Writing an Earnest Money Deposit Check Off A Friend’s Checking Account?

I have seen a few buyers be in a pinch for one reason or another, and not have immediate access to their checkbook. As a result, when writing an earnest money deposit as part of a real estate contract, they use any source they can find. They may use a friend or a parent. They figure they’ll pay them back later. However, that can create a problem or at the very least more paperwork.

If you use someone else’s check as your earnest money deposit for a sales contract, you’ll need to document at least the following:

• A copy of the initial earnest money deposit check from your alternative source.
• Evidence that the check cleared the original account.
• The ability to show the check you write to repay the alternative source you used.
• The ability to show this check clearing your account, with a copy of a bank statement to prove the check cleared.
• An explanation letter explaining all of this mess.

Wouldn’t it be easier to be prepared and use your own checkbook. Then you only provide the lender:

• A copy of the initial earnest money deposit check.
• Evidence the check cleared your account.

The bottom line is if you are looking to buy real estate, be prepared. Don’t write an earnest money deposit off of a friend’s bank account, a parent’s bank account, or a cash advance on a credit card. Don’t even use a business account of yours that you figure on paying back from your personal account. It creates a paperwork nightmare!