One part of the contracting process that I am not terribly sure I completely understand is the use of contingencies. Of course, I never want something like this to happen but lets say I land myself in an unfortunate scenario where my repair costs were underestimated and I am unable to source a buyer for a property.
Assuming I put a thousand into escrow for earnest money and I had a inspection contingency in my contract - how do I exit the deal if we are unable to negotiate any further?
Will an addendum need to be signed by both the seller and myself? How do I officially release any liabilities of myself from a P&S should my contingencies not be met? Does this need to be filed anywhere or do I just contact escrow and notify them I am no longer interested in the property due to X reason.
I did some searching on this but did not locate anything that clarified the answer for me.
If within your contingency time frame you choose not to go through with the purchase (reason must be part of your specific contingency or contingencies), you may cancel the purchase and be legally entitled to your EMD (assuming your contract does not stipulate otherwise. To get said EMD from escrow, the seller must execute a document releasing said funds in order for escrow to release them back to you. If however the seller does not sign and you are within your contractual right to receive it back, the seller can be sued for damages, including, but not limited to attorneys fees and court costs.
Typically, the threat of such action usually persuades the other party to act according to the contract. This is not legal advice and I am not an attorney. Each state has its own laws, including specific contract law.
In TX, the purchase and sales agreement offers the buyers an ability to put up a small additional and non refundable amount (usually $100 or less) for 10 days of non explained contingency, in other words, you don't need any specific reason as to why you will not purchase the property. Your EMD is returned but you lose the $100 (or whichever amount you paid in the contract)
Basically what @Will Barnard said. If you are using NWMLS standard forms it is even easier. The inspection response notice includes a rejection and return of EMD line where you just check a box, single party. For other notice situations generally both parties must sign. Also NWMLS forms use arbitration of disputes.
If you are wholesaling and using your own contracts you should make sure your attorney drafts language that specifies the inspection disapproval and return of EMD process.
Thank you very much for the detailed explanation, this will set me on course to research our specific laws regarding this process in Washington state. Very much appreciated!
Thanks @Bryan R. - Can NWMLS forms be used for wholesaling, I thought I remember hearing you could not use these.
Ah, looks like there is an assignment clause that requires the buyer's permission to assign the contract to another buyer. Will have to dig into this contract a bit more later this evening. Appreciate the information fellas.
If you use the MLS contract, you need to specifically state "and/or assigns" as the Buyer's name.
If you use your own contracts, you can just have the assignment as a clause instead of having the "and/or assigns".
You won't be able to add "and/or assigns" if you are purchasing a property on the MLS from a bank; the banks just won't accept it.
Thanks @Nghi Le !
We normally use the ability to secure financing and partner approval. You have the right attitude. You never want it to happen but you need to protect yourself as well.
We have never not closed on a property. Make sure you have a back up plan if you can't wholesale it. We only buy homes that make sense for us. If its a great deal for me it's a good deal for my end buyer.
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