Wholesale Seller wants to back out after signing contract.

[Cesar Mundaca]

 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!

[Jay Hinrichs]

Originally posted by @Pratik P.:

Originally posted by @Jay Hinrichs:

Originally posted by @Pratik P.:

Originally posted by @Jay Hinrichs:

Originally posted by @Pratik P.:

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

yup if I was the seller that's what I would do.. simply move it to another closer.. its just the price of doing business.. 

ONe thing he could do though and I have done this successfully.

IS take his contract and sue in small claims court..

this was a little different I had a contract to buy a timber deed in the foot hills of Portland..  And the seller wanted to back out after we had the contract signed.. WE have to arrange log purchase orders schedule our loggers ( they move from one job to another ) etc etc.

So what happened I am not sure but I suspect someone can behind us and offered more.. and the guy was pretty rude about it.. normally I would just move on.. But I decided to see how strong our Timber deed purchase contract was in the eyes of a trier of fact. 

So we go to small claims I am suing for 7500.. my profit on this deal would have been a little under 70k..  on a 120k purchase price and we are usually in and out on a job that small in 2 weeks fully paid in 4 weeks.. ( why I always say my days of timber were the best of my career there is simply no faster or bigger money than that gig)  Anyway I present my case including copy of bank statements showing the cash available to purchase. .. the seller does not really have a plausible reason for cancelling.. other than the letter he wrote telling us to stay off his property..  Judge ruled on the bench in our favor.

the guy opens his check book writes a 7500 dollar check and throws it at me as he leaves LOL..   So for you guys who think your within the law on your purchase and wholesaling without the ability to close..  Maybe try small claims.. see how it plays out.. 

Sometimes just the threat of a lawsuit will get people to the table. It worked for me recently where the seller was trying to back out due to cold feet. We let him know we'd sue for specific performance which would put a lis pendens on the property, clouding title (which I would have done). The house was going to tax auction soon so that got him to closing pretty quickly. But like you said, if you can't prove that you have the means to close, I think that would significantly weaken your case in court. But i'm not a lawyer lol

ya bully tactics can work.. agreed..  

 I know it seems like bullying but in this case, I paid for a lot of the sellers moving/storage expenses and spent a lot of time on him, so I didn't appreciate being taken advantage of. 

agreed.. just like the one I sued for SP and won;.  I brought their tax's current to the tune of 30k and gave them 10k on top of it.. then they ghosted me..  but I had to have the purchase price in cash and in escrow on the day of closing before I could sue them.. because up until that time they could have closed.. once I put my money into escrow..  IE fulfilled all the terms of the contract.. then I had a case.

I think this is where many don't realize and frankly don't have the money to do what we did.. IE put up 6 figures and let it sit there for 2 years.. but it was 40k on the line and 250k in profit..  once I demo the house and build 3 new ones.. 

if it was to just protect a few grand would not do it.

the timber one was more of an experiment .  which was nice to see the judge liked out contract and position.  But this is were I think most in the wholesaling business simply cant do specific performance because they cant perform themselves.. they can only perform if someone else does   major Point of the litigation. 

[Jerel Ehlert]

Texas is a race-notice state, and we have the ability to file a memorandum of contract.  This puts the world on notice that seller entered into a contract with you and clouds title.  Most title companies won't close around that and will require a release.

State agencies have authority to investigate and prosecute with the jurisdictional boundaries if the statutes authorizing their existence.  That authority stands unless challenged in court.  Most people don't want to be that test case, and I get that.  I've also known state actors to overstep their authority into illegal activities, too.

Even in Texas, legislators and TRELA (the licensing agency) have been tinkering with the definition of what it means to "broker".  Traditionally, a broker is anyone who is paid to bring buyers and sellers together.  For the most part, that's how Texas does it.  So Your Oregon Financial Investigator would be SoL when it comes to prosecuting unlicensed brokering on a double close...period.  Also, in Texas, equitable title is sufficient to do an assignment of contract and market for someone to sell/assign a contract (and as of 2017 legislative session) with disclosure on the purchase contract.

Really folks, if you don't want more legislation to comply with, don't mess around with consumers.  If they knew what they were doing when they signed a sales contract and get cold feet, I'd convert the sales contract to a purchase contract good for 1 year and $100 option fee.  In Texas, I can record the option agreement and that's a hard cloud on title.  I don't know of any title company that will close around that.  If it really is "buyer's remorse", then a 1 year cooling period and self-termination works.  If the seller gets greedy and wants to sell to another for more, this makes them wait, and that buyer will probably move on, denying the seller fraudulent profits.

[Ronald Rohde]

Originally posted by @Jerel Ehlert:

Texas is a race-notice state, and we have the ability to file a memorandum of contract.  This puts the world on notice that seller entered into a contract with you and clouds title.  Most title companies won't close around that and will require a release.

State agencies have authority to investigate and prosecute with the jurisdictional boundaries if the statutes authorizing their existence.  That authority stands unless challenged in court.  Most people don't want to be that test case, and I get that.  I've also known state actors to overstep their authority into illegal activities, too.

