Wholesaler stopped communicating with earnest money deposit

Chicago, IL · Member since 2017 · 79 posts · 39 votes

Hi Biggerpockets, “What remedies to expect/use on wholesalers that keep the ‘good faith escrow’ and don’t return it?” “What are some of the punishments dealt to the wholesaler e.g. were they imprisoned or fined, forced to pay all plaintiff attorney’s costs, enjoined/lost ability to enter into mortgages, sell real estate, or dealing in finance deals?” We have a signed contract that the wholesaler don't want to move forward with because he discovered he can't double close and have to pay closing costs on two transactions, which eats into his profit. He has stopped contact. Thanks for your answers. Lee

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Kyle J.

Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes

@Lee Lockhart It sounds like you paid this an earnest money deposit directly to the wholesaler. If so, unfortunately you're probably not going to see that money again.

In the future, don't ever pay money directly to a wholesaler (or an actual seller for that matter). It should be held in an escrow account.

Hopefully you're not out too much money.

One idea to help salvage the deal, if it's just the wholesaler that has ghosted you, perhaps you could try going direct to the seller and see if he/she is still interested in selling to you directly? After all, you two are the true principal parties in the deal. The wholesaler was just the middleman. Maybe the seller still wants to sell but is also wondering what happened to the wholesaler. Might be worth a shot.

Good luck.

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
6y
first off in IL you must be licensed real estate agent to wholesale.. so i would start there with the state real estate licensing agency and file a complaint.
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Kyle J.
Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
6y
@Lee Lockhart It sounds like you paid this an earnest money deposit directly to the wholesaler. If so, unfortunately you're probably not going to see that money again.
In the future, don't ever pay money directly to a wholesaler (or an actual seller for that matter). It should be held in an escrow account.
Hopefully you're not out too much money.
One idea to help salvage the deal, if it's just the wholesaler that has ghosted you, perhaps you could try going direct to the seller and see if he/she is still interested in selling to you directly? After all, you two are the true principal parties in the deal. The wholesaler was just the middleman. Maybe the seller still wants to sell but is also wondering what happened to the wholesaler. Might be worth a shot.
Good luck.
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Bradley Laddusaw
Lender · Oceanside, CA · Member since 2014 · 39 posts · 50 votes
6y
@Lee Lockhart, I would have to agree with @Jay Hinrichs and @Kyle J.. Ideally your EMD is sitting with an Escrow. If it is, they are not performing nor executing their part of the transaction as they need to be able to close the front end. A client of ours the other week had a deal unwind due to the Wholesaler not being able to perform on his contractual requirements to close the front end and have the property delivered vacant. In this instance, the EMD was held with escrow, Notice to Perform was issued, the Escrow was officially cancelled and EMD returned. This was in California and our first Covid19 affected deal.
It will be difficult to go this route if the EMD was paid directly to the Wholesaler. My fear is that they may not have even had it in contract if they all of sudden went dark on you. This would not be the first time this has occurred.
-Brad
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
6y
Originally posted by @Bradley Laddusaw:
@Lee Lockhart, I would have to agree with @Jay Hinrichs and @Kyle J.. Ideally your EMD is sitting with an Escrow. If it is, they are not performing nor executing their part of the transaction as they need to be able to close the front end. A client of ours the other week had a deal unwind due to the Wholesaler not being able to perform on his contractual requirements to close the front end and have the property delivered vacant. In this instance, the EMD was held with escrow, Notice to Perform was issued, the Escrow was officially cancelled and EMD returned. This was in California and our first Covid19 affected deal.
It will be difficult to go this route if the EMD was paid directly to the Wholesaler. My fear is that they may not have even had it in contract if they all of sudden went dark on you. This would not be the first time this has occurred.
-Brad
YUP 99% sure that money is gone .. right now ( and even in the past) but especially right now one would have to be nuts to give a EMD to anyone but title company or escrow company or closing attorney.. there are going to be a lot of wholesalers that cant close deals.

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Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
6y
Going to the owner likely won't help....this was probably an REO purchase, which can never be assigned, and your dummy wholesaler didn't know it. Have an agent look in the mls, find it, put your own offer in as soon as his dies.
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