With more than 13 years of experience as a real estate agent and founder of Odigo Real Estate Club, I understand the industry fairly well. I began my career by focusing on distressed properties and helping those in foreclosure before shifting into helping people buy and sell both residential and commercial property.
Like any seasoned agent, I’ve been in the difficult position of not closing a sale by the target date.
But this story has the additional risk of seeing a client lose their funding because of mishaps with the lender. Learn how my scary sales experience ultimately helped me become a tougher, better agent for homebuyers in Washington state.
The Risk of Non-Refundable Earnest Money
Any real estate agent with a serious client will put down a certain amount in earnest money to demonstrate to the seller they’re eager to buy. These funds rightfully belong to the seller should anything go wrong with the sale and cause the deal to fall through. In my case, one particular sale saw a client put down $25,000 in earnest money only for — you guessed it — the closing to hit a snag.
Neither I nor my client were at fault. In this case, the lender did not perform their duty, despite the other parties following protocol to the letter.
Now, I knew this particular bank was not the most reliable from the start. I even tried talking my clients out of working with them. But we all know that clients have the right to choose their lenders. And because of this decision, they were about to lose $25,000 and the property.
Fortunately, I was able to turn things around. Even though the seller and listing agent had full rights to take our earnest money and move it to the next buyer, I was able to convince them to wait a few more days for the sale to go through.
This experience, however, taught me a critical lesson as an agent.
Real Estate Is Not a Gamble
Investing stock market earnings in emerging companies doesn’t guarantee you’ll profit. This concept applies to real estate as well. It’s always better to work with lenders, inspectors, and other industry professionals who prove they’re dependable.
Partnering with contractors you can trust may come with a higher price tag. Ultimately, it’s worth paying a slightly higher interest rate if it means the lender will come through and complete their role in the final transaction. The alternative of losing thousands of dollars in earnest money will sting much worse than paying slightly more to work with the industry’s top experts.
From firsthand experience, I know it’s better to protect clients’ earnest money and steer them away from using the cheapest contractors and lenders available. Safeguarding clients’ earnest money takes precedence, and the peace of mind derived from working with industry experts is well worth any extra expense that may arise.
Coach Clients When Problems Arise
Whether your client puts down a good faith deposit of $500 or $25,000, it’s your job as an agent to protect and guide them during the homebuying process. Acting in their best interests means standing firm, even if it involves challenging their insistence on sticking with an unreliable lender.
That doesn’t mean you should go into “I told you so” mode if you face issues like mine with a client. After all—you need to consistently show up as a professional, just like you expect the contractors you partner with to. Instead, collaborate with clients, and coach them throughout the entire transaction. This not only builds trust but helps you develop solutions that won’t impact the sale.