EMD placed with Title Company

[Latoya Pryor]

I just got my first contract signed. I was informed from another wholesaler that I should not have turned in my EMD to any title company cause if the deal fails I could be charged up to $2000 by title companies for them pulling title. Do they automatically pull the title? She is just holding my emd funds in escrow until closing as I discussed with her(title company). I was also told I could be sued by the owner if I did not have enough funds in my LLC to cover the cost of the contract!? This has me shaking in my boots because I for one learned the EMD was refundable provided the contract clearly stated. And for two I have the right to void the contract within a certain period of time if I do not find a buyer? I'm so confused now. You hear all of this you don't need money to wholesale then I'm being told I have to have the funds available and ready if I do not find a buyer. I'm worried now. I was excited at first. This info is from someone that I was contemplating on doing a jv deal on this property. But he suggests I use the law firm he uses since he has built a rapport with them. My guess is I would need to assign contract over to his LLC since he says he has the proof of funds available. Makes no sense to me. Can someone clarify to me what is going on?

[Lydia R.]

Quote from @Latoya Pryor:

I just got my first contract signed. I was informed from another wholesaler that I should not have turned in my EMD to any title company cause if the deal fails I could be charged up to $2000 by title companies for them pulling title. Do they automatically pull the title? She is just holding my emd funds in escrow until closing as I discussed with her(title company). I was also told I could be sued by the owner if I did not have enough funds in my LLC to cover the cost of the contract!? This has me shaking in my boots because I for one learned the EMD was refundable provided the contract clearly stated. And for two I have the right to void the contract within a certain period of time if I do not find a buyer? I'm so confused now. You hear all of this you don't need money to wholesale then I'm being told I have to have the funds available and ready if I do not find a buyer. I'm worried now. I was excited at first. This info is from someone that I was contemplating on doing a jv deal on this property. But he suggests I use the law firm he uses since he has built a rapport with them. My guess is I would need to assign contract over to his LLC since he says he has the proof of funds available. Makes no sense to me. Can someone clarify to me what is going on?

 First of all, dont panic. Panic only clouds your judgement and causes you to make a rash decision instead of an informed, rational one. 

First thing you need to do is have a conversation with your title company. Ask them if they charge a fee for title work that is completed for deals that dont close. This is a common practice with smaller title companies. Obviously your preference should be to work with a title company that does not charge you if your deal falls apart. I mean, what if the reason the deal falls apart is the title not being clear? That would be a situation beyond your control. 
Second of all, you really should have a better understanding of the entire escrow and title process because otherwise you are at the mercy of those who are more well informed and you are also susceptible to those who dont know what the heck they are talking about but because you dont either you believe what they are saying. When I was in college the girl who lived in the dorm room next to mine truly believed she could not get pregnant if she was on the top. Because of gravity. Yeah....thats what happens when you are uninformed. Please dont be this girl. And Im sure it wont shock you to learn that she got pregnant second semester and dropped out. 

Let me give you a quick crash course in the title and escrow process. The title company is responsible for, among many things, examining the chain of title and making sure there are no title issues or mistakes or unpaid debts that are clouding the title and preventing the eventual buyer from receiving a clear and clean title report on the day of closing. The typically begin this process right away in order to meet the closing date deadline. EMD is refundable but only in the circumstances laid out within your contract. So you might want to pull it out and read what it says about EMD.

You absolutely do NOT have the right to terminate the contract because you could not find a buyer. That is not a valid reason for termination and if that is the reason you provide, you will most certainly lose your EMD. You should read what your contract says about termination. It should outline the valid reasons you can terminate, including the seller's inability to provide clear title and structural defects found within the property that were not disclosed prior to the contract. Again, without reading your contract I cannot tell you for certain what the termination options are.

From the little bit of background you've given, it sounds like this person is just trying to steal your deal. There is ABSOLUTELY no reason for you to assign the contract to their LLC if you already have it under contract. My best guess is that this is an experienced wholesaler who can clearly tell how green and new you are and they are trying to take full advantage. Unfortunately this is a sharkey business and this happens more often than it should. If I were you, I would completely cut off communication with this person because they are quite literally trying to steal your deal.

I have a friend/investor in VA and I trust her implicitly. I can put you in contact with her, she might be a buyer for your deal but if not she can at least give you an education on the actual process in your state so you know how things go and you wont be such a target in the future. Knowledge is power for sure! Send me a PM and I will put you in contact with my friend, her name is Natalie. Shes a sweetheart and she will be more than happy to help you. Sorry this is happening to you but you came to the right place to get advice!

[Nick C.]

I’ve never heard of a title co charging someone for pulling title on a deal that doesn’t close. To cover yourself ask the title co to not pull title until your due diligence period has passed. 
Technically anyone can sue anyone for anything, but if you follow the contract you and the seller signed why would they sue you? And what would they gain out of it?
It sounds like this wholesaler is spreading half truths and misinformation to weasel in on your deal. 

[Latoya Pryor]

Quote from @Nick C.:

I’ve never heard of a title co charging someone for pulling title on a deal that doesn’t close. To cover yourself ask the title co to not pull title until your due diligence period has passed. 
Technically anyone can sue anyone for anything, but if you follow the contract you and the seller signed why would they sue you? And what would they gain out of it?
It sounds like this wholesaler is spreading half truths and misinformation to weasel in on your deal. 

 I was thinking so as well.  All of my research none of this was mentioned that was told to me.  I think it was to scare me as a newbie to weasel as well.  I was definitely thinking paying close attention to words.  My main worry is I didn't want to get into any legal issues because of good intentions and trying my hand at the wholesale process on an honest level.    shheesshh the nerve of some people.  Thanks for your reply

[Latoya Pryor]

Also as a pointer I was told to take my emd out of my escrow at the other title company and put in escrow at attorney office that this particular person deals with and then assign to their llc for better protection!  I'm so new to this and this is an awesome deal that I can't lose over untruthful means.  Is anyone else seeing anything wrong with this?  I'm almost certain I'm not overreacting but still slightly unsure.

[Tom Gimer]

It’s not uncommon to be squeezed out of a wholesale deal if you aren’t careful. 

Blood in the water and whatnot.

[David Ramirez]

Hey @Latoya Pryor,

You want to ensure that you open escrow promptly after signing an agreement with the seller because the earnest money deposit (EMD) is what solidifies the agreement. Additionally, it's important to inform the title agent that you intend to assign the contract to an end buyer. However, you should instruct them to only conduct a title search and hold off on running a municipal lien search, as the latter incurs costs.

If you have clearly specified in your assignment contract, your EMD can be refunded as soon as the end buyer places their EMD. Furthermore, if your agreement with the seller allows you to terminate the agreement at any point before closing for any reason, and especially during the inspection period, you should be entitled to receive your EMD back. In such a case, it would be difficult for them to sue you for insufficient funds.

Good luck!

[Latoya Pryor]

Quote from @David Ramirez:

Hey @Latoya Pryor,

You want to ensure that you open escrow promptly after signing an agreement with the seller because the earnest money deposit (EMD) is what solidifies the agreement. Additionally, it's important to inform the title agent that you intend to assign the contract to an end buyer. However, you should instruct them to only conduct a title search and hold off on running a municipal lien search, as the latter incurs costs.

If you have clearly specified in your assignment contract, your EMD can be refunded as soon as the end buyer places their EMD. Furthermore, if your agreement with the seller allows you to terminate the agreement at any point before closing for any reason, and especially during the inspection period, you should be entitled to receive your EMD back. In such a case, it would be difficult for them to sue you for insufficient funds.

