Fund an EMD

About the author : Dave Dinkel


In the previous FAQ about transactional funding, I was asked how to do deals with no EMD.

The answer to this question, how can your transactional funder fund an EMD, elaborates on the various answers of doing deals with no EMD.

The easiest way, if you are dealing directly with a seller, is to add a clause to your contract stipulating that you will provide the EMD on the day of closing.

The most common way this is handled is your transactional funder simply adds in the EMD to the amount he is wiring to the closing agent to close the A-B leg of the double closing.

I frequently get calls from closing agents that the investor (“B”) showed on his contract with the original seller (“A”) that he was to make a $XXX EMD, however, he never actually deposited the funds with the seller or the closing agent.

Now the closing agent is set to close both legs of the double closing and is short on funds from the investor buyer (“B”) by the EMD amount!

This often happens after I wired the funds to close the A-B leg, so I must send an additional amount ($XXX EMD) for the transactions to close.

I am not suggesting you not make the EMD as required by your contract and hope that the seller doesn’t notice.

On the contrary, follow what the contract requires and remember that if the contract you sign requires an EMD, and if you just don’t put one up, you are still legally liable for the EMD.

This is true if you simply ghost the closing agent and seller, or you don’t cancel during your inspection period.

To protect your EMD “fully”, you could make your inspection period the same day as the closing.

While this sounds silly, if you are working directly with a seller, it can work.

In summary, take your having to fund an EMD seriously or you may have to find the funds anyway to pay your seller and the seller’s attorney’s fees.



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About the author : Dave Dinkel