Is $500 to low for a deposit?

There is fact and fiction involved in your agents statement.

If you are dealing with REO property most of the banks will require so much as earnest money. It could be $1000, or a percentage of the purchase price which could be 3% and some go as far to state whichever is greater. And in some instances there are several cash buyers that are competing for that deal.

But the fiction lies in not all of these bank owned properties are chased in this manner. It sounds as if the agent does not want to work for the pay. If there are more than 1 offer that needs to be generated, than the agent is not wanting to do that. The agent wants an easy deal, where the seller is readily going to accept. My advice would be find another agent that wants to work with you - 500 dollars in many cases is sufficent.

I'm not in CA, and I'm not a Realtor, but this is what I know...

1) Agents are paid by commission of sale price. This lady makes it sound like she's making a percentage off your deposit also. Suspicious, at best.

2) I've NEVER heard of anyone getting beat out on a deal over deposit money. It's always been about a buyer who has made a better offer, either on terms, price, or both.

3) Any savvy investor who shells out $500 or more on every single offer they make is either spending someone else's money, printing their own money, or on the fast track to bankruptcy.

4) 3% or higher for a deposit might be the norm if you're looking at $400k properties or higher, but just like listing price, they're going to ask for the moon and hope some buyer is a freakin' astronaut.

5) Why would a seller/bank pull their property off the market when they haven't even accepted your offer yet? Either I'm misunderstanding her plain English, or it sounds like an excuse (aka "Snow job").

6) Judging just by the language of her letter, she sounds lazy, greedy, dishonest, and rude. She seems more interested in her opinion of herself than your business. She would have been an obstacle to your success.

7) She's getting out of your way, and that's the silver lining I see here. For every 25 realtors you go through, you may find 1 worth your time. Clearly, she wasn't "the one."

Here's my advice, for what it's worth...
Use this experience to improve your screening of future Realtors.
CA is full of agents who work for investors, focus on those who do.
Pin this "letter" of hers up on your dartboard, archery target, etc.
When you cash your first huge check, send her a voided copy and write on it, "Thanks for your support! Ricky... "
I'm almost willing to bet $500 by the time she gets it, she'll be in a different line of work. Keep pushing, and take care...

Morals of your story:
"When someone shows you who they really are, believe them." - Madea.
"Never let a 'Realtor' push you around. NEVER!" - Dave Boyden.

It appears you already received some advice from other members. Besides finding another real estate agent you could offer a higher earnest moeny deposit upon "acceptance of contract and satisfaction of any contingences" you note in the purchase agreement. Thus, this will still give you a little time to complete your due diligence or implement your exit strategy. I hope this helps. Good luck with real estate investing. Believe and Achieve! - Joe

In one word -- NO.

My agent has a photo copy of my check for $500 for her to make multiple offers with. I also live in California.

That's a great point, agents usually only deposit earnest money when a contract has been accepted. Also if a lender wants more earnest money it is up to them to negotiate for it - Not your agent! It is a shame that this agent feels this way - don't let this stop you. You definately need to look for an agent right away one that wants to help you. There are several agents out there that would love to assist you, especially in todays given market conditions.

I just did a deal recently (one of my absolute first deals) in which we signed a contract with the seller and gave him a check for TEN DOLLARS as earnest money!
We actually gave him a TEN DOLLAR check for earnest money!
AND guess what? HE WAS HAPPY!
He was so happy that he actually said, "Wow! I got a CHECK! All I've BEEN getting lately are BILLS!"
So a CHECK made out to him made his day and he sold his house!
So this owner was HAPPY with ten dollars earnest money.

And this transaction took place in Berkeley, California. We bought his house for $250,000.

It's nice that she used an email to break off communication with you instead of in person, like a real RE agent would do. These "car salespersons" that pass themselves off as RE agents aren't worth dealing with. My last agent didn't even bother to call me back even though she make a commission on a deal, and another decided to schedule showings after we made plans to make 5 offers. Why didn't she tell you in person that a $1000 EM would be more acceptable? As I look at the RE contract 5.0, I see nothing about their "rule". I do see, "Initial earnest money of $_____ by check, cash, OR note due on _____, to be increased to a total of $_______ by _______, 20__.
You'll find someone that is patient and want to make money. They think this is the good ol'days where agents had their greedy little mits in the overblown prices using their scientific "property market analysis". As a former RE appraiser, I find their system erratic at best.

What she said could actually be correct; it depends on the owner, bank and price of the house

Here in NYC, nothing less than $5k is accetable for a deposit as anything less will be looked at as you're wasting time and if you go cheap on the deposit, it assumes you really don't have funding or downpayment money.

She wasn't wrong in any sense, but again it is all subjective

You have to understand that there is always a chance you can't find a buyer or financing, and realtors get paid on commissions, which means you should always have a backup.

When I have clients make offers, I show the same property myself. Why??? Because no house is yours until I put those keys in your hands and while i'd like to believe that you'll find a buyer or financing, you at the same time have to cover your tracks just in case.