Good luck!

 Very helpful!  So glad I did all that you mentioned so I should be fine.  I think I was trying to be scared out of my deal so they could move in. I also confirmed witht he title copany and everything is straight.  Thank you

[Don Konipol]

Quote from @Latoya Pryor:

I just got my first contract signed. I was informed from another wholesaler that I should not have turned in my EMD to any title company cause if the deal fails I could be charged up to $2000 by title companies for them pulling title. Do they automatically pull the title? She is just holding my emd funds in escrow until closing as I discussed with her(title company). I was also told I could be sued by the owner if I did not have enough funds in my LLC to cover the cost of the contract!? This has me shaking in my boots because I for one learned the EMD was refundable provided the contract clearly stated. And for two I have the right to void the contract within a certain period of time if I do not find a buyer? I'm so confused now. You hear all of this you don't need money to wholesale then I'm being told I have to have the funds available and ready if I do not find a buyer. I'm worried now. I was excited at first. This info is from someone that I was contemplating on doing a jv deal on this property. But he suggests I use the law firm he uses since he has built a rapport with them. My guess is I would need to assign contract over to his LLC since he says he has the proof of funds available. Makes no sense to me. Can someone clarify to me what is going on?

No one can answer your question with any assurance that the answer is correct without first reading the executed purchase contract and second knowing the state that the property is located in.  
Further, the term “title company”, can actually cover a variety of different companies.  There’s the company that actually underwrites the title policy.  There’s the company that acts as escrow agent.  There’s the company that acts as closing agent. There’s the company that is a wholly owned office of the policy underwriter.  The company that’s a “fee office “ for the underwriter.  Often, a single entity service some or all of these.  
So, the answer to your concern depends on (1) specific language in the purchase contract (2) state law of the state the property is located in (3) the type of entity you’re dealing with as “title company” and their policies and procedures.  

Whether the seller can keep your earnest money deposit because you never had the ability to complete the transaction is an interesting one.  I’ve heard of an argument being made that if someone makes an offer to purchase a property and has no ability to complete that offer, and assuming the offer is not subject to a financing condition, then the buyer has committed a fraudulent act by stating he will complete a purchase that he has no ability to complete.  This is regardless of any contingency, other than perhaps financing, since he couldn’t have completed the deal even if the contingencies had been satisfied.  I would think in most cases a seller would not pursue this avenue.
Escrow agents will now days only release earnest money if both sides of the transaction agree to the release.  If not they will submit the earnest money to an “inter pleader” and let the courts decide.  Sometimes with amounts under $5,000 you can go to small claims court and have a small claims judge decide the earnest money issue if the parties can’t come to an agreement. 

[Lydia R.]

Quote from @Latoya Pryor:

I just got my first contract signed. I was informed from another wholesaler that I should not have turned in my EMD to any title company cause if the deal fails I could be charged up to $2000 by title companies for them pulling title. Do they automatically pull the title? She is just holding my emd funds in escrow until closing as I discussed with her(title company). I was also told I could be sued by the owner if I did not have enough funds in my LLC to cover the cost of the contract!? This has me shaking in my boots because I for one learned the EMD was refundable provided the contract clearly stated. And for two I have the right to void the contract within a certain period of time if I do not find a buyer? I'm so confused now. You hear all of this you don't need money to wholesale then I'm being told I have to have the funds available and ready if I do not find a buyer. I'm worried now. I was excited at first. This info is from someone that I was contemplating on doing a jv deal on this property. But he suggests I use the law firm he uses since he has built a rapport with them. My guess is I would need to assign contract over to his LLC since he says he has the proof of funds available. Makes no sense to me. Can someone clarify to me what is going on?

 First of all, dont panic. Panic only clouds your judgement and causes you to make a rash decision instead of an informed, rational one. 

First thing you need to do is have a conversation with your title company. Ask them if they charge a fee for title work that is completed for deals that dont close. This is a common practice with smaller title companies. Obviously your preference should be to work with a title company that does not charge you if your deal falls apart. I mean, what if the reason the deal falls apart is the title not being clear? That would be a situation beyond your control. 
Second of all, you really should have a better understanding of the entire escrow and title process because otherwise you are at the mercy of those who are more well informed and you are also susceptible to those who dont know what the heck they are talking about but because you dont either you believe what they are saying. When I was in college the girl who lived in the dorm room next to mine truly believed she could not get pregnant if she was on the top. Because of gravity. Yeah....thats what happens when you are uninformed. Please dont be this girl. And Im sure it wont shock you to learn that she got pregnant second semester and dropped out. 

Let me give you a quick crash course in the title and escrow process. The title company is responsible for, among many things, examining the chain of title and making sure there are no title issues or mistakes or unpaid debts that are clouding the title and preventing the eventual buyer from receiving a clear and clean title report on the day of closing. The typically begin this process right away in order to meet the closing date deadline. EMD is refundable but only in the circumstances laid out within your contract. So you might want to pull it out and read what it says about EMD.

You absolutely do NOT have the right to terminate the contract because you could not find a buyer. That is not a valid reason for termination and if that is the reason you provide, you will most certainly lose your EMD. You should read what your contract says about termination. It should outline the valid reasons you can terminate, including the seller's inability to provide clear title and structural defects found within the property that were not disclosed prior to the contract. Again, without reading your contract I cannot tell you for certain what the termination options are.

From the little bit of background you've given, it sounds like this person is just trying to steal your deal. There is ABSOLUTELY no reason for you to assign the contract to their LLC if you already have it under contract. My best guess is that this is an experienced wholesaler who can clearly tell how green and new you are and they are trying to take full advantage. Unfortunately this is a sharkey business and this happens more often than it should. If I were you, I would completely cut off communication with this person because they are quite literally trying to steal your deal.

I have a friend/investor in VA and I trust her implicitly. I can put you in contact with her, she might be a buyer for your deal but if not she can at least give you an education on the actual process in your state so you know how things go and you wont be such a target in the future. Knowledge is power for sure! Send me a PM and I will put you in contact with my friend, her name is Natalie. Shes a sweetheart and she will be more than happy to help you. Sorry this is happening to you but you came to the right place to get advice!

[Lydia R.]

Quote from @Latoya Pryor:

Also as a pointer I was told to take my emd out of my escrow at the other title company and put in escrow at attorney office that this particular person deals with and then assign to their llc for better protection!  I'm so new to this and this is an awesome deal that I can't lose over untruthful means.  Is anyone else seeing anything wrong with this?  I'm almost certain I'm not overreacting but still slightly unsure.

 You are totally getting scammed! Please see the other response I posted to your question. Do not do any of those things! This person is actively trying to screw you over.

[Latoya Pryor]

Quote from @Lydia R.:

Quote from @Latoya Pryor:

I just got my first contract signed. I was informed from another wholesaler that I should not have turned in my EMD to any title company cause if the deal fails I could be charged up to $2000 by title companies for them pulling title. Do they automatically pull the title? She is just holding my emd funds in escrow until closing as I discussed with her(title company). I was also told I could be sued by the owner if I did not have enough funds in my LLC to cover the cost of the contract!? This has me shaking in my boots because I for one learned the EMD was refundable provided the contract clearly stated. And for two I have the right to void the contract within a certain period of time if I do not find a buyer? I'm so confused now. You hear all of this you don't need money to wholesale then I'm being told I have to have the funds available and ready if I do not find a buyer. I'm worried now. I was excited at first. This info is from someone that I was contemplating on doing a jv deal on this property. But he suggests I use the law firm he uses since he has built a rapport with them. My guess is I would need to assign contract over to his LLC since he says he has the proof of funds available. Makes no sense to me. Can someone clarify to me what is going on?

 First of all, dont panic. Panic only clouds your judgement and causes you to make a rash decision instead of an informed, rational one. 

First thing you need to do is have a conversation with your title company. Ask them if they charge a fee for title work that is completed for deals that dont close. This is a common practice with smaller title companies. Obviously your preference should be to work with a title company that does not charge you if your deal falls apart. I mean, what if the reason the deal falls apart is the title not being clear? That would be a situation beyond your control. 
Second of all, you really should have a better understanding of the entire escrow and title process because otherwise you are at the mercy of those who are more well informed and you are also susceptible to those who dont know what the heck they are talking about but because you dont either you believe what they are saying. When I was in college the girl who lived in the dorm room next to mine truly believed she could not get pregnant if she was on the top. Because of gravity. Yeah....thats what happens when you are uninformed. Please dont be this girl. And Im sure it wont shock you to learn that she got pregnant second semester and dropped out. 

Let me give you a quick crash course in the title and escrow process. The title company is responsible for, among many things, examining the chain of title and making sure there are no title issues or mistakes or unpaid debts that are clouding the title and preventing the eventual buyer from receiving a clear and clean title report on the day of closing. The typically begin this process right away in order to meet the closing date deadline. EMD is refundable but only in the circumstances laid out within your contract. So you might want to pull it out and read what it says about EMD.

You absolutely do NOT have the right to terminate the contract because you could not find a buyer. That is not a valid reason for termination and if that is the reason you provide, you will most certainly lose your EMD. You should read what your contract says about termination. It should outline the valid reasons you can terminate, including the seller's inability to provide clear title and structural defects found within the property that were not disclosed prior to the contract. Again, without reading your contract I cannot tell you for certain what the termination options are.

From the little bit of background you've given, it sounds like this person is just trying to steal your deal. There is ABSOLUTELY no reason for you to assign the contract to their LLC if you already have it under contract. My best guess is that this is an experienced wholesaler who can clearly tell how green and new you are and they are trying to take full advantage. Unfortunately this is a sharkey business and this happens more often than it should. If I were you, I would completely cut off communication with this person because they are quite literally trying to steal your deal.

I have a friend/investor in VA and I trust her implicitly. I can put you in contact with her, she might be a buyer for your deal but if not she can at least give you an education on the actual process in your state so you know how things go and you wont be such a target in the future. Knowledge is power for sure! Send me a PM and I will put you in contact with my friend, her name is Natalie. Shes a sweetheart and she will be more than happy to help you. Sorry this is happening to you but you came to the right place to get advice!

Thank you so much for your useful information. I'm proud of myself because my contract is very detailed to provide my own coverage should I not be able to sell within the due diligence period and get my EMD funds back. Also that other wholesaler has been cut loose. My last contact was him asking if I would accept $20,000 and assign the contract over to him. My answer was a flat no I will not. I'm so glad I used my instincts as well as my awareness and ability to be able to tell that his intentions were dishonest. Once again thank you!

[Latoya Pryor]

Quote from @Latoya Pryor:

Quote from @Lydia R.:

Quote from @Latoya Pryor:

I just got my first contract signed. I was informed from another wholesaler that I should not have turned in my EMD to any title company cause if the deal fails I could be charged up to $2000 by title companies for them pulling title. Do they automatically pull the title? She is just holding my emd funds in escrow until closing as I discussed with her(title company). I was also told I could be sued by the owner if I did not have enough funds in my LLC to cover the cost of the contract!? This has me shaking in my boots because I for one learned the EMD was refundable provided the contract clearly stated. And for two I have the right to void the contract within a certain period of time if I do not find a buyer? I'm so confused now. You hear all of this you don't need money to wholesale then I'm being told I have to have the funds available and ready if I do not find a buyer. I'm worried now. I was excited at first. This info is from someone that I was contemplating on doing a jv deal on this property. But he suggests I use the law firm he uses since he has built a rapport with them. My guess is I would need to assign contract over to his LLC since he says he has the proof of funds available. Makes no sense to me. Can someone clarify to me what is going on?

 First of all, dont panic. Panic only clouds your judgement and causes you to make a rash decision instead of an informed, rational one. 

First thing you need to do is have a conversation with your title company. Ask them if they charge a fee for title work that is completed for deals that dont close. This is a common practice with smaller title companies. Obviously your preference should be to work with a title company that does not charge you if your deal falls apart. I mean, what if the reason the deal falls apart is the title not being clear? That would be a situation beyond your control. 
Second of all, you really should have a better understanding of the entire escrow and title process because otherwise you are at the mercy of those who are more well informed and you are also susceptible to those who dont know what the heck they are talking about but because you dont either you believe what they are saying. When I was in college the girl who lived in the dorm room next to mine truly believed she could not get pregnant if she was on the top. Because of gravity. Yeah....thats what happens when you are uninformed. Please dont be this girl. And Im sure it wont shock you to learn that she got pregnant second semester and dropped out. 

Let me give you a quick crash course in the title and escrow process. The title company is responsible for, among many things, examining the chain of title and making sure there are no title issues or mistakes or unpaid debts that are clouding the title and preventing the eventual buyer from receiving a clear and clean title report on the day of closing. The typically begin this process right away in order to meet the closing date deadline. EMD is refundable but only in the circumstances laid out within your contract. So you might want to pull it out and read what it says about EMD.

You absolutely do NOT have the right to terminate the contract because you could not find a buyer. That is not a valid reason for termination and if that is the reason you provide, you will most certainly lose your EMD. You should read what your contract says about termination. It should outline the valid reasons you can terminate, including the seller's inability to provide clear title and structural defects found within the property that were not disclosed prior to the contract. Again, without reading your contract I cannot tell you for certain what the termination options are.

From the little bit of background you've given, it sounds like this person is just trying to steal your deal. There is ABSOLUTELY no reason for you to assign the contract to their LLC if you already have it under contract. My best guess is that this is an experienced wholesaler who can clearly tell how green and new you are and they are trying to take full advantage. Unfortunately this is a sharkey business and this happens more often than it should. If I were you, I would completely cut off communication with this person because they are quite literally trying to steal your deal.

I have a friend/investor in VA and I trust her implicitly. I can put you in contact with her, she might be a buyer for your deal but if not she can at least give you an education on the actual process in your state so you know how things go and you wont be such a target in the future. Knowledge is power for sure! Send me a PM and I will put you in contact with my friend, her name is Natalie. Shes a sweetheart and she will be more than happy to help you. Sorry this is happening to you but you came to the right place to get advice!

Thank you so much for your useful information. I'm proud of myself because my contract is very detailed to provide my own coverage should I not be able to sell within the due diligence period and get my EMD funds back. Also that other wholesaler has been cut loose. My last contact was him asking if I would accept $20,000 and assign the contract over to him. My answer was a flat no I will not. I'm so glad I used my instincts as well as my awareness and ability to be able to tell that his intentions were dishonest. Once again thank you!

 Also I would love to get in contact with your investor friend in virginia.  You can never not meet enough good people in the industry.

Thanks

[Lydia R.]

Quote from @Latoya Pryor:

Quote from @Latoya Pryor:

Quote from @Lydia R.:

Quote from @Latoya Pryor:

I just got my first contract signed. I was informed from another wholesaler that I should not have turned in my EMD to any title company cause if the deal fails I could be charged up to $2000 by title companies for them pulling title. Do they automatically pull the title? She is just holding my emd funds in escrow until closing as I discussed with her(title company). I was also told I could be sued by the owner if I did not have enough funds in my LLC to cover the cost of the contract!? This has me shaking in my boots because I for one learned the EMD was refundable provided the contract clearly stated. And for two I have the right to void the contract within a certain period of time if I do not find a buyer? I'm so confused now. You hear all of this you don't need money to wholesale then I'm being told I have to have the funds available and ready if I do not find a buyer. I'm worried now. I was excited at first. This info is from someone that I was contemplating on doing a jv deal on this property. But he suggests I use the law firm he uses since he has built a rapport with them. My guess is I would need to assign contract over to his LLC since he says he has the proof of funds available. Makes no sense to me. Can someone clarify to me what is going on?

 First of all, dont panic. Panic only clouds your judgement and causes you to make a rash decision instead of an informed, rational one. 

First thing you need to do is have a conversation with your title company. Ask them if they charge a fee for title work that is completed for deals that dont close. This is a common practice with smaller title companies. Obviously your preference should be to work with a title company that does not charge you if your deal falls apart. I mean, what if the reason the deal falls apart is the title not being clear? That would be a situation beyond your control. 
Second of all, you really should have a better understanding of the entire escrow and title process because otherwise you are at the mercy of those who are more well informed and you are also susceptible to those who dont know what the heck they are talking about but because you dont either you believe what they are saying. When I was in college the girl who lived in the dorm room next to mine truly believed she could not get pregnant if she was on the top. Because of gravity. Yeah....thats what happens when you are uninformed. Please dont be this girl. And Im sure it wont shock you to learn that she got pregnant second semester and dropped out. 

Let me give you a quick crash course in the title and escrow process. The title company is responsible for, among many things, examining the chain of title and making sure there are no title issues or mistakes or unpaid debts that are clouding the title and preventing the eventual buyer from receiving a clear and clean title report on the day of closing. The typically begin this process right away in order to meet the closing date deadline. EMD is refundable but only in the circumstances laid out within your contract. So you might want to pull it out and read what it says about EMD.

You absolutely do NOT have the right to terminate the contract because you could not find a buyer. That is not a valid reason for termination and if that is the reason you provide, you will most certainly lose your EMD. You should read what your contract says about termination. It should outline the valid reasons you can terminate, including the seller's inability to provide clear title and structural defects found within the property that were not disclosed prior to the contract. Again, without reading your contract I cannot tell you for certain what the termination options are.

From the little bit of background you've given, it sounds like this person is just trying to steal your deal. There is ABSOLUTELY no reason for you to assign the contract to their LLC if you already have it under contract. My best guess is that this is an experienced wholesaler who can clearly tell how green and new you are and they are trying to take full advantage. Unfortunately this is a sharkey business and this happens more often than it should. If I were you, I would completely cut off communication with this person because they are quite literally trying to steal your deal.

I have a friend/investor in VA and I trust her implicitly. I can put you in contact with her, she might be a buyer for your deal but if not she can at least give you an education on the actual process in your state so you know how things go and you wont be such a target in the future. Knowledge is power for sure! Send me a PM and I will put you in contact with my friend, her name is Natalie. Shes a sweetheart and she will be more than happy to help you. Sorry this is happening to you but you came to the right place to get advice!

Thank you so much for your useful information. I'm proud of myself because my contract is very detailed to provide my own coverage should I not be able to sell within the due diligence period and get my EMD funds back. Also that other wholesaler has been cut loose. My last contact was him asking if I would accept $20,000 and assign the contract over to him. My answer was a flat no I will not. I'm so glad I used my instincts as well as my awareness and ability to be able to tell that his intentions were dishonest. Once again thank you!

 Also I would love to get in contact with your investor friend in virginia.  You can never not meet enough good people in the industry.

Thanks

 Send me a PM! More than happy to connect you. 

[Russell Brazil]

If you entered into a contract with out the ability to fulfil the terms of that contract knowingly, then you have committed fraud by inducement. 

[Lydia R.]

Quote from @Latoya Pryor:

Quote from @Lydia R.:

Quote from @Latoya Pryor:

I just got my first contract signed. I was informed from another wholesaler that I should not have turned in my EMD to any title company cause if the deal fails I could be charged up to $2000 by title companies for them pulling title. Do they automatically pull the title? She is just holding my emd funds in escrow until closing as I discussed with her(title company). I was also told I could be sued by the owner if I did not have enough funds in my LLC to cover the cost of the contract!? This has me shaking in my boots because I for one learned the EMD was refundable provided the contract clearly stated. And for two I have the right to void the contract within a certain period of time if I do not find a buyer? I'm so confused now. You hear all of this you don't need money to wholesale then I'm being told I have to have the funds available and ready if I do not find a buyer. I'm worried now. I was excited at first. This info is from someone that I was contemplating on doing a jv deal on this property. But he suggests I use the law firm he uses since he has built a rapport with them. My guess is I would need to assign contract over to his LLC since he says he has the proof of funds available. Makes no sense to me. Can someone clarify to me what is going on?

 First of all, dont panic. Panic only clouds your judgement and causes you to make a rash decision instead of an informed, rational one. 

First thing you need to do is have a conversation with your title company. Ask them if they charge a fee for title work that is completed for deals that dont close. This is a common practice with smaller title companies. Obviously your preference should be to work with a title company that does not charge you if your deal falls apart. I mean, what if the reason the deal falls apart is the title not being clear? That would be a situation beyond your control. 
Second of all, you really should have a better understanding of the entire escrow and title process because otherwise you are at the mercy of those who are more well informed and you are also susceptible to those who dont know what the heck they are talking about but because you dont either you believe what they are saying. When I was in college the girl who lived in the dorm room next to mine truly believed she could not get pregnant if she was on the top. Because of gravity. Yeah....thats what happens when you are uninformed. Please dont be this girl. And Im sure it wont shock you to learn that she got pregnant second semester and dropped out. 

Let me give you a quick crash course in the title and escrow process. The title company is responsible for, among many things, examining the chain of title and making sure there are no title issues or mistakes or unpaid debts that are clouding the title and preventing the eventual buyer from receiving a clear and clean title report on the day of closing. The typically begin this process right away in order to meet the closing date deadline. EMD is refundable but only in the circumstances laid out within your contract. So you might want to pull it out and read what it says about EMD.

You absolutely do NOT have the right to terminate the contract because you could not find a buyer. That is not a valid reason for termination and if that is the reason you provide, you will most certainly lose your EMD. You should read what your contract says about termination. It should outline the valid reasons you can terminate, including the seller's inability to provide clear title and structural defects found within the property that were not disclosed prior to the contract. Again, without reading your contract I cannot tell you for certain what the termination options are.

From the little bit of background you've given, it sounds like this person is just trying to steal your deal. There is ABSOLUTELY no reason for you to assign the contract to their LLC if you already have it under contract. My best guess is that this is an experienced wholesaler who can clearly tell how green and new you are and they are trying to take full advantage. Unfortunately this is a sharkey business and this happens more often than it should. If I were you, I would completely cut off communication with this person because they are quite literally trying to steal your deal.

I have a friend/investor in VA and I trust her implicitly. I can put you in contact with her, she might be a buyer for your deal but if not she can at least give you an education on the actual process in your state so you know how things go and you wont be such a target in the future. Knowledge is power for sure! Send me a PM and I will put you in contact with my friend, her name is Natalie. Shes a sweetheart and she will be more than happy to help you. Sorry this is happening to you but you came to the right place to get advice!

Thank you so much for your useful information. I'm proud of myself because my contract is very detailed to provide my own coverage should I not be able to sell within the due diligence period and get my EMD funds back. Also that other wholesaler has been cut loose. My last contact was him asking if I would accept $20,000 and assign the contract over to him. My answer was a flat no I will not. I'm so glad I used my instincts as well as my awareness and ability to be able to tell that his intentions were dishonest. Once again thank you!

 I dont even know you and Im proud of you!! Good job for sticking to your guns and trusting your gut! If he was willing to offer 20K that means its worth a lot more. Great job. 

[Latoya Pryor]

Quote from @Russell Brazil:

If you entered into a contract with out the ability to fulfil the terms of that contract knowingly, then you have committed fraud by inducement. 

 Are you saying wholesaling is fraud?    How do you describe wholesaling property?  Also I'm not out to commit fraud against anyone.  I've been using the techniques as described on this platform as well as real estate meetups. Please explain more about your thoughts?  Thanks

[Latoya Pryor]

Quote from @Lydia R.:

Quote from @Latoya Pryor:

Quote from @Lydia R.:

Quote from @Latoya Pryor:

I just got my first contract signed. I was informed from another wholesaler that I should not have turned in my EMD to any title company cause if the deal fails I could be charged up to $2000 by title companies for them pulling title. Do they automatically pull the title? She is just holding my emd funds in escrow until closing as I discussed with her(title company). I was also told I could be sued by the owner if I did not have enough funds in my LLC to cover the cost of the contract!? This has me shaking in my boots because I for one learned the EMD was refundable provided the contract clearly stated. And for two I have the right to void the contract within a certain period of time if I do not find a buyer? I'm so confused now. You hear all of this you don't need money to wholesale then I'm being told I have to have the funds available and ready if I do not find a buyer. I'm worried now. I was excited at first. This info is from someone that I was contemplating on doing a jv deal on this property. But he suggests I use the law firm he uses since he has built a rapport with them. My guess is I would need to assign contract over to his LLC since he says he has the proof of funds available. Makes no sense to me. Can someone clarify to me what is going on?

 First of all, dont panic. Panic only clouds your judgement and causes you to make a rash decision instead of an informed, rational one. 

First thing you need to do is have a conversation with your title company. Ask them if they charge a fee for title work that is completed for deals that dont close. This is a common practice with smaller title companies. Obviously your preference should be to work with a title company that does not charge you if your deal falls apart. I mean, what if the reason the deal falls apart is the title not being clear? That would be a situation beyond your control. 
Second of all, you really should have a better understanding of the entire escrow and title process because otherwise you are at the mercy of those who are more well informed and you are also susceptible to those who dont know what the heck they are talking about but because you dont either you believe what they are saying. When I was in college the girl who lived in the dorm room next to mine truly believed she could not get pregnant if she was on the top. Because of gravity. Yeah....thats what happens when you are uninformed. Please dont be this girl. And Im sure it wont shock you to learn that she got pregnant second semester and dropped out. 

Let me give you a quick crash course in the title and escrow process. The title company is responsible for, among many things, examining the chain of title and making sure there are no title issues or mistakes or unpaid debts that are clouding the title and preventing the eventual buyer from receiving a clear and clean title report on the day of closing. The typically begin this process right away in order to meet the closing date deadline. EMD is refundable but only in the circumstances laid out within your contract. So you might want to pull it out and read what it says about EMD.

You absolutely do NOT have the right to terminate the contract because you could not find a buyer. That is not a valid reason for termination and if that is the reason you provide, you will most certainly lose your EMD. You should read what your contract says about termination. It should outline the valid reasons you can terminate, including the seller's inability to provide clear title and structural defects found within the property that were not disclosed prior to the contract. Again, without reading your contract I cannot tell you for certain what the termination options are.

From the little bit of background you've given, it sounds like this person is just trying to steal your deal. There is ABSOLUTELY no reason for you to assign the contract to their LLC if you already have it under contract. My best guess is that this is an experienced wholesaler who can clearly tell how green and new you are and they are trying to take full advantage. Unfortunately this is a sharkey business and this happens more often than it should. If I were you, I would completely cut off communication with this person because they are quite literally trying to steal your deal.

I have a friend/investor in VA and I trust her implicitly. I can put you in contact with her, she might be a buyer for your deal but if not she can at least give you an education on the actual process in your state so you know how things go and you wont be such a target in the future. Knowledge is power for sure! Send me a PM and I will put you in contact with my friend, her name is Natalie. Shes a sweetheart and she will be more than happy to help you. Sorry this is happening to you but you came to the right place to get advice!

Thank you so much for your useful information. I'm proud of myself because my contract is very detailed to provide my own coverage should I not be able to sell within the due diligence period and get my EMD funds back. Also that other wholesaler has been cut loose. My last contact was him asking if I would accept $20,000 and assign the contract over to him. My answer was a flat no I will not. I'm so glad I used my instincts as well as my awareness and ability to be able to tell that his intentions were dishonest. Once again thank you!

 I dont even know you and Im proud of you!! Good job for sticking to your guns and trusting your gut! If he was willing to offer 20K that means its worth a lot more. Great job. 

 Thank you!  That is very kind of you.  There's a previous post on this forum post about fraud!?  That's not my intentions at all.  Why is everyone making me feel bad for taking on this occupation?  Is it just people who are against wholesalers? 

[Russell Brazil]

Quote from @Latoya Pryor:

Quote from @Russell Brazil:

If you entered into a contract with out the ability to fulfil the terms of that contract knowingly, then you have committed fraud by inducement. 

 Are you saying wholesaling is fraud?    How do you describe wholesaling property?  Also I'm not out to commit fraud against anyone.  I've been using the techniques as described on this platform as well as real estate meetups. Please explain more about your thoughts?  Thanks

 It's very simple. If you enter into a contract to purchase something...could be real estate, could be a car, could be a watch.....and you know you do not have the ability to fulfil that contract....that is Fraud by the Inducement. Also if you make any false statements to the seller this would fall under that as well.

Do not enter into contracts if you are unable to meet the terms of that contract. Look up your state statutes and case law on the subject to see what your liability could be potentially if you have an injured party (the seller) who presses the issue.

Here in DC we are seeing many a seller lately being represented by legal aid on fraud by inducement issues with wholesalers. 

Nothing wrong with assigning a contract (assuming that is legal in your state) but you need to be able to fulfil the terms of any contract you enter into.

[Latoya Pryor]

Quote from @Russell Brazil:

Quote from @Latoya Pryor:

Quote from @Russell Brazil:

If you entered into a contract with out the ability to fulfil the terms of that contract knowingly, then you have committed fraud by inducement. 

 Are you saying wholesaling is fraud?    How do you describe wholesaling property?  Also I'm not out to commit fraud against anyone.  I've been using the techniques as described on this platform as well as real estate meetups. Please explain more about your thoughts?  Thanks

 It's very simple. If you enter into a contract to purchase something...could be real estate, could be a car, could be a watch.....and you know you do not have the ability to fulfil that contract....that is Fraud by the Inducement. Also if you make any false statements to the seller this would fall under that as well.

