I understand your frustration but earnest money doesn't allow them to walk away in any state I have seen. Sacrificing earnest money doesn't allow breaking the contract, in my state it allows the seller to decide whether to keep their earnest money in forfeit or sue them for breach of contract.

Earnest money becomes fairly standard in an area. In my area any home under $1,000,000 uses $1,000 earnest money. A buyer asking more would send up red flags for me, and I would decline or ask for other assurances that really made the contract favor me.

Also, higher earnest money doesn't always mean more for the seller. Lower amounts are easy to walk away from and forfeit. At higher amounts buyers will attempt to request ridiculous repairs or use satisfactory inspection clauses that force the seller into giving up the earnest money. I doubt very seriously that higher earnest money contracts are more successful and suspect that when the earnest money is high enough buyers spend a lot more effort in sabotaging the deal.

In my personal experience I always use the satisfactory inspection clause which can extract me from any deal so long as anything comes up on inspection (which something always comes up). I will always get my $1,000 back. Also in my state the seller has 7 days to sign the Release of Earnest money or I get the earnest money plus 3 x that amount in penalty if the seller kept it without cause. So to me the $800 of inspections are all I ever stand to lose in the deal.

We have termination option periods here where they can terminate for no reason and get earnest money back. Also financing contingency period where they can get it back if they don't qualify. Usually 10 day option/15-20 day financing contingency run concurrently. They only risk earnest money after that point. No sueing. More earnest money shows serious buyer that is less likely to walk away at end of contract. Inspections are done and negotiated in 10 day option period.

Normal earnest money is 1 percent of price of house here.

There is no state in the U.S. that I know of which doesn't allow sellers to sue. I am not sure of the rules in other countries. There are states that allow you to keep earnest money and sue for performance and there are states that require the seller to return earnest money and then sue for performance. Real estate has some very specific buyer protections but walking away without suing is not one I have heard of. There are currently court cases going through right now in Texas and North Carolina that are testing unpaid option periods.

In typical contracts, options must be evidenced with consideration. In other words, buyers have to pay some money that is not earnest money or refundable against the purchase price for the option to walk away. When states started mandating option periods the language clearly indicated that they expected buyers to pay for it. I realize that buyers are not paying for the option, but plaintiffs are arguing that without consideration, option contracts are not valid even when they are in the scope of a larger real estate contract. There is precedent for this, commercial real estate options contracts are not valid without consideration, and that has been tested in court.

While the above is really neither here nor there in your case. I find it hard to believe that any state with an option period would then protect buyers with the forfeit of only earnest money. The protection simply isn't necessary, it is like a law saying people are not allowed to fly no matter how hard they flap their arms. I suspect that you are misunderstanding the law. Let me know your state and I will be happy to look at it for you.

Suing for specific performance or damages is rare so many real estate agents may discount it out of hand. Rarely is it worth the expense for hiring an attorney to really sue, but sometimes a letter noting that you plan to sue is just as powerful.

Getting an offer with a small amount of earnest money or one with a very low offer on price doesn't mean that the buyer's agent hasn't been "helping" the buyer to the very utmost degree.

Clients don't have to do what we want them to do;

we have to do what they want us to do.

OP wrote:

"People that can put 20 percent dn, would walk away from a house in a heartbeat when they only have 500. At risk. Happened twice this week."

Sounds to me as though the buyer's agent WAS helping and protecting their client's best interest.

Why not just counter, asking for a higher deposit?

Are you selling FSBO?

What state/country is the OP in that requires 1%? Every real estate transaction I've done had a $1,000 check attached, and once the sellers signed the contract it was binding on all parties. Yes, there were clauses like inspections etc, but if the buyers just backed out the $1,000 went to the seller.

Even our very first home in 1975 had a $1,000 check attached to the contract. The price for that house was $36,000.

There is no set amount to put down when making an offer. My husband and I have put down as little as $100. on a 79k house. (our first in '82) Did the seller like that, no I'm sure they didn't. I don't care what the seller likes or dislikes. It is my money and there is no reason to put down money on a house that I am not seriously wanting to buy. We ended up purchasing that house. Don't recall what the buyers put down on homes we have sold. It didn't make all that much difference to me. We haven't had any trouble with buyers backing out of the sale.

To clarify, 1 percent is normal, not required. Earnest money shows commitment.

Of course a seller could sue, but you can't force a buyer to buy, and the money the seller would pay to sue would likely be less than money awarded. So sueing isn't a VIABLE OR REALISTIC option.

Someone putting down such a small amount, and digging their heels in about putting more earnest money tells me that they are not committed, and are making it so they can easily walk away from the house without losing much money. That is the only reason to not put more earnest money down. That weakens the offer.

I am a Realtor, and have been for yrs. Yes, we countered. On one, we got more earnest money. On the other we countered, but haven't heard response, and it is on a new listing with multiple offers coming in.

