A Word About Earnest Money Deposits

earnest moneyThe true sincerity of a buyer who has interest in acquiring a rental property routinely lies in the amount of “up-front” (or earnest money deposit) he or she is willing to put up with an offer to purchase the property.

Think about it.

A buyer who is willing to only make an earnest money deposit of say, just $1,000, on an offer to purchase a million dollar apartment complex is not going to appear very sincere to the seller of that complex. In fact, it could result in the buyer’s offer to purchase being rejected totally by the seller altogether; or at the very least, counter-offered.

So how should do you tailor the amount of your earnest money deposit?

There are no set standards, so you’ve got to wing it. But I would suggest putting a large enough amount of cash on the table to show to the seller that you are really interested in acquiring the property; otherwise you can lose the opportunity.

By the same token, however, protect yourself. Negotiate plenty of contingency clauses so you can rightfully demand the return of your earnest money deposit if they are not fulfilled to your satisfaction and approval.


James Kobzeff

James Kobzeff has over thirty years experience as a realtor and investment real estate specialist. He is the developer of ProAPOD real estate investment software and freely shares his real estate investing articles.