How Much Does EMD Funding Cost?

Why is EMD funding priced as a fee?

Because the money is out for a short, defined period. The lender wires the earnest money deposit to escrow and is repaid either at closing, when the deposit is credited to your purchase, or from the refund if the deal dies inside the contingencies. A monthly rate on a few weeks of exposure does not fit that shape, so the product is priced as a fee.

Axelrad's EMD funding page describes it as "a fee, not a monthly rate."

Is the fee flat or a percentage?

Either is possible. At Axelrad, the fee can be a flat amount or a percentage of the deal, and it is typically a percentage. Whichever applies, the $500 minimum per deal still holds, there is flexibility for investors doing their first deals, and the fee for your deal is quoted before you sign.

What does the fee depend on?

Axelrad quotes the fee per deal. In general, things that affect a deposit lender's pricing include:

• The size of the deal and the deposit.
• How long the deposit will be out before closing.
• How long the deposit stays refundable, and how clear the contingencies are.
• The overall deal and its exit.

The rule that does not bend: Axelrad funds fully refundable deposits only.

Be wary of comparing quotes on the headline number alone. A low fee that grows every time closing is extended, a separate processing charge, or a failure fee if the deal cancels can cost more than a higher quote with nothing added on. Ask for the total in dollars for your expected timeline, and for what changes if that timeline slips.

What do you owe if the deal cancels?

At Axelrad, if the deal cancels inside your contingencies, nothing more is owed. The refunded deposit comes back to Axelrad out of escrow, the fee was paid up front, and Axelrad does not charge a failure or non-performance fee. The deal you need to avoid is the one where a contingency expires and the deposit goes hard, so give your cancellation notice on time.

How does it compare with your other options?

Axelrad's EMD page lays out four ways to put up a deposit. Here is the comparison:

The right comparison is not "fee vs zero." It is the fee against what that cash would otherwise be doing, or against the profit share a partner would want.

A worked example

Example only, with hypothetical round numbers. You have two refundable contracts open, each needing a $3,000 deposit, and $4,000 in cash that you also need for a third deal's inspection and marketing costs.

• Using your own cash: You can fund one deposit, leaving $1,000. The third deal waits.
• Using EMD funding on both deposits: Your $4,000 stays free. Suppose, for this example, the quoted fee on each were the $500 minimum: you would pay $1,000 in total, up front. If one of the two deals then cancels inside its contingencies, its deposit goes back to the lender and nothing more is owed on it.
• Using a JV partner: Your cash stays free, but you give up a share of the profit on both deals.

If either contract nets several thousand dollars, the fee is easy to justify. If the deposit is small and your cash would sit idle anyway, Axelrad's own page says to skip EMD funding.

When is EMD funding not worth the cost?

Axelrad's page lists the situations directly:

1. The deposit goes hard on day one. (Axelrad will not fund it anyway.)
2. The contract has no inspection or due-diligence period.
3. The deposit is small and your cash is sitting idle.
4. What you are short of is the money to close, not the deposit.

In case four, you need transactional or gap funding, not EMD funding.

What questions should you ask about the fee?

1. What is the total fee for this deposit, in dollars, and is it flat or a percentage of the deal?
2. When is it paid? (At Axelrad, up front.)
3. Does the fee change if closing is extended?
4. What is owed if the deal cancels inside the contingencies? (At Axelrad, nothing more.)
5. Is there a failure or non-performance fee? (Axelrad does not charge one.)
6. What is owed if the deposit goes hard and the deal dies?

Get the answers in writing before you sign. The live comparison of gator funding vs EMD vs transactional is useful context if you are deciding which product you actually need.

Key takeaways

• EMD funding is priced as a fee, not a monthly rate.
• At Axelrad the fee can be flat or a percentage of the deal, typically a percentage, with a $500 minimum and flexibility for investors working on their first deals.
• The fee is paid up front and shown before signing, and there is no credit pull.
• If the deal cancels inside contingencies, nothing more is owed and there is no failure fee.
• Compare the fee with what your cash could do elsewhere or with a JV split.
• Skip EMD funding when the deposit is small, your cash is idle, or the deposit is non-refundable.

See the fee before you commit

Request EMD funding with your contract and deposit details, and the team will show you the fee for your deal before anything is signed. Terms and the full program are on the EMD funding page.