaying the process another two or three months.

Now that inventory is dried up and short sale departments are on the ball about getting short sales approved, they are a commodity. Considering all the bidding wars and multiple offer situations that exist in well priced properties, it can be somewhat emotionally complicated to buy an REO making short sales a good option to go after assuming a buyer does not need a home within the next 6 months to a year. Because of this, demanding (as part of the negotiation process) buyer-earnest money upon execution of a contract is a must…and buyers will wait.

If a buyer does not want to put money up front, move on to the next. And the next. And the next. Until a buyer is found that will stick with you until the short sale is approved. It’s a seller’s market out there, even if your upside down.