Earnest Money Deposit Loan: Where to Get EMD Funded on a Wholesale Deal

The earnest money deposit (EMD) is often the first cash a wholesale deal asks for, and it is due on whatever deadline the contract sets. Here is where wholesalers get it funded and how the options compare.

Where can a wholesaler get earnest money funded?

1. Your own cash. Simplest and cheapest up front. The catch is that the cash is frozen in escrow until closing and cannot work anywhere else. If you are writing several offers, that adds up.

2. A joint-venture (JV) partner. A partner puts up the deposit in exchange for part of your profit. No cash from you, but you give up a share of the deal and some control.

3. A gator or private individual. In creative-finance circles, a gator is a private party who funds short pieces of other people's deals, most often the deposit, for a fee. Terms vary person to person, so the paperwork matters. See gator lending contract for what it should cover.

4. A dedicated EMD lender. A lender whose product is funding deposits. At Axelrad, EMD funding (also called a gator loan) is built for fully refundable deposits. It covers land as well as other deals, and Axelrad can fund any volume and size of EMDs, from one deposit to EMDs in the millions on large commercial portfolio deals.

5. Hard money? Rarely. Most hard money lenders fund at closing, not before, so the deposit still has to come from somewhere else.

How do the options compare?

A general comparison. Terms vary by lender; see the EMD funding page for Axelrad's current terms.

Why is a personal loan a bad fit for earnest money?

Some new wholesalers reach for a personal loan or a credit card because it is familiar. For a deposit on an investment deal, it is the wrong shape:

• It is personal debt. The obligation sits on you, not on the deal, and it shows up on your credit.
• Repayment usually runs on a schedule. Payments typically start whether or not the deal closes, and the term is often far longer than the life of one contract.
• It is not tied to the deposit. If the deal dies and the deposit comes back, you still have a loan to manage separately.
• Use restrictions. Read the agreement. Some personal loan terms limit how the money can be used.
• The purchase lender may care. If the purchase is being financed, that lender may have rules about borrowed deposits. See can you borrow earnest money without hurting the loan?.

An EMD loan is built around the deposit itself: it is wired straight into escrow and repaid at closing, or from the refunded deposit if the deal dies inside its contingencies. At Axelrad, a cancellation inside contingencies means nothing more is owed. The deposit comes back to us, the fee was paid up front, and there is no failure or non-performance fee.

What does an EMD lender need?

At Axelrad: an executed contract, a fully refundable deposit and the title company's wire instructions. It also helps to send the deposit amount and due date, the contingency deadlines, the title or escrow contact and your planned closing or exit. Tell us about amendments or approaching deadlines.

If your exit is an assignment, say so up front. A funded EMD can sit on a deal you plan to assign, but the new parties must also sign for the EMD so it remains assignable.

How do you get earnest money funded, step by step?

1. Check the contract for the deposit amount and deadline. See when earnest money is due.
2. Confirm the deposit is refundable and note the inspection or due-diligence deadline.
3. Get the title company's wire instructions and verify them by phone with title.
4. Send the contract and details to the EMD lender.
5. Review and sign the funding terms. At Axelrad, you see the fee before you sign. It can be flat or a percentage of the deal and is typically a percentage. The minimum is $500 per deal, the fee is paid up front, and there is flexibility on fees for investors getting their first deals done.
6. The deposit is wired to escrow, and the contract goes live.

When is EMD funding not worth it?

When the deposit is small and your cash is idle anyway, when the deposit is non-refundable from day one, or when the contract has no inspection or due-diligence period. And if what you are really short of is money to close, not the deposit, you need a different product, such as transactional funding on a double close. Our wholesale funding resources help match the request to the deal stage.

Key takeaways

• Wholesalers fund deposits with their own cash, JV partners, gators or private individuals, or an EMD lender.
• A personal loan is personal debt with a fixed schedule, not tied to the deposit, and a poor fit for one contract.
• An EMD loan is wired straight into escrow and repaid at closing or from the refunded deposit.
• Axelrad's EMD funding covers land and can fund any volume and size of deposit, including large commercial portfolio deals.
• If the deal cancels inside contingencies, nothing more is owed at Axelrad. A funded EMD can stay on an assigned deal if the new parties also sign for it.
• Verify wire instructions with title and know your contingency deadlines before anyone funds.

Talk to Axelrad

Have a deposit due on a refundable contract? Send it through Axelrad's application, and see EMD funding for current terms.