Earnest money in MD - where do buyers come up with 5-10% before selling their previous home?

[Anonymous]

Anonymous wrote:Savings. We came up with 20%. Never sold first home- kept as investment property.

20% in EMD?? I doubt it (unless you were extremely ill advised). You do realize op is asking about EMD and not down payment, right? 20% down payment, yes. 20% EMD is just plain silly.

[Anonymous]

Anonymous wrote:We did $18,000 on a $550,000 house because we couldn't sell our previous home in another city (rented it out but we had no cash out of it) and needed all of our cash to redo the home (needed $100,000 to even start renovation) We bought a foreclosure and bank paid closing costs.

We refinanced in a year and the house appraised high enough to avoid having FHA loan. We did lose the $10,000 that the FHA costs at closing but we had no choice.

Not sure if it applies to your situation with the FHA loan but I vaguely remember getting back a portion of the prepaid mortgage insurance when I sold my first house financed with a FHA loan. I remember having to follow-up and it taking atleast a month or two to get the money.

Back to OP question, I purchased 8 years ago so a lot has changed since then. I think we did put 5-10K earnest on a 450K home. In the contract we had to put down how we planned to finance our purchase and I think we were planning a decent downpayment and that was saved apart from the money tied to the sale of the home. In fact, our pre-approval amount assumed we were carrying the mortgage on the house. We also were asked to provide a financial disclosure form as part of our offer which knocked me over because my first purchase in VA didn't ask for that. I did not put my SS# or bank account numbers on the form, and reluctantly provided the other info ...we were the only offer for the home but supposedly it is standard to ask for this in Montgomery County.

As for earnest versus downpayment etc. Having a house sale contingency is going to weaken the offer if there are any other offers on the table that don't require a house sale for the financing. Back when I purchased it was a seller's market so some people were waiving home inspections and were not making offers contingent on selling a home. I think everyone has a financing clause unless it is a cash deal so if the house doesn't appraise or your loan falls thru, you can back out and get your earnest money back. I remember when I picked among offers I looked for offer price and and evaluated risks. I don't think I really looked at earnest money in deciding among offers other than the fact it existed and was enough to show the person wouldn't walk away randomly. I do remember looking at downpayment amount and if there was a home sale contingency. I there were two offers for the same amount, no home sale clause, I would pick the person with a 30% downpayment over the person planning a 5% downpayment.

[Anonymous]

We recently put 7% EMD on a $1m home in DC. Settled on this amount after asking agent what average was on last 10 homes he sold. With contingencies in place we didn't feel this was high risk.