I’m sick of it.

I’ve just gotten yet another email from a real estate “guru” who never sends me anything but “invitations” to webinars and teleconferences.

Look, I’m all for webinars and teleconferences and even offer them myself sometimes. But geez! This guy, who is here in Atlanta, seems absolutely opposed to giving away any valuable content without delivering it through a teleconference and attaching a price tag to it.

So I made a radical decision: I looked through my e-mail to find the name of every real estate guru who has e-mailed me this week. And if I’ve not gotten at least one useful piece of information from them in that time period, I removed myself from their email list.

Enough is enough. It’s reasonable for these people to sell things to make money, but it’s nothing but purely disrespectful to you if that’s all they ever do. So here are the steps I recommend:

• Take a minute to go through your e-mail inbox for the past couple of weeks - it’s helpful to “sort” your inbox by the sender’s name
• For every email from a real estate “guru” - do a quick scan of the content they send you. Is any of it worthwhile or potentially worthwhile? If not, go to the end of any email from the guru and click the “unsubscribe” link.
• If the emails you receive from a particular guru are helpful or informative, send them a note or make a post on their blog thanking them for it - they’ll really appreciate it

Ok, my rant is over. Back to business

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I saw a really interesting summary of the current state of the economy today at the Tech Ronin blog. While I disagree with several of the points made in that post, I think the analysis is fundamentally reasonable and well informed.

It’s astounding to think that people are able to see nothing but bad news when looking at the recent housing data.

For example, over at the Big Picture, the focus seems to be on the news about the decline of nearly 16% in housing values over the past year.

That’s a legitimate concern, but let’s remember a few things:

• 7 of the 20 cities in Case Shiller index saw month-over-month increases
• A huge portion of the drop in prices can be attributed to Las Vegas, Phoenix and Miami
• The April-to-May drop was only 0.9%, slower than before
• Many cities outside of the 20 cities tracked by Case Shiller have experienced clear bottoms and are now appreciating (such as here in Atlanta, Georgia)

Yes, there are some serious challenges remaining the real estate market. But those challenges are increasingly localized, with increasing numbers of bright spots all over the country.

This is part of the Real Estate Contract Fundamentals Series. I’m not giving you legal advice - you’ve got to get that for yourself from a qualified attorney. To get a free copy of the Real Estate Purchase and Sale Agreement upon which this series is based, visit the Monster Purchase And Sale Agreement Download Page.

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If you’ve ever made an offer to purchase real estate, you’ve probably been asked to make an earnest money deposit.

Officially, earnest money is a payment that’s designed to show “good faith”. There’s no legal standard for it. Usually the buyer pays earnest money, but sometimes the seller will do so. Sometimes it’s a small amount - maybe only $10 - and sometimes it’s thousands of dollars.

Generally, it works like this: The buyer puts up a particular amount of money upon making an offer to purchase a property. That money is held by one of the real estate brokers or attorneys/title companies involved in the transaction. When the transaction closes successfully, the money is given to the seller. If the transaction doesn’t close due to default of the seller, the buyer’s money is returned. If the buyer defaults and thus doesn’t close, the seller keeps the earnest money.

Earnest money is not a requirement to have a valid real estate contract. Many real estate brokers will tell you otherwise, but that’s simply a commonly held misconception. However, earnest money is so widely known and expected that it may not be worth your effort to dissuade a seller from requiring earnest money from you.

The real questions about earnest money are:

• How much should you pay?
• Who holds the earnest money?
• What is the criteria for releasing the money?
• What happens to the earnest money in the event that either buyer or seller breaches the contract?

How much earnest money should you pay? I think the answer should be as close to ZERO as possible. Generally speaking, the payment of earnest money does nothing positive for the buyer and should thus be minimized to as little as $5 or $10 if the seller can be convinced of it. The biggest exception to this rule should be in the event that there are multiple parties competing to acquire the property. In that case, a significant earnest money deposit can sometimes be the factor making a seller decide in your favor.

Who holds the earnest money? If the earnest money in question is a small amount, such as under $100, I don’t think it really matters who holds it. But if it’s a larger amount, then you should be sure to either hold the earnest money yourself, or have it held by your broker, attorney or title company. There’s no good reason to relinquish control of your money to a party who isn’t working on your behalf unless it’s absolutely necessary.

What is the criteria for releasing the earnest money? For example: If the buyer inspects the property and finds it unsatisfactory, is the earnest money returned? Or if the agreement is terminated by mutual consent, who receives the money?

What happens if the contract is breached?  Of course, the smaller the amount of earnest money you pay, the less this really matters. But a word of caution here:

Many gurus recommend that you pay only $5 or $10 in earnest money and write in a provision that allows you to terminate your contract with the seller and you’ll only lose your earnest money and nothing else.

I don’t disagree with the fundamental idea behind this, but be aware of this: There probably isn’t a judge anywhere in the USA who will allow you to get out of a real estate transaction with damages of only $5 if your decision to terminate the transaction doesn’t have a legitimate basis. So don’t plan to use a real estate contract with a tiny earnest money deposit as a proxy purchase option, because that strategy just won’t pass muster if it goes to court.

I’d love to hear about your experiences and strategies with earnest money! Tell us all about it in the comments area below, and thanks for visiting FreeRealEstateTraining.com!

This is part of the Real Estate Contract Fundamentals Series. I’m not giving you legal advice - you’ve got to get that for yourself from a qualified attorney. To get a free copy of the Real Estate Purchase and Sale Agreement upon which this series is based, visit the Monster Purchase And Sale Agreement Download Page.

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In our last installment of the Purchase And Sale Agreements series, I gave you some pointers on determining the purchase price for the property on which you’re making an offer.

But deciding HOW MUCH you’ll pay is only half of the battle. You’ve also got to determine HOW and WHEN you’ll pay that amount.

Usually, the purchase of an investment property is broken down into several different financial transactions. For example:

• Earnest Money is frequently paid by the buyer to the seller (or seller’s agent/attorney) immediately or soon after the offer is made
• The buyer might bring cash to the closing for part or all of the purchase
• A new loan may be necessary to finance the purchase price
• The buyer and seller may enter into a creative arrangement, like seller financing, subject-to, etc

So your next step is to determine which of these (or other) methods you’ll use for satisfying the purchase price you’ve decided to offer.

In tomorrow’s installment, we’ll talk about Earnest Money. This is one of the most commonly misunderstood parts of real estate contracts, and I’m looking forward to setting the record straight on this issue.

But for now, please do me a favor - tell us what methods you’ve used or studied for satisfying the purchase price in your contracts. Do you favor owner financing? Why? Do you make a lot of cash offers - or maybe do you use some other strategy entirely? Sound off below!

Thanks again for visiting FreeRealEstateTraining.com!