Earnest Money for Land Deals

How is land different from a house deal?

With a house, the big unknowns are condition and price. With land, the unknowns are often whether you can use it at all. A parcel can look perfect on a map and still have no legal access, a zoning designation that blocks your plan, or no practical way to get water or sewer to it.

Those questions take longer to answer than a home inspection. That makes the due diligence period on a land contract, and the refundability of the deposit during it, more important.

What due diligence usually protects a land deposit?

Contracts vary, and these are general items rather than a complete list:

• Survey and boundaries. Where the parcel actually is, and whether anything encroaches.
• Legal access. Recorded access to a public road, not just a dirt track someone has been using.
• Zoning and permitted use. What the local rules allow on the parcel.
• Utilities and septic. Availability of water, power and sewer, or whether the soil supports a septic system.
• Title. Liens, easements and anything else of record.

Your contract should give you a due diligence or feasibility period long enough to get answers, and the right to cancel and recover the deposit if the answers are bad. The live post on transactional funding for land lists the questions to ask title.

How do investors fund land deposits?

Axelrad's EMD funding covers land. It funds fully refundable deposits only. The fee can be flat or a percentage of the deal and is typically a percentage, with a $500 minimum and some flexibility for investors working on their first deals. If you cancel inside your contingencies, nothing more is owed: the refunded deposit comes back to Axelrad, and there is no failure or non-performance fee.

Can you double close a land deal?

Yes. Axelrad's transactional funding covers land. The structure is the same as on a house: you buy from the seller (A–B) with a transactional loan for 100% of the purchase price and resell the same day to your end buyer (B–C), whose funds repay the loan. Pricing on the transactional funding page starts at 1 point on the standard double close.

What changes on land is title preparation. Make sure the legal description on both contracts matches exactly and that title has cleared access, survey and lien questions on both legs.

Can you assign a land contract with a funded deposit?

Yes, if the contract allows assignment. A funded EMD can sit on a land deal you plan to assign, but the new parties must also sign for the EMD so it remains assignable. Tell the funder about the assignment plan at the start.

A worked example

Example only, with hypothetical round numbers. You contract to buy a 10-acre parcel for $60,000 with $1,200 earnest money (2%, inside the typical 1–3% range Axelrad cites) and a 30-day feasibility period.

1. The deposit is due in three business days. You request EMD funding, and the deposit is wired to escrow.
2. In the first two weeks you confirm recorded access and zoning. Then you sign an end buyer at $75,000.
3. Because the contract does not allow assignment, you double close. A transactional loan funds the $58,800 still owed after the deposit, both closings happen the same day, and the end buyer's money repays the loan and the fee.
4. The deposit is credited to your purchase, and the EMD funding is repaid at closing.

If step 2 had turned up no legal access, you would cancel inside the 30 days. The refunded deposit would go back to the EMD lender, and with Axelrad nothing more would be owed.

What should you send with a land funding request?

1. The executed purchase contract with the feasibility deadline highlighted.
2. The deposit amount, due date and the title company's wire instructions.
3. The legal description and parcel number.
4. Your plan: hold, assign or double close, and any end buyer contract.

If you already know of an access or survey issue, say so in the first message. It is far easier to plan around a known problem than one title discovers the day before closing.

Key takeaways

• Land deposits are only as safe as the due diligence period that protects them.
• Access, zoning, utilities, survey and title are the usual land questions.
• Axelrad's EMD funding covers fully refundable land deposits.
• If you cancel inside contingencies, nothing more is owed and there is no failure fee.
• Axelrad's transactional funding covers land double closes.
• Match the legal description across both contracts before a double close.

Under contract on a parcel?

Send the land deal to Axelrad with your feasibility dates, and the team will tell you whether the deposit, the double close or both can be funded. See the EMD funding page for current terms.