We like Redfin's concept so we've wanted to use them.  We have a pre approved VA loan and no home to sell but we don't have much cash so we're asking the seller to pay closing - not unusual for VA loans.  We made a couple offers through conventional agents but we tried to bid at 5-10% under list and got outbid.  It doesn't seem to be a buyer's market anymore.

We went to an open house, liked it and worked out an offer with the selling agent that she thought the seller's would accept, though we didn't discuss the deposit.  I thought it would be a good time to try Redfin.  When we got to the deposit amount, I said a thousand dollars which is the amount our conventional broker had suggested on bids.  It's low but we're not paying any down payment or closing so there's no need to prove we have a lot of cash.  Redfin insisted it had to be at least 1% but 2% would be better.  I argued that we should put the offer together along with a copy of our preapproval letter for that specific property and our mortgage brokers phone number to give the seller's confidence, but he insisted on calling the selling agent to ask how much deposit they wanted.  He did and they said they wanted four thousand at least.  We don't have that much cash so that was the end of that.  I think maybe when a broker from a company you never heard of calls representing a client you know nothing about and asks how little deposit you will take, you are always going to get the textbook answer. 

I wish now I'd gone through our conventional broker because I think a local person who offers a whole package including a helpful local broker would have been able to get the contract at least submitted to the buyers.  My feeling is that there was more emphasis on making sure Redfin wasn't wasting their time then on getting us the best deal.  That might be a drawback to using a big company like Redfin that isn't well known and has to protect itself from people wasting their time.

ceedubya, thanks for your post, I've been selling Real Estate for a few years now (I was previously with Long & Foster) and I have always understood Earnest deposits to be between 1% and  3% of the contract price, and in DC it's sometimes even higher. I can guarantee you that any seller receiving a written offer with a $1,000 Earnest deposit will counter back for a higher amount, they are taking their home off the market for your offer so it has to be worth their trouble in case you default and the deposit goes to them, $1,000 will get you very little for the exposure time they lost while under contract and not active for sale. I would have done the same as Marshall by calling the agent to discuss our offer, this is something that we do with all of our offers which helps in developing rapport with the other agent and in the long run helps our representation of the client.

Please note that we are not a big company (only 3 DC agents writing contracts) but we have made a big impact in the area with our top notch representation and our LOCAL knowledge because we are after all local and experienced agents, and I can tell you that most agents on the other side of our transactions are very happy with us and so are our clients. The Redfin name is getting out and in a positive way!

I wish you the best of luck with the next traditional agent that you use, I see that you have already gone through at least a couple of agents prior to us so maybe your luck and/or approach will adapt for some success.

I've been buying homes for 38 years. This is my third VA loan and I've never put more than $1,000 in escrow.  I've bought 7 houses in 6 states with conventional loans and always put 2% or more in escrow.  With the conventional loans I had a large down payment set aside so putting some of it in escrow was painless.  With the VA loans I make no down payment and no closing costs so escrow comes out of my pocket.  I don't have the extra $3K but even if I did I wouldn't want to put into an escrow.  The earnest money should be in proportion to the sellers risk not some one size fits all formula.  This is a low risk sale.

As to the rapport between agents, in this case the seller isn't going to know they had a buyer with a pre approved VA loan making an offer that nets them 96% of their list price, closing anytime they like and no contingencies except appraisal and inspections.  Because of a $1K escrow instead of $4K.  The property has been on the market almost two months.  Maybe the seller's would welcome my offer but we don't have sufficient agent rapport to get it to them.

I don't know where you're coming from with the idea I can't keep an agent.  I have used one, her broker disappointed me but I'll be working with her again tomorrow.

ceedubya,

After reading your post, I think you should be careful with your words when venting on a public forum, especially when it concerns a person's profession, which, if untrue, is defamatory and can invite liability for libel. You state many admissions in your post that shows much inexperience with the current state of real estate market in northern Virginia.

My points below cause me to believe that your beliefs of the northern Virginia real estate market are incongruent with reality. 

First, you indicated that you've gone through more than one agent before your experience with Redfin, for a total of at least three. This tells me that you are most likely an unrealistic client or you are really good at picking bad agents. The agents on Redfin have earned excellent ratings from the public and as far as brokerages go, their terms are very generous. What other brokerage do you know that will show you properties without having you sign a brokerage agreement? Not many.

Second, you need cash. At least a little. You're not buying a used car here, you're buying property in one of the most expensive real estate markets in the United States and the world! If you're hoping to buy residential real estate that is in reasonably habitable condition, you're going to need cash to have a strong offer - whether it's for the EMD or a large down payment. There's a reason why many sellers will accept a lower price with an all-cash offer instead of an offer that stipulates financing with a higher offer amount. Cash is King.

