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Real Estate Fight Club

18
Mar 2020

Episode 25: Do You Need Earnest Money?

March 18, 2020

In Episode 25 of the Toe-2-Toe Podcast, hosts Jenn Murtland and Monica Weakley duke it out over whether earnest money is a good idea. Hear why Jenn feels passionately that earnest money is stupid, then hear why Monica is in favor of earnest money. This was a hot topic with agents surveyed across the nation. 

Episode Highlights: 

  • Do you need earnest money?
  • Jenn says no. She thinks you don’t need it and that earnest money is stupid because it provides a false sense of security.
  • In Ohio, the contract favors the buyer, and the buyer can get out for any reason.
  • Jenn understands that some people feel that earnest money ensures that the buyer has skin in the game.
  • In Ohio and Kentucky, if the buyer and seller can't agree on where the earnest money should go when a contract is canceled, then it eventually just reverts to the buyer.
  • Monica feels that earnest money can demonstrate the buyer’s seriousness.
  • Monica says that if she has two otherwise equal contracts and one has offered much more earnest money, that tells her something about that client's financial situation and level of interest.
  • Jenn argues that it doesn't mean that the buyer is more serious.
  • Jenn suggests that buyers could offer the entire down payment as earnest money.
  • Jenn has had an earnest money dispute at the end of a deal. 
  • Monica wonders if earnest money helps buyers pause before walking away from a transaction. 
  • Monica reminds us that buyers are emotional. A buyer without earnest money will walk when they run into any kind of issue.
  • Jenn argues that there must be a better way and better protection for the seller.
  • Maybe if earnest money was non-refundable and always defaulted to the seller that would help.
  • Jenn feels that only buyers like the idea of earnest money.
  • Agents across the country had a lot to say about earnest money.
  • In her final statement, Jenn reiterates that we don’t need earnest money.
  • Monica concludes that earnest money can help you have a conversation with the seller about their level of seriousness.

3 Key Points:

  1. Earnest money may provide a false sense of security.
  2. Earnest money may help sellers differentiate between two otherwise similar offers in terms of their seriousness and ability to buy. 
  3. Earnest money can function as “skin the game” that helps buyers stay the course.

Resources Mentioned: