Wholesale Seller wants to back out after signing contract.

35 Replies

 Hello Everyone, i have read many posts on bigger pockets and i know there are other posts regarding similar situations however mine is slightly different and i would like specific guidance for my current situation. i would like to apologize in advance if i use this forum incorrectly, it is my first time posting. So, without further ado this is the situation i'm in...

I found a seller willing to sell his property for a great price, after explaining in detail how this would all play out we signed a contract and he was happy, the same day that we signed i had a buyer walk through the property with me and he is interested in purchasing asap.

the next day i submitted my EMD and even paid for a title search... then i was contacted by a real estate attorney the seller hired saying i can no longer speak with the seller and that i can only speak directly with her if i need to tell him anything and that they have opened a case with miami dade police department against me(i have no idea why, i have done NOTHING illegal or misleading. i'm doing everything by the book so i believe this is only a scare tactic) they also said i need to sign a cancel and release form to release the seller from the contract. i was not given any reason as to why the seller had this sudden change of heart but i'm going to assume that he got a better offer or a real estate agent (which he mentioned was interested) probably promised to sell for higher and quickly.

I responded to the attorney asking why their client changed their mind. (if it's medical or job loss i would obviously release them with no problem) my email also says their client has signed a legally binding contract and i have already invested time and money into this property and will begin seeking legal advice regarding "Specific Performance" against their client. *I am still awaiting their response to this email*

i spoke to the attorney at my Title company who has advised me that my contract is solid and has all of the key elements to make it a valid contract. i have a buyer waiting for me to clear this up so we can close.

My questions are...
How can i make sure he does not sell to another buyer?
Can i move forward with the closing regardless of the seller trying to back out?
How can i cloud the title to make sure he does not sell to another investor and should i do it?
Should i attempt to sue for "Specific Performance" as the attorney at the title company told me to do?
Should i just collect the EMD from my end buyer and use that to show sellers attorney that we are going through with this?
If it all falls through what do i do about the $200 i've already spent on Title and EMD??

Also, this is taking place in Miami, Florida and i am rather new so i apologize for any rookie questions.

Any other tips would be greatly appreciated. Thank you all very much!

@Cesar Mundaca

It's a very good question. This scenario occurs all the time. You need to find a real estate Attorney to file a specific performance suit. Once filed he can file a lis pendens in the Land Records putting any future Buyer's title company on notice.

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Cesar the information by @Rich Baer is right on. However what some have done to cloud title was to file an affidavit of contract.

With that being said, many investors simply say...NEXT.

As far as Brokering without a License as @John Thedford mentions, in my option that is an over worn topic. Note that concern was brought up by a realtor. People assign contracts all the time. 

Originally posted by @Rich Baer:

@Cesar Mundaca

It's a very good question. This scenario occurs all the time. You need to find a real estate Attorney to file a specific performance suit. Once filed he can file a lis pendens in the Land Records putting any future Buyer's title company on notice.

Thank you very much for the HELPFUL response, i will be contacting a real estate attorney tomorrow and update you all as the story develops. 

As for @john thedford i appreciate your concern but that topic has been discussed enough, we all know it IS legal if done properly. Also, i actually am licensed in the state of Florida, i'm also very experienced with residential and commercial sales but i ventured into real estate investing for some added revenue since real estate is my full time job.

@Cesar Mundaca

Dude just release them and move on. Focus on your marketing and don’t waste time with people like this. You will spend more time figuring this out and get no where rather than focusing on your MARKETING that will bring you deals. Im not 100% sure about Florida but what you are doing is not a felony in Texas. You are buying and selling the CONTRACT for the house (not the actual house). THATS HOW YOU KEEP IT LEGAL.

Originally posted by @Adam Mitchell:

@Cesar Mundaca

Dude just release them and move on. Focus on your marketing and don’t waste time with people like this. You will spend more time figuring this out and get no where rather than focusing on your MARKETING that will bring you deals. Im not 100% sure about Florida but what you are doing is not a felony in Texas. You are buying and selling the CONTRACT for the house (not the actual house). THATS HOW YOU KEEP IT LEGAL.

 Again, i greatly appreciate your input. i wish i had the luxury you have, however, i am a Floridian, i pay my parents bills because they are too elderly to pay it themselves due to the modern day slave system (I'd gladly open a new discussion about this but I don't think it's suitablein this forum) therefore a $10k-$20k deal is life-changing for me/us. I'm not about to back down just because my cold-footed/greedy seller decided to sell to someone else because they offered more. Correct me if I'm wrong but I feel that my situation could and will serve as a steppingstone for future Investors.

We're all here to make money and be successful, not to be Taken advantage of. If my contract is not worth half a cent then PLEASE show me one that's worth all of our time so that this B.S doesn't happen to new/tenured investors.

@Cesar Mundaca maybe the seller felt you did not disclose the true value of the home , which you are obligated to do as an agent, during negotiations and decided to take action against you.

In the end you are not going to force anyone to sell their home, best case you get the earnest money back. Worst case the lawyer nitpicks everything you did, finds 1 or more violations and you get fined and lose your real estate license.

You are not a defender of all investors near and far, let it go and move on. If 20k is so life-changing sell a couple homes and get the 20 k 

Originally posted by @Cesar Mundaca:
Originally posted by @Rich Baer:

@Cesar Mundaca

It's a very good question. This scenario occurs all the time. You need to find a real estate Attorney to file a specific performance suit. Once filed he can file a lis pendens in the Land Records putting any future Buyer's title company on notice.

Thank you very much for the HELPFUL response, i will be contacting a real estate attorney tomorrow and update you all as the story develops. 

As for @john thedford i appreciate your concern but that topic has been discussed enough, we all know it IS legal if done properly. Also, i actually am licensed in the state of Florida, i'm also very experienced with residential and commercial sales but i ventured into real estate investing for some added revenue since real estate is my full time job.

 What does your broker advise you to do?

Is the seller elderly? If so, they may be seeking charges for victimizing the elderly. They are a protected class in FL. 

@Cesar Mundaca I started from zero as well. Don’t worry about where you are today just write out where you want to be and put a plan in place to get there. Your right one wholesale deal will change your life and once you do one you will learn so much it will get easier. But I keep going back to the most important part of wholesaling and thats the Marketing. You have to find a source of leads that you can work effectively. If you have experience with elderly then maybe focus on helping them through probate or foreclosure processes. Also focus on serving instead of what the business will do for you personally. If you can help people (example - help someone to get rid of a house thats going into foreclosure) you are serving and will be rewarded for that. If you keep those 2 things as the most important and build your day around those two things everything else will fall in place.

I use a TREC (Texas Real Estate Commission) contract for all my deals.

@John Thedford Might want to back off the absolute statements that someone is breaking the law.  You're making a bunch of assumptions based on little information.

So far as I know, wholesaling done correctly is legal in every state, and can be done without a real estate license.  At this point, Cesar is just on the buy-side and opening title.  You didn't even know what STATE he was in before you accused him of violating YOUR state's law.

@Cesar Mundaca There's a lot more going on here than can be easily related on this thread.  If it's worth it, pay to talk to a real estate litigation attorney to see if you have a case.  If the money's worth the expense, defend your position.  If your margin was small, cut and move on.

Originally posted by @Jesse Hobbs:

John Thedford what is the difference between buying and selling and brokering?

 In most jurisdictions, the difference is buy/sell is for your own account, and brokering almost universally means you are doing this for SOMEONE ELSE's account.  If you screw yourself up, you are the only one harmed.  The reason brokering is a licensed activity is because you can screw a lot of other (who vote) up.

@Cesar Mundaca As others have stated you should definitely consult a real estate attorney. I would also suggest that you do a double close instead of an assignment with your buyer. Find a transactional funding company that will lend you the money to do your double close. It could be that the seller got offered more money or got cold feet and wants to back out of this deal. I understand that to you 10-20k is a life changing amount of money but you have to consider the possible outcomes of this scenario. What happens if you sue for specific performance and sellers attorney asks you to provide proof that you have the funds to close this deal? What happens if your buyer backs out and your seller decides to proceed with the sale? By all means if there is a simple, cost effective solution then get this deal closed. But if its going to cost you 12k in legal fees and court costs is it really worth it? There are easier deals out there. You have to decide at what point you are willing to walk away.

DISCLAIMER: Not a RE Attorney or licensed as an agent in Florida. My opinion is just that of some random dolt on the internet. Following the advice is most likely foolish and may result in injury or death as well as financial burdens that would crush a normal human.

If you decide to continue after the property I would get a lawyer and follow it step by step. There will be a whole lot of money put in before anything is pulled out. I may just ask for the money I have invested in exchange for a cancellation. IE the $200 and the EMD refunded. You don't have to just let it go and you don't have to continue to chase it either.

Good Luck in whatever you decide.

@Jerel Ehlert thank you for responding. When wholesaling for yourself would double closings or another method potentially lean toward the law considering it brokering or just whether others (other accounts) are involved.

I appaulagise if I'm beating a dead horse here. I am new and have been reading as much on this site as I can. His post just brought this possibility to my attention.

Originally posted by @Jerel Ehlert:

@John Thedford Might want to back off the absolute statements that someone is breaking the law.  You're making a bunch of assumptions based on little information.

So far as I know, wholesaling done correctly is legal in every state, and can be done without a real estate license.  At this point, Cesar is just on the buy-side and opening title.  You didn't even know what STATE he was in before you accused him of violating YOUR state's law.

@Cesar Mundaca There's a lot more going on here than can be easily related on this thread.  If it's worth it, pay to talk to a real estate litigation attorney to see if you have a case.  If the money's worth the expense, defend your position.  If your margin was small, cut and move on.

Jerel to keep on the blanket statement theme..  I think there needs to be a definition of wholesaling..  if one is NOT doing any marketing for buyers does not have a website and is not in the business to do the same thing over and over then I agree with the occasional assignment theory you stated.

I got a flyer from someone who does not own a property and is not licensed .. so I got tired of is it legal to market a home.. I have yet to see anyone advertise a contract  LOL  I sent it to my state regulator and here is my reply I got back from the Authorities at the state.

State of Oregon - Real Estate Agency

Frances Hlawatsch | Financial Investigator

Best regards,

Thank you again for the information, if I have further questions for you during the investigation I will certainly reach out.

The Agency is well aware that unlicensed “wholesalers” are rampant in our jurisdiction. Addressing the problems is like trying to put out small individual fires in a forest that is burning. The Agency’s investigations are complaint driven, so we rely heavily on the public, and our licensees to bring these individuals to our attention.

Thank you for getting back to me. The advertising copy you attached to your email came out perfectly and will be very helpful. Thanks!

Hello Jay,

So you can see they did open and investigation into this one and one more I sent in from someone out of state.. both have gotten don't do it again letters from the state .. so another offense it this would get scaled back up..  So again we need a clear definition of what is wholesaling and how can it legally be done.. to many wholesale means U buy it and once in title U sell it.. when I was being interviewed by the investigator I asked about double closings.. they said same thing.. they don't believe small EM is equitable interest and that some that advertises a home before they own it is breaking the brokerage laws and especially on its face if they buy it in the morning and sell it same day.. that is obvious to them they marketed a property they did not own.. 

AS for suit for performance.. again this is talked about by most folks that have never actually done any litigation.  and for this guy who thinks he is going to make 10 or 20k to successfully win a suit of performance will take years and 10 to 20k in legal fee's. 

I have done exactly one in 40 years.. took little over 2 years.. I also had to put up 100% of the cash to buy the property into escrow on the close date.. I think its rare the average wholesaler has the money to put 100% of the purchase price into escrow and let it sit there for 1 to 2 years .. so reality as you know in your line of work rarely what the average person thinks it is when talking about litigation.. and maybe in other states laws are different but that's how this one worked out for us..  the ONLY reason I did it was it was a rescue and I gave the seller 40k up front.. and they would not close plus it was a bulldozer 3 lot project that had 250k in juice on top.. so it was worth  putting 6 figures into escrow for 2 years and paying attorneys fees at the end of the day even with a court order the seller would not sign a deed.. we had to amend our order and the title company actually close the deal with the judges amended order being the document that transferred title.. it was the first time I had ever seen title transfer without some sort of deed.. 

Bottom line when a seller backs out and you just have a maybe 1 k into the deal  unless there is some HUGE profit on the other side suit for performance is just blustering.

They are trying to scare you out of the transaction. You have a legally binding contract and both parties are fully expected to perform. I personally wouldn't let it go so easily but it depends on your situation and patience to play this out. If you decide to just cancel, I would ask for money for wasting your time. 

Originally posted by @Pratik P.:

They are trying to scare you out of the transaction. You have a legally binding contract and both parties are fully expected to perform. I personally wouldn't let it go so easily but it depends on your situation and patience to play this out. If you decide to just cancel, I would ask for money for wasting your time. 

keep in mind they can just simply open escrow at another title or escrow company and close before anything happens..

Originally posted by @Jay Hinrichs :
Originally posted by @Pratik P.:

They are trying to scare you out of the transaction. You have a legally binding contract and both parties are fully expected to perform. I personally wouldn't let it go so easily but it depends on your situation and patience to play this out. If you decide to just cancel, I would ask for money for wasting your time. 

keep in mind they can just simply open escrow at another title or escrow company and close before anything happens..

Definitely a possibility

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