Do not enter into contracts if you are unable to meet the terms of that contract. Look up your state statutes and case law on the subject to see what your liability could be potentially if you have an injured party (the seller) who presses the issue.

Here in DC we are seeing many a seller lately being represented by legal aid on fraud by inducement issues with wholesalers. 

Nothing wrong with assigning a contract (assuming that is legal in your state) but you need to be able to fulfil the terms of any contract you enter into.

So my question was...Do you consider all wholesalers fraud?  Especially if the contract states assignable and buyer is aware?  I'm new to this so once again fraud is not my intention.  Are you saying wholesaling is probably not the best profession since most wholesalers do not have the money to purchase property out right?  

[Latoya Pryor]

Quote from @Latoya Pryor:

Quote from @Russell Brazil:

Quote from @Latoya Pryor:

Quote from @Russell Brazil:

If you entered into a contract with out the ability to fulfil the terms of that contract knowingly, then you have committed fraud by inducement. 

 Are you saying wholesaling is fraud?    How do you describe wholesaling property?  Also I'm not out to commit fraud against anyone.  I've been using the techniques as described on this platform as well as real estate meetups. Please explain more about your thoughts?  Thanks

 It's very simple. If you enter into a contract to purchase something...could be real estate, could be a car, could be a watch.....and you know you do not have the ability to fulfil that contract....that is Fraud by the Inducement. Also if you make any false statements to the seller this would fall under that as well.

Do not enter into contracts if you are unable to meet the terms of that contract. Look up your state statutes and case law on the subject to see what your liability could be potentially if you have an injured party (the seller) who presses the issue.

Here in DC we are seeing many a seller lately being represented by legal aid on fraud by inducement issues with wholesalers. 

Nothing wrong with assigning a contract (assuming that is legal in your state) but you need to be able to fulfil the terms of any contract you enter into.

So my question was...Do you consider all wholesalers fraud?  Especially if the contract states assignable and buyer is aware?  I'm new to this so once again fraud is not my intention.  Are you saying wholesaling is probably not the best profession since most wholesalers do not have the money to purchase property out right?  

 Also can you explain fraud by inducement if there is no tricking the seller into signing the contract?  Once again especially if terms are listed in the contract?

[Don Konipol]

Quote from @Latoya Pryor:

Quote from @Latoya Pryor:

Quote from @Russell Brazil:

Quote from @Latoya Pryor:

Quote from @Russell Brazil:

If you entered into a contract with out the ability to fulfil the terms of that contract knowingly, then you have committed fraud by inducement. 

 Are you saying wholesaling is fraud?    How do you describe wholesaling property?  Also I'm not out to commit fraud against anyone.  I've been using the techniques as described on this platform as well as real estate meetups. Please explain more about your thoughts?  Thanks

 It's very simple. If you enter into a contract to purchase something...could be real estate, could be a car, could be a watch.....and you know you do not have the ability to fulfil that contract....that is Fraud by the Inducement. Also if you make any false statements to the seller this would fall under that as well.

Do not enter into contracts if you are unable to meet the terms of that contract. Look up your state statutes and case law on the subject to see what your liability could be potentially if you have an injured party (the seller) who presses the issue.

Here in DC we are seeing many a seller lately being represented by legal aid on fraud by inducement issues with wholesalers. 

Nothing wrong with assigning a contract (assuming that is legal in your state) but you need to be able to fulfil the terms of any contract you enter into.

So my question was...Do you consider all wholesalers fraud?  Especially if the contract states assignable and buyer is aware?  I'm new to this so once again fraud is not my intention.  Are you saying wholesaling is probably not the best profession since most wholesalers do not have the money to purchase property out right?  

 Also can you explain fraud by inducement if there is no tricking the seller into signing the contract?  Once again especially if terms are listed in the contract?

LaToya, in answer to your question, most large wholesalers have the ability to close themselves on any single offer they make so that aspect of their contract is NOT fraud by inducement.  If the person makes an offer stating intent to purchase a property, but KNOWS that they don’t have the ability to fulfill the contract either for lack of funds or inability to obtain financing, then yes this meets the thresh hold for fraud.  Any “weasel” clauses have nothing to do with whether or not fraud was committed, since we are dealing with INTENT here.
Despite this it’s been going on for 40 years. Almost nobody has been called out on it until very recently.  There’s been some action by state real estate commissions, but in truth most of their power is in suspending or revoking licenses, or disciplining licensees.  Attorneys aren’t interested in suing people with no funds to pay the judgement; often the seller has not suffered any financial loss anyway. So people attempting wholesaling will continue doing what they’re doing with almost no consequences.
The way most real property purchase contracts are written they contain an “out” for numerous reasons; failure to pass inspection, inability to obtain financing, etc.  This amounts to the buyer getting a de facto option to purchase the property.  Some contracts, such as the one provided for SFR by the Texas Real Estate Commission, contain an option to include an unrestricted option period where the contract could be terminated for any reason within a specific period of time, for a specific fee.

When I used to “wholesale” properties (we called it “flipping” then) I used a straight option. I would offer, depending on property price and type, a $500 to $2500 (no refundable) option fee to the seller enabling me to purchase the property within 30, 60, or 90 days for a specific price.  If I was unable to secure a buyer who would close within the option period (we could do a Simultaneous closing in those days ) then I “lost” the option money; if I was able to secure buyer who did perform my profit was the agreed price to buyer minus the agreed price to seller minus option fee minus title costs.

 

[Latoya Pryor]

Quote from @Don Konipol:

Quote from @Latoya Pryor:

Quote from @Latoya Pryor:

Quote from @Russell Brazil:

Quote from @Latoya Pryor:

Quote from @Russell Brazil:

If you entered into a contract with out the ability to fulfil the terms of that contract knowingly, then you have committed fraud by inducement. 

 Are you saying wholesaling is fraud?    How do you describe wholesaling property?  Also I'm not out to commit fraud against anyone.  I've been using the techniques as described on this platform as well as real estate meetups. Please explain more about your thoughts?  Thanks

 It's very simple. If you enter into a contract to purchase something...could be real estate, could be a car, could be a watch.....and you know you do not have the ability to fulfil that contract....that is Fraud by the Inducement. Also if you make any false statements to the seller this would fall under that as well.

Do not enter into contracts if you are unable to meet the terms of that contract. Look up your state statutes and case law on the subject to see what your liability could be potentially if you have an injured party (the seller) who presses the issue.

Here in DC we are seeing many a seller lately being represented by legal aid on fraud by inducement issues with wholesalers. 

Nothing wrong with assigning a contract (assuming that is legal in your state) but you need to be able to fulfil the terms of any contract you enter into.

So my question was...Do you consider all wholesalers fraud?  Especially if the contract states assignable and buyer is aware?  I'm new to this so once again fraud is not my intention.  Are you saying wholesaling is probably not the best profession since most wholesalers do not have the money to purchase property out right?  

 Also can you explain fraud by inducement if there is no tricking the seller into signing the contract?  Once again especially if terms are listed in the contract?