Third, many times the list price is not indicative of the true market value of the property. Most of the time the list price is too high. These properties sit on the market and do not sell. The properties in which are you interested are probably priced correctly, which makes it a great value. Well, other buyers notice it too. It's very probable that the price has been set purposefully low in order to invite multiple offers. Did you ask your past agents what they thought the properties were worth? I have a feeling that those properties probably had multiple offers and sold for near or over list price.

Lastly, from your post, I think the steps taken by the Redfin agent were very reasonable, and frankly, his suggestion would have only brought your offer up to par. Your experience with "never [putting] more than $1,000 in escrow" tells me that although you may have been "buying homes for 38 years," those homes were bought closer to 38 years ago or not in northern Virginia. Or both. It seems to me that after you were not convinced that your EMD was too small, the Redfin agent actually called up the seller's agent to find out what would suffice - what would the sellers consider as enough for taking their property off the market in order to work out a sale to you, which most likely would have taken several weeks to several months in this market. And especially due to the credit markets, what if your near 100% did not come through? The seller's agent verified what the Redfin agent had told you and you still refused to listen. Is this also what happened with your other agents?

It's not all bad news. I just want you to see that a 1% escrow deposit is a very reasonable amount for a strong offer. All the contractual contingencies mostly provide ways for you get out of the contract with the EMD. If you breach the contract, the only practical remedy that the seller will usually have left is a part of the EMD (sometimes the seller must share the EMD with the listing broker).

I do, however, have good news for you. The property is not lost yet. You can still make an offer on the property with another agent. I know for sure that you're not locked in with Redfin because Redfin has very generous terms. And realistically, for your financial security, you should have at least two months worth of mortgage payments AFTER closing. In fact, many lenders now require this. Suzie Orman, of course, would recommend at least 3 to 6 months of savings, just for your own safety.

Good luck!

I think we need some more information here:

1. Was it a multiple offer situation? 

2. Was anything else discussed besides the deposit with the listing agent?

3. How long was the house on the market?

On the surface, assuming it was a normal offer situation (not competing) than the Redfin agent should NOT have called to discuss just the deposit.  There are many variables in an offer and a EMD is just one factor. Some factors in a contract are stronger than others and those factors should receive emphasis from the buyers agent, not the weakest factor. 

Maybe a $1000 EMD may have been worth the risk for the seller if the other terms were acceptable (price, contingencies, etc).  It is the buyers agent to make their client appear as strong as possible, I don't understand why you would call the listing agent and discuss your clients weakest point. Why not discuss your clients stronger points with the listing agent? Remember, the sellers makes the decision whether to accept, reject or counter not the listing agent.

Any good listing agent would tell a buyers agent to bring a big EMD, was she suppose to tell you bring a small deposit? When it is on paper, that is a different story.

This is a buyers market, you should not allow the sellers to set the terms. There is no requirement for an EMD, sure 1% has become the norm, but $1000 with VA and FHA loans are common and sellers will usually take them because it is a buyers market.  

At the end of the day  I think this client (based on the limited info available here) was not represented properly.  

Now, what really probably happened in this situation is that Marshall probably had several other buyers who wanted to make offers. In an attempt to help the most serious buyers he weeded out the offers that had little chance of being accepted and tended to the most serious buyers first.  

So if ceedubya had a low ball offer with little chance of getting accepted (especially if it was just listed or is was in a multiple offer situation)  than Marshall was doing his serious clients a service by making sure they receive ample attention. 

Can we clarify the questions above? Thanks

Khalil El-Ghoul

I-Agent.com Realty 

I've never made a post on this website before but I'll say this.  If you can't afford to put down a down payment of 4,000 you shouldn't be buying a 400,000 house.  Period.

Khalil,

I am with you on this one.

The EMD has multiple purposes. One is to have a source of compensating the seller in case the buyer breaches. But the other, and equally important one, is to tie up the buyer's cash so that he/she cannot use it to make another EMD on another property in case the first offer doesn't pan out. The seller is therefore doubly motivated to ask for a big EMD which he/she can then use to string the buyer along as long as possible with multiple rounds of countering before providing a final answer. The buyer's EMD gives all the leverage to the seller and none to the buyer. I have never heard of a deal (in a buyer's market) that was clinched by proving that the buyer had lots of spare cash to throw on the table. Any seller who is dazzled by that is inexperienced, naive, or both.

In a buyer's market, the wise buyer should always put down the least EMD possible. And a good buyer's agent will present this offer to the seller as part of his/her fiduciary duty to the client, without calling the listing agent to see if the EMD is acceptable. That is poor practice to say the least. If Redfin agents are not sincerely representing their clients as buyer's agents, where their objective should be to assist the clients in achieving their housing goals, providing good counsel, and conducting ethical services, then I would have to question their understanding of their role.