Option fee money is separate from em, and usually just token amounts like 50-75.00. It normally gets credited to buyer upon closing, or seller if they exercise their unrestricted option to terminate during that period (usually 7-10 days).

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Depends on the state I guess. Minnesota laws are written in such a way that earnest money is simply a token. The buyer almost always gets it back in the end so it's more the language in the purchase agreement.

Sometimes it's not the agent who is driving some of these decisions.

I didn't realize that, in real estate, there's such a thing as "normal".

still don't believe it LOL!

Historically, earnest money was given when the contract was offered as a show of good faith. It got adopted to real estate to keep someone from making frivolous offers, and it kept that function for hundreds of years. Essentially, you handed over a week's wages to demonstrate that you were serious. Even though you have the right to get your money returned, there is a serious amount of trust in handing someone your money.

Over time they warped into this idea that a buyer who can produce earnest money is qualified, but with the emergence of prequal letters that went away. Today in many regions they are mostly useless. The real estate agent doesn't even collect the check until after the offer is accepted. The seller doesn't even get the money and every state has specific rules for escrow that practically keep it from the seller even in default. The signal of seriousness is more than taken care of with inspections, which are much more of a sunk cost and a much better signal of intent.

Of course a seller could sue, but you can't force a buyer to buy, and the money the seller would pay to sue would likely be less than money awarded. So sueing isn't a VIABLE OR REALISTIC option.

The courts can and have forced people to buy. As for the money people paying being less than awarded...rarely is that the case. Suing someone for contract damages doesn't usually take more than a few thousand dollars. Despite the amount of the transaction, real estate contracts are fairly simple. The problem is the duty to mitigate damages, the seller must continue to market the property and is only entitled to the damages actually incurred. Which for most people means the couple of thousand bucks they would get are a waste of their time. However, that also typically makes it a case you can pursue in small claims court. If you are a real estate agent you know this. At least I hope you do...How can you advise your clients if you don't?

$30,000 off of a list price of $300,000 does not seem like the end of the world. Even if the buyers only came up by half, that is $285,000, which is only 5% off of list price.

Step back from the personal aspect of the transaction and handle it as you would coach one of your clients.

BTW... 1% of the sales price is about what we see here as a fair amount of deposit too.

I think the big question is - why post this? You wanted to inform other realtors that they are doing something wrong, while this is probably not the best forum for that, OK. But thus far it doesn't seem like other realtors really agree with you.

As a realtor you wouldn't make an offer for 10% under asking price on the second day on the market if a buyer asked you to? You better pray that the house goes for a hell of a lot more because if I was the client and you refused to make an offer of 10% off and the house ends up selling even close 5% off - I would climb all up in your ass.

I absolutely cannot refuse to make an offer. We must present all offers. As a buyers agent, I would show my buyers the comps and explain why I think they risk losing the house by offering 30k less. And putting only 500 em. If they insisted I would probably let LA know that I am aware offer is lower than they were expecting, but show comps or reason why it is low. I probably would not keep the buyers if they wanted to lowball every home they want to make can offer in, and we're not being realistic about what the market is here. I'm not going to waste my time. There is a time and place to lowball...home needs repairs, stigma, something glaring like bad location, was overpriced, on the mkt for a long time due to not showing well (dirty,cluttered, pet smells), etc. Not on a new listing of a custom home priced to sell. (New from that builder is over 155 sf...resale spec homes in area sell for 117-143 sf. This is priced at 127 sf, view lot, 3 car gar, 8 ft doors, and a lot of high end features.) A decent agent would guide buyers in making an offer that is reasonable, if they are serious. If buyers won't make reasonable offers, (which might be a lowball offer in the right situation) I won't waste my time.

As the listing agent, my sellers didn't even want to counter. I encouraged them to do so with some kind of discount to show they would negotiatate, but let buyer know they were not going to fire sale it. As it is, we are currently in a multiple offer situation. Original offer is out. We have 3 other offers as of 9 pm tonight. All with decent em. Highest and best is due tomorrow eve. Home should bring over asking, based on offers submitted...

bry: you might want to edit your post and change "buyers" to "sellers."

Thanks Weedy...I do that all the time.

I do that all the time too, and I deal with this stuff daily.

I would not put down any more earnest money than needed. You never know what is going to show up on an inspection so why tie up more of your money than you have to?

I dont understand this post. Do you think you are teaching real estate agents something? Agents don't control the offer their clients want to make. We can only try to educate them on what a fair offer is or isnt. In my state, and probably all states, agents are required by law to present ALL offers. If you dont like the offer, you turn it down, that simple. Some buyers like to test the waters, sometimes they are lucky and get a great deal. They have no way of knowing if you will be one of those deals if they dont try. You would hate my state, buyers make offers with NO Money down. We dont take "binder" checks at all. The first money that is seen is about 2 weeks after the offer is made, after inspections are done, when a formal contract is signed.