LaToya, in answer to your question, most large wholesalers have the ability to close themselves on any single offer they make so that aspect of their contract is NOT fraud by inducement.  If the person makes an offer stating intent to purchase a property, but KNOWS that they don’t have the ability to fulfill the contract either for lack of funds or inability to obtain financing, then yes this meets the thresh hold for fraud.  Any “weasel” clauses have nothing to do with whether or not fraud was committed, since we are dealing with INTENT here.
Despite this it’s been going on for 40 years. Almost nobody has been called out on it until very recently.  There’s been some action by state real estate commissions, but in truth most of their power is in suspending or revoking licenses, or disciplining licensees.  Attorneys aren’t interested in suing people with no funds to pay the judgement; often the seller has not suffered any financial loss anyway. So people attempting wholesaling will continue doing what they’re doing with almost no consequences.
The way most real property purchase contracts are written they contain an “out” for numerous reasons; failure to pass inspection, inability to obtain financing, etc.  This amounts to the buyer getting a de facto option to purchase the property.  Some contracts, such as the one provided for SFR by the Texas Real Estate Commission, contain an option to include an unrestricted option period where the contract could be terminated for any reason within a specific period of time, for a specific fee.

When I used to “wholesale” properties (we called it “flipping” then) I used a straight option. I would offer, depending on property price and type, a $500 to $2500 (no refundable) option fee to the seller enabling me to purchase the property within 30, 60, or 90 days for a specific price.  If I was unable to secure a buyer who would close within the option period (we could do a Simultaneous closing in those days ) then I “lost” the option money; if I was able to secure buyer who did perform my profit was the agreed price to buyer minus the agreed price to seller minus option fee minus title costs.

 

 Thanks for clarifying your previous statement for the unknown including me.  To say I'm committing fraud out of the blue was a blow to the face especially if that is not my intention.  It's just weird how these wholesalers meetups are advertised and open to the public to attend and supposedly be so illegal.  Thanks

[Don Konipol]

Quote from @Latoya Pryor:

Quote from @Don Konipol:

Quote from @Latoya Pryor:

Quote from @Latoya Pryor:

Quote from @Russell Brazil:

Quote from @Latoya Pryor:

Quote from @Russell Brazil:

If you entered into a contract with out the ability to fulfil the terms of that contract knowingly, then you have committed fraud by inducement. 

 Are you saying wholesaling is fraud?    How do you describe wholesaling property?  Also I'm not out to commit fraud against anyone.  I've been using the techniques as described on this platform as well as real estate meetups. Please explain more about your thoughts?  Thanks

 It's very simple. If you enter into a contract to purchase something...could be real estate, could be a car, could be a watch.....and you know you do not have the ability to fulfil that contract....that is Fraud by the Inducement. Also if you make any false statements to the seller this would fall under that as well.

Do not enter into contracts if you are unable to meet the terms of that contract. Look up your state statutes and case law on the subject to see what your liability could be potentially if you have an injured party (the seller) who presses the issue.

Here in DC we are seeing many a seller lately being represented by legal aid on fraud by inducement issues with wholesalers. 

Nothing wrong with assigning a contract (assuming that is legal in your state) but you need to be able to fulfil the terms of any contract you enter into.

So my question was...Do you consider all wholesalers fraud?  Especially if the contract states assignable and buyer is aware?  I'm new to this so once again fraud is not my intention.  Are you saying wholesaling is probably not the best profession since most wholesalers do not have the money to purchase property out right?  

 Also can you explain fraud by inducement if there is no tricking the seller into signing the contract?  Once again especially if terms are listed in the contract?

LaToya, in answer to your question, most large wholesalers have the ability to close themselves on any single offer they make so that aspect of their contract is NOT fraud by inducement.  If the person makes an offer stating intent to purchase a property, but KNOWS that they don’t have the ability to fulfill the contract either for lack of funds or inability to obtain financing, then yes this meets the thresh hold for fraud.  Any “weasel” clauses have nothing to do with whether or not fraud was committed, since we are dealing with INTENT here.
Despite this it’s been going on for 40 years. Almost nobody has been called out on it until very recently.  There’s been some action by state real estate commissions, but in truth most of their power is in suspending or revoking licenses, or disciplining licensees.  Attorneys aren’t interested in suing people with no funds to pay the judgement; often the seller has not suffered any financial loss anyway. So people attempting wholesaling will continue doing what they’re doing with almost no consequences.
The way most real property purchase contracts are written they contain an “out” for numerous reasons; failure to pass inspection, inability to obtain financing, etc.  This amounts to the buyer getting a de facto option to purchase the property.  Some contracts, such as the one provided for SFR by the Texas Real Estate Commission, contain an option to include an unrestricted option period where the contract could be terminated for any reason within a specific period of time, for a specific fee.

When I used to “wholesale” properties (we called it “flipping” then) I used a straight option. I would offer, depending on property price and type, a $500 to $2500 (no refundable) option fee to the seller enabling me to purchase the property within 30, 60, or 90 days for a specific price.  If I was unable to secure a buyer who would close within the option period (we could do a Simultaneous closing in those days ) then I “lost” the option money; if I was able to secure buyer who did perform my profit was the agreed price to buyer minus the agreed price to seller minus option fee minus title costs.

 

 Thanks for clarifying your previous statement for the unknown including me.  To say I'm committing fraud out of the blue was a blow to the face especially if that is not my intention.  It's just weird how these wholesalers meetups are advertised and open to the public to attend and supposedly be so illegal.  Thanks

There are other methods of wholesaling which do not violate any laws.  For instance, you can have a end buyer lined up beforehand and create an entity 99% owned by yourself and 1% owned by the end buyer and after the property is put under contract you can transfer your 99% to the end buyer for a fee.  

you can also place a provision in the contract stating that you will not be closing UNLESS you can find an end buyer at a higher price.  

The point is FULL DISCLOSURE of your real intentions will always result in legal transactions.  Of course it probably lessens the chance of sellers accepting your offer. 

[Latoya Pryor]

Quote from @Don Konipol:

Quote from @Latoya Pryor:

Quote from @Don Konipol:

Quote from @Latoya Pryor:

Quote from @Latoya Pryor:

Quote from @Russell Brazil:

Quote from @Latoya Pryor:

Quote from @Russell Brazil:

If you entered into a contract with out the ability to fulfil the terms of that contract knowingly, then you have committed fraud by inducement. 

 Are you saying wholesaling is fraud?    How do you describe wholesaling property?  Also I'm not out to commit fraud against anyone.  I've been using the techniques as described on this platform as well as real estate meetups. Please explain more about your thoughts?  Thanks

 It's very simple. If you enter into a contract to purchase something...could be real estate, could be a car, could be a watch.....and you know you do not have the ability to fulfil that contract....that is Fraud by the Inducement. Also if you make any false statements to the seller this would fall under that as well.

Do not enter into contracts if you are unable to meet the terms of that contract. Look up your state statutes and case law on the subject to see what your liability could be potentially if you have an injured party (the seller) who presses the issue.

Here in DC we are seeing many a seller lately being represented by legal aid on fraud by inducement issues with wholesalers. 

Nothing wrong with assigning a contract (assuming that is legal in your state) but you need to be able to fulfil the terms of any contract you enter into.

So my question was...Do you consider all wholesalers fraud?  Especially if the contract states assignable and buyer is aware?  I'm new to this so once again fraud is not my intention.  Are you saying wholesaling is probably not the best profession since most wholesalers do not have the money to purchase property out right?  

 Also can you explain fraud by inducement if there is no tricking the seller into signing the contract?  Once again especially if terms are listed in the contract?

