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Do we close escrow after the bank accept my offer for a short sale or vice versa?

The listing agent asks me to deposit a $5000 check to escrow company before the bank accept my offer for a short sale. I know this might be a sensitive question, but does is sound rite?  Is she affraid that I might back out of the deal? I gave her a copy of the check, but she said I still need to give her a real check after the bank send people to do the house inspection, so she can tranfer the title to my name.  I am really confused.
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November 06 2010 - Casa de Santiago
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Answers (6)

The important part of your question is "before the bank accepted my offer". Untill their is an accepted offer and accepted terms, including amout of escrow, you should not be giving up any money. The bank may require proof of financing, or a promissory note to be paid on acceptance of both parties but they can not ask you to give them money for a contract that does not yet exist. Please get a buyers agent, it will be their job to make sure you dont get scammed or mislead. Short sales are hard and confusing and a small error can cost ALOT of money. I can refer you a great agent in your area if you would like, but you should have someone on your side!

Good Luck
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November 10 2010
Kyle,
Earnest deposit is required to bind the accepted offer between you & the home owner.  This deposit is required to be placed in an escrow account.

Hope this helps.
Steve
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November 10 2010
Kyle, the agents who have responded so far have explained the earnest money deposit process pretty well.

Yes, it is common.

The biggest problem I hear from my clients, though, is that they really didn't understand under what circumstances they can get their money back or NOT.

$5,000 is a lot of money to have tied up - you need to make sure you have no questions as to how that money is being used and it sounds like the listing agent is not providing enough explanation.  This is why I always recommend clients have their own agent. You need someone on your side looking out solely for your interests.

Keep asking questions about that $5k until you feel comfortable.
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November 07 2010
It sounds like your agent didn't Explain it very well. Your Earnest Money or Escrow is kind of like a deposit in good faith that you are willing to purchase the property if everything checks out ok. In your contract you will have an alloted time for you to do your due diligence on the property, check insurance cost, get your mortgage in place and do your inspections on the place. YOUR $$ is credited back to you at closing unless you default on the contract and then the seller will keep it. Your check will not be cashed until you have a signed contract by both parties and then it will go into the seller's brokers escrow account and credited back to you at closing. On your inspections, you need to pay the inspector at the time of inspection for their services. Keep in mind a Short Sale will take 60-120 days to close if everything goes smoothly.
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November 07 2010
OK-this does sound confusing. Here it goes anyway. Did you put $5,000 to be the amount for the escrow deposit? Also, did you receive a bank approval letter from the listing agent stating that the bank is going ahead of the short sale? Some listing agents do negotiate escrow funds to be deposited for 60 days refundable so they have time to negotiate the short sale. Short sales take a lot of work. Best to you.
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November 07 2010
Kyle,
I can only tell you how it is done in California.  When your offer is written the agent must retain a check from you or you must agree to wire the funds directly to escrow at acceptance by both parties.  Short Sale is no different.  What is a little different is that we have a buyer sign a short sale addendum that states exactly how long the buyer will be required to stay in the escrow (usually 30-45 days). If the Short Sale lender does not answer back in that time frame then the buyer can request cancellation of the contract and return of their deposit or they can choose to extend the timeframe longer if they still want the home.  Most banks give 30 days to close after they provide the short sale approval.  That is when I have my clients start their home inspections, appraisals etc... You can do these ahead of time, but note: you risk walking away from the money you spend if no approval is recieved.
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November 07 2010
 
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