Even in Texas, legislators and TRELA (the licensing agency) have been tinkering with the definition of what it means to "broker".  Traditionally, a broker is anyone who is paid to bring buyers and sellers together.  For the most part, that's how Texas does it.  So Your Oregon Financial Investigator would be SoL when it comes to prosecuting unlicensed brokering on a double close...period.  Also, in Texas, equitable title is sufficient to do an assignment of contract and market for someone to sell/assign a contract (and as of 2017 legislative session) with disclosure on the purchase contract.

Really folks, if you don't want more legislation to comply with, don't mess around with consumers.  If they knew what they were doing when they signed a sales contract and get cold feet, I'd convert the sales contract to a purchase contract good for 1 year and $100 option fee.  In Texas, I can record the option agreement and that's a hard cloud on title.  I don't know of any title company that will close around that.  If it really is "buyer's remorse", then a 1 year cooling period and self-termination works.  If the seller gets greedy and wants to sell to another for more, this makes them wait, and that buyer will probably move on, denying the seller fraudulent profits.

 What I also see is if seller has another buyer for more money, just split the difference with prior buyer. If they didn't want the home to live in or improve, splitting the profits works to avoid litigation.

[Cesar Mundaca]

Hello everyone, sorry for the long response. I would like to begin by thanking each and every one of you for your feedback! Sorry i went missing for a little, i was dealing with this issue as well as working hard to make sure i get more deals in the pipe line... the conclusion of this mess is as follows.

THE CONCLUSION
So, it turns out the seller hired that attorney to attempt to get out of our contract, the lawyer threatened me with lawsuits and even threatened to escalate this to FREC claiming that we took advantage of her client along with a ton of other lies that i proved wrong. The list of just a few of these lies along with my objection/proof is listed below.

Lie #1
Seller claims we preyed on them and knocked on their door and then forced them to sell the house.
-This is a lie because i have a screen shot of a text message from the property owner that clearly shows the home owner initiated the deal by reaching out to me in response to a mailer i sent out. The screen shot shows he wrote the property address, his name, and his interest in selling to me.

Lie#2
Seller claims i had a partner go to his house to get the contract signed and then i showed up an hour later to demand the house keys.
-This is a lie because i took a picture of the homeowner signing the contract while my partner stood next to him which proves i was there at the time the contract was signed.

Lie#3
Seller claims he does not understand English and had no idea what he was signing.
-This is a lie because the photo shows him wearing READING glasses and carefully reading it.

Lie#4
Seller claims we only gave him page 2 of the contract to sign and he never saw the first page that shows the agreed upon price.
-This is a lie because although we used a simplified version of a wholesale contract that is only 2 pages there is NO WAY we could only hand him the second page because the contract was printed on ONE sheet of paper that was printed 2-sided.

Lie#5
Seller claims to be an elderly man that we took advantage of.
-This is a lie because he's only 52 years old and after doing a some research on him i found that he is actually out on bond for 2 felonies (probably why he's selling) that include manufacturing drugs and drug trafficking up to 2,000 LBS of marijuana. ...With that being said, do you really think a drug trafficker in Miami qualifies as an "elderly man" that you can take advantage of? Not to mention in the photo i took of him signing the contract he is clearly bigger, stronger and in better physical shape than i am... and i'm 27!

Lie #6
Seller opened a case with the local detectives to investigate me regarding real estate fraud.
-This is a lie because at no point did i try to fraudulently conduct business, i carefully explained everything to him in his language (Spanish) and have done everything in my power to make sure the deal goes smoothly and he gets what we agreed upon.

There was many other lies that thanks to my ability to remain organized and keep track of everything i work on were also proven wrong... the detectives even went to my Brokerage firm where the owner/broker called me in to have a meeting, it started out with him chewing me up for what he believed to be a shady agent but after presenting my side of the story he was on my side and said there was absolutely no doubt in his mind that i was doing this correctly and had nothing but good intentions. he said the seller is just a lowlife who wants to get out of the contract to get more money somewhere else. My broker then directly contacted sellers attorney and presented my side of the story along with all of my evidence.... his attorneys response was "Effective immediately we no longer represent the home owner and want nothing to do with him." 

Although the above paragraph is a win in my book, i decided to just let it go. I don't want to force the man to sell if he really does not want to and he will probably just lawyer up again and the battle will start all over. There will be more deals and although this $10,000-$20,000 payday was going to be amazing, i have learned a lot from this experience and will be better equipped for it next time.

NO DEAL, LEARN, GROW, MOVE ON.

[JD Martin]

What happened to the $200? 

[Cesar Mundaca]

@JD Martin Counting it as a $200 life lesson.

[JD Martin]

Originally posted by @Cesar Mundaca:

@JD Martin Counting it as a $200 life lesson.

I'm willing to bet one day it will be $200 well spent :)

[Cesar Mundaca]

@JD Martin Haha, thanks! i'm sure it will be too!