LaToya, in answer to your question, most large wholesalers have the ability to close themselves on any single offer they make so that aspect of their contract is NOT fraud by inducement.  If the person makes an offer stating intent to purchase a property, but KNOWS that they don’t have the ability to fulfill the contract either for lack of funds or inability to obtain financing, then yes this meets the thresh hold for fraud.  Any “weasel” clauses have nothing to do with whether or not fraud was committed, since we are dealing with INTENT here.
Despite this it’s been going on for 40 years. Almost nobody has been called out on it until very recently.  There’s been some action by state real estate commissions, but in truth most of their power is in suspending or revoking licenses, or disciplining licensees.  Attorneys aren’t interested in suing people with no funds to pay the judgement; often the seller has not suffered any financial loss anyway. So people attempting wholesaling will continue doing what they’re doing with almost no consequences.
The way most real property purchase contracts are written they contain an “out” for numerous reasons; failure to pass inspection, inability to obtain financing, etc.  This amounts to the buyer getting a de facto option to purchase the property.  Some contracts, such as the one provided for SFR by the Texas Real Estate Commission, contain an option to include an unrestricted option period where the contract could be terminated for any reason within a specific period of time, for a specific fee.

When I used to “wholesale” properties (we called it “flipping” then) I used a straight option. I would offer, depending on property price and type, a $500 to $2500 (no refundable) option fee to the seller enabling me to purchase the property within 30, 60, or 90 days for a specific price.  If I was unable to secure a buyer who would close within the option period (we could do a Simultaneous closing in those days ) then I “lost” the option money; if I was able to secure buyer who did perform my profit was the agreed price to buyer minus the agreed price to seller minus option fee minus title costs.

 

 Thanks for clarifying your previous statement for the unknown including me.  To say I'm committing fraud out of the blue was a blow to the face especially if that is not my intention.  It's just weird how these wholesalers meetups are advertised and open to the public to attend and supposedly be so illegal.  Thanks

There are other methods of wholesaling which do not violate any laws.  For instance, you can have a end buyer lined up beforehand and create an entity 99% owned by yourself and 1% owned by the end buyer and after the property is put under contract you can transfer your 99% to the end buyer for a fee.  

you can also place a provision in the contract stating that you will not be closing UNLESS you can find an end buyer at a higher price.  

The point is FULL DISCLOSURE of your real intentions will always result in legal transactions.  Of course it probably lessens the chance of sellers accepting your offer. 

 Thank you.  Very helpful

[Ned Carey]

@Latoya Pryor there have been some very long answers, often with mutiple quotes. This makes it vaery hard to follow. 

I have not read all the posts but I think this wholesaler is misleading you.

    "My last contact was him asking if I would accept $20,000 and assign the contract over to him. My answer was a flat no I will not." 

Did I understand that corectly? He is offering you a $20,000 assignment fee and you said no! How big a deal is this? 

There is a LOT to know about real estae and the law. Keep reaing here and it will gradually become more clear. good Luck. 

[Lydia R.]

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I just got my first contract signed. I was informed from another wholesaler that I should not have turned in my EMD to any title company cause if the deal fails I could be charged up to $2000 by title companies for them pulling title. Do they automatically pull the title? She is just holding my emd funds in escrow until closing as I discussed with her(title company). I was also told I could be sued by the owner if I did not have enough funds in my LLC to cover the cost of the contract!? This has me shaking in my boots because I for one learned the EMD was refundable provided the contract clearly stated. And for two I have the right to void the contract within a certain period of time if I do not find a buyer? I'm so confused now. You hear all of this you don't need money to wholesale then I'm being told I have to have the funds available and ready if I do not find a buyer. I'm worried now. I was excited at first. This info is from someone that I was contemplating on doing a jv deal on this property. But he suggests I use the law firm he uses since he has built a rapport with them. My guess is I would need to assign contract over to his LLC since he says he has the proof of funds available. Makes no sense to me. Can someone clarify to me what is going on?

 First of all, dont panic. Panic only clouds your judgement and causes you to make a rash decision instead of an informed, rational one. 

First thing you need to do is have a conversation with your title company. Ask them if they charge a fee for title work that is completed for deals that dont close. This is a common practice with smaller title companies. Obviously your preference should be to work with a title company that does not charge you if your deal falls apart. I mean, what if the reason the deal falls apart is the title not being clear? That would be a situation beyond your control. 
Second of all, you really should have a better understanding of the entire escrow and title process because otherwise you are at the mercy of those who are more well informed and you are also susceptible to those who dont know what the heck they are talking about but because you dont either you believe what they are saying. When I was in college the girl who lived in the dorm room next to mine truly believed she could not get pregnant if she was on the top. Because of gravity. Yeah....thats what happens when you are uninformed. Please dont be this girl. And Im sure it wont shock you to learn that she got pregnant second semester and dropped out. 

Let me give you a quick crash course in the title and escrow process. The title company is responsible for, among many things, examining the chain of title and making sure there are no title issues or mistakes or unpaid debts that are clouding the title and preventing the eventual buyer from receiving a clear and clean title report on the day of closing. The typically begin this process right away in order to meet the closing date deadline. EMD is refundable but only in the circumstances laid out within your contract. So you might want to pull it out and read what it says about EMD.

You absolutely do NOT have the right to terminate the contract because you could not find a buyer. That is not a valid reason for termination and if that is the reason you provide, you will most certainly lose your EMD. You should read what your contract says about termination. It should outline the valid reasons you can terminate, including the seller's inability to provide clear title and structural defects found within the property that were not disclosed prior to the contract. Again, without reading your contract I cannot tell you for certain what the termination options are.

From the little bit of background you've given, it sounds like this person is just trying to steal your deal. There is ABSOLUTELY no reason for you to assign the contract to their LLC if you already have it under contract. My best guess is that this is an experienced wholesaler who can clearly tell how green and new you are and they are trying to take full advantage. Unfortunately this is a sharkey business and this happens more often than it should. If I were you, I would completely cut off communication with this person because they are quite literally trying to steal your deal.

I have a friend/investor in VA and I trust her implicitly. I can put you in contact with her, she might be a buyer for your deal but if not she can at least give you an education on the actual process in your state so you know how things go and you wont be such a target in the future. Knowledge is power for sure! Send me a PM and I will put you in contact with my friend, her name is Natalie. Shes a sweetheart and she will be more than happy to help you. Sorry this is happening to you but you came to the right place to get advice!

Thank you so much for your useful information. I'm proud of myself because my contract is very detailed to provide my own coverage should I not be able to sell within the due diligence period and get my EMD funds back. Also that other wholesaler has been cut loose. My last contact was him asking if I would accept $20,000 and assign the contract over to him. My answer was a flat no I will not. I'm so glad I used my instincts as well as my awareness and ability to be able to tell that his intentions were dishonest. Once again thank you!

 I dont even know you and Im proud of you!! Good job for sticking to your guns and trusting your gut! If he was willing to offer 20K that means its worth a lot more. Great job. 

 Thank you!  That is very kind of you.  There's a previous post on this forum post about fraud!?  That's not my intentions at all.  Why is everyone making me feel bad for taking on this occupation?  Is it just people who are against wholesalers? 

 Wholesaling is a controversial topic. There are a lot of bad apples out there that make the rest of us guilty by association. Dont listen to that noise. Ive been wholesaling for almost 8 years. Do what you say youre going to do. If you tell the seller they are going to get $150,000 for their house then make sure they get $150,000 for their house. You did whats you said you were going to do. No one is going to even investigate your deal if you follow through. Its when you make promises you dont keep that people get pissed off and they have every right to be angry. 

Dont worry about this noise. Just keep doing what you are doing. Close this deal you have and then close 10 more!