Its not personal. Its business

I live in texas and have made several offers on properties and the agent had asked me how much earnest money would I be interested in putting down on the property and I mentioned leave it open for the time being and will put the amount in at a later time and there was no problem in me doing it this way. Recently I went and looked at a foreclosure with an asking price of 45,000 and a value of 200,000 and I asked the agent about putting in an offer on the property and she said the selling bank wants an em deposit of 1000 when an offer is made so I mentioned it to my tenant buyer he needs to make sure he wants the property so mentioned to him to check out what insurance and such would cost him as this is a log home and the insurance will no doubt be more than a normal house so he is checking in on this and other things too before making a decision. This is one of those kind of deals that can be tricky since it is a log home and a couple logs need to be replaced and this needs to be done before they get worse and not just any body can do this. So as for the em deposit one has to try what they can and see what works is my opinion and as for the agent do not let that bother you look for a new one there are plenty out there.

Shawn

I'm a real estate agent from CA but non-active at the moment. I just want to say $500 is enough as long as the bank or seller accepts it. You can deposit as little as $10 as long as everyone is in agreement. Some agents don't seem to accept that investors don't put a lot of money down. I see so many agents shooting themselves in the foot because they don't want to ruin their reps, but if they get some guts they'll find out that they can make a lot of money provided they team up with the right investor. Most agents are scared to work outside the box. Truthfully we are not taught in real estate school how to handle investors that's something we learn once we continue our education. Most agents that carry the designation (CCIM- Certified Commercial Investment Member) are equipped to handle deals with investors. You may also want to check out agents that are associated with (The Society of Exchange Counselors). Agents with these designations usually demonstrate a level of practical expertise in the investment field. I'm not sure if the CCIM agent handle residential but I know for sure they handle commercial. Check them out to see what you find. By all means lose that agent she will never help you realize your dreams. Hope this helps. Happy Investing.

Tricia
Never give up always strive to get up! A family that prays together stays together!

from all the resarch $ 0 - 3% of the sellers price is sufficent for earnest money a downpayment etc; remember downpayment from your pocket never has to be had ever! their are plenty of ways to place a house on contract without money from anyone : short sales, auctions, all require re-assignment all you have to do is be a assigner and whola you got it made; you just need to put a lot more effort in landing the deals is all.

it works.

you guys rock

$1-$20k, the amount put down is not determined by the realtor, nor the broker, nor the buyer, but the owner of the property.

I've done deals where i've put down as low as $150 on a property and as much as $10k down, but those were extreme cases and the biggest difference in them were the price of the homes involved.

Yes agents get paid by commission, and for the most part most of us are guarded against offering lowball offers because most times those offers are rejected. I have no problem thinking outside the box, but only if there is a chance of things working out; I personally don't believe in just doing anything 'just because' because I do well even if I did the standard way, i'm good.

I just think the constant realtor bashing because they chose not to do what you want is somewhat unwarranted thinking that for some reason they're trying to dash your dreams or hold you back somehow; what it comes down to is they are protecting themselves and maybe,......just maybe they know what they are talking about.

I myself am an investor so I can see both sides of the coin

many bad realtors here in CA, but if you find ONE good one, they'll be your best friend. Many people have given you good advice. Giving more em after inspection and contingencies is perfectly fine.

At least she let you know. One of mine, all gung ho and ready to go, just decided to not return calls or emails after I found properties to put lower offers on; all were over 180 days on the market and fixer uppers!!! (this was 2 months ago; all are still on the market and NOT moving). Its one thing to know of a seller who is sensitive about their property and would be offended by a low offer (if a realtor knows this, they should explain it to you) and another to dismiss an offer because of the amount of security deposit or offer amount and generalize reasons why not to submit the offer.

A good realtor would have suggested to add a phrase as Indiana Joe suggested. It shows she wasn't willing to think outside the box or approach you with alternative. It seems she was looking for a way out. Chalk it up as another learning experience.

Hello DG Family, I just wanted to add another note, if you seek out a buyers agent you may not run into the problem of your agent running out on you because he/she if working for you exclusively. Before you hire an agent ask if he/she represents the buyer or the seller, or if they represent both. The difference between the two agents are a buyers agent represents the buyer and will make sure the buyer gets there wishes fulfilled. As with the seller's agent they are working to make sure the seller gets his/her wishes. You may want to call the office of your choice and speak to the receptionist to find out which agent represents buyers and do they work with investors. The receptionist is your first and best contact person on finding out who handles what in there office. Well family hope this shines some light on the subject. Take care all and happy investing.

Tricia
Never give up always strive to get up! A family that prays together stays together!

In Connecticut - $1000 or greater is the norm - the agents frown when you offer below this as earnest money - I thought there was a law that all offers must be presented to the seller REGARDLESS of the amount of EM..

I agree, show 50 dollars but state upon acceptance $xxx will be made available.

Some agents are soooo lazy its pitiful!