EMD placed with Title Company

Richmond, Virginia
Wholesaling
3yFollow

EMD placed with Title Company

Latoya Pryor
Real Estate Agent · Richmond, VA · Member since 2022 · 81 posts · 12 votes

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?

0Reply
173 views

Most Popular Reply

Lydia R.
Investor · Austin TX · Member since 2016 · 1k+ posts · 2k+ votes
3y
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!

3Reply
See this reply in the discussion

33 Replies

Jump to latestLatest
  • Latoya Pryor
    OP
    Real Estate Agent · Richmond, VA · Member since 2022 · 81 posts · 12 votes
    3y

    @Ned Carey Thank you!  I've only had 2 people actually answer what I was initially asking.  One of the 2 were you.  

    1Reply
  • Marc Maitre
    Member since 2019 · 69 posts · 62 votes
    3y

    I've done wholesale deals, and never once have I come up with the EMD. Once you find a buyer, have them submit the EMD to the title. Not sure if this is bad practice or not but that's how I was taught. Seller asks for EMD ok, no problem, find buyer, have buyer put down EMD. At the end of the day, if the seller is truly motivated, getting their money is all they care about.

    1Reply
  • Latoya Pryor
    OP
    Real Estate Agent · Richmond, VA · Member since 2022 · 81 posts · 12 votes
    3y
    Quote from @Marc Maitre:

    I've done wholesale deals, and never once have I come up with the EMD. Once you find a buyer, have them submit the EMD to the title. Not sure if this is bad practice or not but that's how I was taught. Seller asks for EMD ok, no problem, find buyer, have buyer put down EMD. At the end of the day, if the seller is truly motivated, getting their money is all they care about.

    Thank you!  I've heard of that in many cases as well
    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    3y
    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. 


    Nick its common in markets that are still stuck in the 1800s and have to use title abstractors to pull title manually.  but its not  2k it usually 200 to 300 bucks. 
    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    2Reply
  • Patrick MahoneyPro Member
    Investor · Sonoma County, CA · Member since 2022 · 12 posts · 2 votes
    3y

    Hi Latoya! Great post with lots of great replies! Another way to do a deal like this is to work with a micro lender aka transactional lender. My team and I specialize in funding EMDs for the wholesaler for a small fee at closing. That way if you do not have the funds or your capital is tied up in another deal or even if you do not want the risk of using your own money for the deal. This can help you scale your wholesaling business faster allowing you to do more deals without using any of your own money down! Reach out anytime if you would like some more information or run into a situation where this may be helpful! And great work!

    1Reply
  • Ke Nan Wang
    Developer · St. Augustine, FL · Member since 2018 · 311 posts · 384 votes
    3y

    To answer your question, none of the title company I've worked with charge a fee on holding EMD in escrow. My title company holds money for me in escrow doesn't even relate to real estate transactions.

    I do have to say it’s definitely higher risk in the wholesaling business because it’s not regulated. 
    For this type of risk with that many land mines I would highly recommend you have a mentor who can guide you through the process closely. Someone who has your best interest in heart and no hidden agenda. I would start with word of mouth before falling into the online guru trap.


    If you are this nervous right now and there will be a lot more. It’s a high risk and high reward game. 

    1Reply
  • Latoya Pryor
    OP
    Real Estate Agent · Richmond, VA · Member since 2022 · 81 posts · 12 votes
    3y
    Quote from @Ke Nan Wang:

    To answer your question, none of the title company I've worked with charge a fee on holding EMD in escrow. My title company holds money for me in escrow doesn't even relate to real estate transactions.

    I do have to say it’s definitely higher risk in the wholesaling business because it’s not regulated. 
    For this type of risk with that many land mines I would highly recommend you have a mentor who can guide you through the process closely. Someone who has your best interest in heart and no hidden agenda. I would start with word of mouth before falling into the online guru trap.


    If you are this nervous right now and there will be a lot more. It’s a high risk and high reward game. 


     Thank you for the pointer!

    0Reply
  • Benjamin Krebs
    Realtor · Kansas City, MO · Member since 2021 · 118 posts · 25 votes
    2y
    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?


     Hey, I'd love to connect if you're still looking for something like this!

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free