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Equal Housing Opportunity Homes. Prices, conditions and apartment availability are subject to change without notice. Please upgrade your browser to improve your experience. When should a promissory note for earnest money be payable to the escrow company? The buyer wants a 20 day due diligence period which is okay by me.

They also want the promissory note payable 20 days after agreement. It seems to me like this can tie up the property without any risk of loss to them if they withdraw their offer without cause.

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Fred Sperry share 64 months ago Report. Viewing Answers 1 - 6 of 6. I would hope that the best for both parties would be the desire of any of us. My suggestion would be to put together a deal that would allow the seller to continue to seek other buyers during due diligence period, but have a 72 hour clause where your buyer can have an agreed upon deal and at the time another offer comes in your buyer would have 72 hours to remove contingency or withdraw their offer.

That way both have protections especially with such a long period on earnest money. I hope your home has long since closed.

Perhaps this answer will help others when faced with a similar offer. A 20 day inspection period is an extremely long time for a normal closing. Most due diligence can and should be done within the first 7 days of entering into a contract. If the buyer is motivated and truly wants to close then they should put an importance on getting their inspections out of the way quickly.

It is always wise for a seller to request an earnest money deposit up front and have it deposited with escrow as soon as the offer is agreed to in writing by both parties. If you do consider a promissory note then I would have it due no later then within 7 days of accepting an offer and have the inspection period matching it.

If you agree to something longer then you risk holding your property off the market for a longer period with no recourse from the buyer. If the buyer is asking for a longer inspection period then normal then there is a very high chance that the buyer is unsure as to if they really want to close on the property. Be very careful with extended requests for due diligence. Promissory notes are not my favorite. If they don't have the money now, they may not have it later.

You are correct - they will be able to tie up the property and that puts the seller at a disadvantage. No money, no due dilligence period, but they can do all the checking they want while the house is still on the market the fastest they finish the due dilligence, the faster they secure the house with a signed offer.

It is a matter of negotiation, and placed in writing when the sale agreement contract is written. In our area, three days, or three business days after offer acceptance begining the following day is common. When I have an out of state buyer, or other timing issues that I know will arise, I write in a longer redemption period. So typically if the offer is accepted on the first, than the funds would be due on the 4th if it is regular days, and depending on when the weekend or possibly holidays fall possibly the 7th.

I usually try to avoid a promissory note and get a check for earnest money from the buyer when we put together their offer. But sometimes that isn't possible, if the buyer is out of the area and emailing the offer or maybe the buyer doesn't have their checkbook with them.

Promissory note as earnest money??

In that case, I would have the promissory note redeemed within business days. Twenty days is too long to wait for earnest money. A promissory note for earnest money should always be payable to the Seller. That way, if the transaction should terminate before the promissory note has been redeemed, the escrow company will have clear instructions from the Buyer and Seller regarding disbursement of any funds.

The purchase agreement will specify the contingencies that must be cleared by either party; removal of contingencies addenda to the purchase agreement will identify whether or not those contingcies have been removed; and this will determine which party receives the earnest money disbursement.

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