Earnest Money Deposits: How CRE Investors Can Use them to their Advantage

For CRE buyers, earnest money deposits seem to be nothing but an extra requirement in an already complex purchase process. 

While you are thinking about how to secure the financing needed to purchase a property, you also have to think about getting EMDs sorted. Without it, the seller will not even allow you to inspect the property and talk less about negotiating for it.  

In what sense then can one talk about EMDs being an advantage? There are two answers: timely payment of EMDs and payment of higher EMDs. 

How timely EMD payments give you an advantage 

In competitive markets where demand exceeds supply, sellers are always looking for ways to narrow the playing field. Buyers are also exploring opportunities to gain an advantage over competitors. 

Within such competitive markets, the ability to provide EMDs quicker than other potential buyers is an advantage. 

EMDs became popular as a way for sellers to differentiate serious potential buyers from unserious ones, those with a buying intent from those who are just doing market research. 

Thus, quick payment demonstrates seriousness, commitment, and significant buying interest. These types of potential buyers are more attractive to sellers. 

Furthermore, quick EMD payment can provide negotiation leverage as sellers may be more willing to provide favorable terms for serious-minded buyers. This is especially true when sellers are in a haste to complete the deal.  

Gaining an advantage by offering more

Though EMDs are now popular, they are not a legal requirement. Consequently, no fixed rate applies everywhere. While you can get by with 1%-3% of the property’s price in Georgia, Kansas, and Connecticut, sellers in Alaska, New York, and Michigan may ask for up to 10%.

For competitive deals and in competitive markets, potential buyers have embraced proposing a higher EMD rate as a way to gain an advantage. If the seller is requesting 10%, a liquid potential buyer can offer 15%. 

In this case, it is a battle of the most liquid investor. 

Like timely payment, offering higher EMD rates is a sign of seriousness that can make the seller consider you more valuable and even offer more favorable terms.  

Furthermore, sellers can take it as evidence that you are unlikely to back out and are likely to be in a good position to secure the funding for the deal. 

How to secure a competitive edge

Since no CRE seller is always liquid, being in a position to pay higher EMDs in a timely fashion can be difficult. The most realistic solution is to have an EMD financing source that can help you secure a competitive edge. 

Duckfund seeks to provide such an edge for CRE investors. Regarding timeliness, you can complete an application in two minutes and get the funds transferred to an escrow account within 48 hours of a successful application. 

Also, Duckfund supports CRE buyers who are seeking to win competitive deals by providing financing for higher EMD rates. 

What is more? Duckfund supports multiple (simultaneous) deals, providing EMD financing for as many properties as you want.  Yet, they require no collateral or credit report. 

If you are also trying to finance a commercial property, Duckfund offers equity financing (up to $100 million) and debt financing (up to $500 million) for pre-development, development, re-development, and value-added projects in the multifamily, build-to-rent, industrial, and hospitality sectors. 

Don’t let earnest money deposits stop you. With Duckfund, you can turn what seems to be an extra burden into an extra advantage. 

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