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Are you required to put down a down payment when placing a bid on a short sale property?

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July 07 2012 - Rose City Park
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Actually on a short sale, I've never had a bank turn down a promissory note. It is the right move. Now, if you are offering on a foreclosure, then yes, you need to provide a real check and likely a cashiers check. However, you would be ill advised to submit anything other than a promissory note with a short sale offer.
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August 14 2012
Many lenders will not accept promissory notes for earnest money, so you can save a potential headache by providing an earnest money check.  Remember the standard Oregon Short Sale Addendum specifies that your earnest money check will not be deposited until after the lender has accepted the offer. 
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August 14 2012
If you are talking about "earnest money" you don't have to put it down right away. You can submit a promissory note with the offer and you want have to deposit any money into title until the bank accepts the offer!
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August 14 2012
Just like with any other contract, the short sale agreement is between the buyer and the seller (current owner, not their bank).  In the case of a short sale, the contract is contingent upon the approval of the seller's lien holder.  Other contingencies can be on financing or inspection (to show that it's a contingency like any other).

With any contract (depending on which state you're in), earnest money is negotiable between the buyer and seller and is held until closing by the party who is most likely to hold earnest money in your state.  Depending upon the terms of the contract, if the terms of the short sale are not approved by the lender within a specific amount of time, the earnest money can be returned to the buyer.
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July 08 2012
Yes. In a short sale, there owner, not the lender, still owns the home, and the purchase protocols and mortgage financing is the same as any purchase. You line up your financing and write the offer with an earnest money check attached. Use the proper paperwork, and if the deal falls through, you'll get your earnest money back.
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July 08 2012

If referring to earnest money either in the form of check or promissory note, neither is redeemed until the lien holder approves the sale. Let's say you write an offer and the seller accepts it today, you deposit nothing until the bank proves the sale as all time lines in our earnest money agreement are subject to bank approval, this applies to the inspection period as well. When and if the bank approves the sale your earnest money will be redeemed with the escrow company and will be applied to your down payment/ final settlement charges, (This is supposing the transaction is in Oregon, I am not familiar with other states)

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July 08 2012
I'm not clear what state Ms. Polack is in, but in Oregon the buyer's deposit check is held by the buyer's agent until escrow is opened, then it is delivered to the escrow agent (title company in Oregon) which deposits it and holds the funds in escrow until closing, when they typically become part of the down payment. 
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July 07 2012
Maybe you are referring to the escrow deposit, not necessarily to the down payment.  Down payments are paid the day of closing.  Escrow deposit is held in escrow by the listing agency once the offer has been accepted by seller and lender.
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July 07 2012
In some states there has been addendums specifically for short sales that state the buyer will provide their earnest money payment once the bank has given their approval to the sale. This also holds true for the inspection period not kicking in until bank approval.

If Oregon doesn't have a pre-filled form to address this issue, your agent can write up an addendum to cover such a situation.

Personally I wouldn't advise a client to write the earnest money check until the bank has given approval because (in my state) the earnest money check has to be deposited into an escrow account and the check can't be held by either agent. However this may be different under Oregon law.
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July 07 2012
Let's be sure about terminology.  There is a difference between your "down payment" and your "deposit". 

A deposit is to guarantee to the seller that the buyer is serious, because under certain conditions the buyer may lose that deposit if they do not proceed with the sale.  It typically becomes part of the down payment when the transaction closes.

The down payment is a guarantee to the lender that the buyer has sufficient equity that they are unlikely to walk away frivolously.   Also, the larger the down payment, the lower the mortgage rate because the more the buyer has invested, the more confidence the lender has that the buyer will not walk away frivolously. 

A more thorough explanation is at my blog post at http://bit.ly/Ly0hGz
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July 07 2012
May vary from state to state--but in California, the worst case scenario is to write a deposit check that is held by your Realtor and never cashed un less the deal goes through.
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July 07 2012
 
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Are you required to put down a down payment when placing a bid on a short sale property?
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