Ernest Money Anyone?
October 3, 2010 8:42 PM Subscribe
Should we be concerned about a realtor who didn't tell us about ernest money?
The first week we listed our home we got an offer for the full price. Inspections were made and everything looked perfect for a firm closing date. The day before closing our realtor told us we had to reschedule because of a holdup by the buyer's credit union. Now the second date has been pushed back because RD-USDA has temporarily stopped issuing conditional commitments until further notice. Our realtor assures us that since President Obama signed the relevant bill last week this is only a delay. When we asked him to secure a deposit from our buyers (we'd never heard about ernest money until a friend mentioned it today) he came up with $500 himself instead. Is all of this kosher or should we be concerned? The home price is below a hundred-thousand and our realtor is with a well-established firm.
The first week we listed our home we got an offer for the full price. Inspections were made and everything looked perfect for a firm closing date. The day before closing our realtor told us we had to reschedule because of a holdup by the buyer's credit union. Now the second date has been pushed back because RD-USDA has temporarily stopped issuing conditional commitments until further notice. Our realtor assures us that since President Obama signed the relevant bill last week this is only a delay. When we asked him to secure a deposit from our buyers (we'd never heard about ernest money until a friend mentioned it today) he came up with $500 himself instead. Is all of this kosher or should we be concerned? The home price is below a hundred-thousand and our realtor is with a well-established firm.
Best answer: Did your Realtor tell yu that he/she supplied the earnest money? If so that really makes no sense as that money is suppose to come from the buyers and indicate a level of commitment and collateral for the deal. In many cases your contract will outline how that money may be fore-fitted to you (the sellers) if the buyers fail to meet certain benchmarks.
Its very strange that your Realtor would offer that up themselves unless they may be representing both sides of the transaction and want to do everything they can to make the deal go through.
Call in and ask to speak with the Broker of your Agent (their boss basically) and ask to get clarification on this situation.
posted by crewshell at 9:43 PM on October 3, 2010
Its very strange that your Realtor would offer that up themselves unless they may be representing both sides of the transaction and want to do everything they can to make the deal go through.
Call in and ask to speak with the Broker of your Agent (their boss basically) and ask to get clarification on this situation.
posted by crewshell at 9:43 PM on October 3, 2010
Best answer: And if your real estate agent is representing both sides of the transaction, it's very much in your interest to get someone else to represent only you. It's legal in some states for an agent to represent both sides, but really not a great idea, because it's an inherent conflict of interest. It's a little like having your lawyer also represent the guy you're suing.
posted by zachlipton at 10:22 PM on October 3, 2010
posted by zachlipton at 10:22 PM on October 3, 2010
Talk to your real-estate lawyer and your banker.
posted by sebastienbailard at 10:37 PM on October 3, 2010
posted by sebastienbailard at 10:37 PM on October 3, 2010
Best answer: Earnest money is given to you frim the buyer at the time a contract is written up to indicate that the buyer is "earnest" with regard to their intention to buy your property. It is forfeited to you if the buyer than decides to back out of the contract outside of any stipulations (such as problems problems found during the the inspection). Why your realtor gave you money instead is something I would find suspicious and worth further investigation.
posted by violetk at 5:37 AM on October 4, 2010
posted by violetk at 5:37 AM on October 4, 2010
Best answer: Yes, that's weird. Call someone in charge at their company and ask them what's up.
And if your real estate agent is representing both sides of the transaction, it's very much in your interest to get someone else to represent only you. It's legal in some states for an agent to represent both sides, but really not a great idea, because it's an inherent conflict of interest. It's a little like having your lawyer also represent the guy you're suing.
No, it's not. A Realtor is a salesperson. They don't represent anyone's interests, they try to move merchandise.
posted by gjc at 6:25 AM on October 4, 2010 [1 favorite]
And if your real estate agent is representing both sides of the transaction, it's very much in your interest to get someone else to represent only you. It's legal in some states for an agent to represent both sides, but really not a great idea, because it's an inherent conflict of interest. It's a little like having your lawyer also represent the guy you're suing.
No, it's not. A Realtor is a salesperson. They don't represent anyone's interests, they try to move merchandise.
posted by gjc at 6:25 AM on October 4, 2010 [1 favorite]
Best answer: I disagree. Officially, a realtor works for the seller (even if representing the buyer) because the commission is paid by the seller as a percentage of the purchase price when the deal closes.
However, a realtor that represents both sides of a transaction does have a conflict of interest; specifically, getting the best deal for the seller is inherently in conflict with getting the best deal for the buyer.
If there are two realtors, the commissions from both are paid by the seller, but if you, as the buyer, have a realtor that is not otherwise tied to the seller, that realtor only makes money when you have found an adequate deal that most benefits you. Yes, he can maximize his commission by urging you to pay more, but if you get the sense that a realtor is behaving this way, it's best to walk away from that realtor.
Instead, look for the realtor that is more concerned with making the buyer happy than with maximizing the dollar amount of the sale. It is not black and white to determine this, but if a realtor repeatedly tries to show you houses above your desired price range, that can be a clue.
As for the original question, it is very weird that a realtor would pay earnest money on behalf of a client. It smacks of desperation and bending rules and points to possibly shady ethics.
posted by Doohickie at 7:08 AM on October 4, 2010
However, a realtor that represents both sides of a transaction does have a conflict of interest; specifically, getting the best deal for the seller is inherently in conflict with getting the best deal for the buyer.
If there are two realtors, the commissions from both are paid by the seller, but if you, as the buyer, have a realtor that is not otherwise tied to the seller, that realtor only makes money when you have found an adequate deal that most benefits you. Yes, he can maximize his commission by urging you to pay more, but if you get the sense that a realtor is behaving this way, it's best to walk away from that realtor.
Instead, look for the realtor that is more concerned with making the buyer happy than with maximizing the dollar amount of the sale. It is not black and white to determine this, but if a realtor repeatedly tries to show you houses above your desired price range, that can be a clue.
As for the original question, it is very weird that a realtor would pay earnest money on behalf of a client. It smacks of desperation and bending rules and points to possibly shady ethics.
posted by Doohickie at 7:08 AM on October 4, 2010
Best answer: An agent may represent one party or the other, but their main concern is closing the deal and making their x%.
And in many states, they can not legally represent both parties: in Rhode Island they have you sign a form explaining their relationship. (And yes, this is actually a new thing here. One more petty bit of double-dealing that's off the table, thank goodness.)
posted by wenestvedt at 7:32 AM on October 4, 2010
And in many states, they can not legally represent both parties: in Rhode Island they have you sign a form explaining their relationship. (And yes, this is actually a new thing here. One more petty bit of double-dealing that's off the table, thank goodness.)
posted by wenestvedt at 7:32 AM on October 4, 2010
Response by poster: This is all very helpful but what I'm really after is how common is it for a "seller's agent" not to discuss ernest money in any way?
posted by Mertonian at 8:20 AM on October 4, 2010
posted by Mertonian at 8:20 AM on October 4, 2010
Best answer: Did you not do a contract signing after accepting their offer? Traditionally that's where the earnest money bit comes up. It's not a casual thing: the contract spells out under what conditions the deposit will be forfeited to the seller should the closing fall through and under what conditions it will be returned to the buyer. (For example, should a bank not approve the loan or should something serious come up during the inspections, the buyer would generally have the opportunity to receive his/her deposit back in full. Conditions can also be written up about time-tables or, really, whatever you can think of and come to agreement on). In general, this deposit is kept in the seller's attorney's escrow account until it is released at closing.
In any case, what you're describing -- should it cause the sale to fall through -- sounds precisely like the sort of situation that would end up with the deposit being returned to the purchaser. What the deposit is really for is to deter the purchaser from simply changing their mind and walking away.
posted by nobody at 9:40 AM on October 4, 2010
In any case, what you're describing -- should it cause the sale to fall through -- sounds precisely like the sort of situation that would end up with the deposit being returned to the purchaser. What the deposit is really for is to deter the purchaser from simply changing their mind and walking away.
posted by nobody at 9:40 AM on October 4, 2010
Response by poster: Yes to the contract but there was no mention of a deposit. I'm emailing our realtor now. Thanks so much!
posted by Mertonian at 1:33 PM on October 4, 2010
posted by Mertonian at 1:33 PM on October 4, 2010
Response by poster: We just spoke with our realtor and he informed us that the ernest money is in escrow but that we'll never have a claim to it even if the sale falls through because the buyers are doing all they can to make it happen. We're okay with this but please let us know if you have a different understanding.
posted by Mertonian at 1:39 PM on October 4, 2010
posted by Mertonian at 1:39 PM on October 4, 2010
he is right in that you wouldn't be entitled to the earnest money because it's not as if the buyer is trying to get out of the contract. they do want the house and they are doing what they can to complete the transaction. on the other hand, if the case was that they are trying to get out of the deal, then yes, the earnest money would be yours.
(and it's earnest.)
posted by violetk at 9:23 AM on October 5, 2010
(and it's earnest.)
posted by violetk at 9:23 AM on October 5, 2010
This thread is closed to new comments.
I don't know what Obama having signed a bill recently has to do with anything.
posted by dfriedman at 8:53 PM on October 3, 2010