Backing Out of an Assignment Deal – Advice?

Question

Hey everyone, I’m looking for some insight. I have an assignment deal that I’m considering backing out of before closing.( I'm the end buyer) The title company already has my $5K EMD. I just found out the property is in a Zone A flood area, which means lower property values and a longer selling timeline.

At this point, I’d rather take the $5K loss than deal with the potential headaches. Has anyone been in a similar situation? How did you handle it? Appreciate any advice!

Kevin Sobilo · Answer

@Mike Romano, you have to look at your contract. You want to make sure the $5k is the only money you will owe. Some sales contract's don't limit the seller to retaining the $5k EMD, they can also seek liquidated damages in addition. For example, they could seek lost rent until they get another deal done. It all depends on the contract.

Since it sounds like you are working without a real estate agent, I would contact a lawyer to review the contract and help you notify the seller's side correctly to terminate the contract and release the EMD.

In the future, you might want to use an agent or lawyer when entering deals like this. Many contracts allow for the buyer to do some due diligence that could include things like inspections, zoning, whether the property is insurable, etc. If this had been in your contract and you discovered the issue during the due diligence period you could have been terminating the contract and getting back that $5k EMD.

Peter Mckernan · Answer

Is this something that was not disclosed? Even with assignment deals from wholesalers, if there are things that were not disclosed I have been able to get clients out of them. There are things that if not disclosed can still be pinned back on the wholesaler/seller even if you are buying the deal. Material facts are still something that are significant in properties purchases in any compacity.

Mike Romano · Answer

@Kevin Sobilo Thanks, this is a simple and straightforward assignment contract.

Chris Seveney · Answer

It's definitely a tough situation when you find out critical information like being in a flood zone right before closing. Do you have an out to get escrow back?

Ken M. · Answer

First, call the title/escrow/attorney company and see if you are entitled to your money back. Then find out from a realtor broker or attorney what the disclosure requirements are. Then find out from the person on title, not the assignor, what the assignor promised or has in writing as an agreement. It may have been an illegal assignment depending on circumstances.

For instance, if the assignor represented that they were selling the property and if they are not an agent, they might be illegally representing sellers. If they told you they were selling a contract, it may be a legal transaction. An attorney can help you with the definitions, what is allowed and what isn't. Spend the couple of hundred dollars to get legal advice.

Backing Out of an Assignment Deal – Advice?

Backing Out of an Assignment Deal – Advice?

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