How can I get my earnest money back?

Question

I put $3000 earnest money down today on a home from a wholesaler. I tried for 2 days to get into the house. When they finally got back to us they could only show it at 5pm on the 2nd day. We told them we didn’t want to put the earnest money down until we saw the property but they said they’d open it to other buyers by 1pm that day if we didn’t. We put the money down and went off the pictures we were emailed. 3 hours later we saw the property and it was NOTHING like they described it. The pictures were very deceiving. It needed way more rehab than they estimated and their ARV was off as well. There was NO potential to make money. We would have lost money. I called the wholesaler right away and complained. He said he’d “try” to get us our money back. My argument is that he told us other buyers wanted this property and put pressure on us to put the money down without seeing it. Please tell me I have SOME hope of getting that money back!!

Jay Hinrichs · Answer

Classic wholesaler scenario and why working with them is at your own risk..

NEVER give them money up front..

NEVER trust their numbers

ONLY look at their deals as leads..

If you gave them the money and not the title company then you probably lost it and can try small claims.

if its at the title company and its truly EM  then it takes your signature to release it.. so just don't sign. and work it out most of the time you guys will split it..

Chris Mason · Answer

Lurkers: It's probably best that you not communicate to folks practicing real estate without a license, unless you have a lawyer on the horn for the entire conversation, a lawyer of your choosing that the "wholesaler" is paying for.

Friendly reminder that when it comes to real estate, if it's not in writing (in the form of a contract signed by all parties) then there's a good chance that it didn't happen and a judge will not care about your story.

OP: Call a real estate lawyer. A good one is worth $300/hr. Good luck.

John Thedford · Answer

Why would you want to deal with people that skirt laws? Most of them are operating illegally. Here is what I warn people about before they deal with these types:BEFORE you deal with any unlicensed broker consider these ideas:

1. Always require WRITTEN comps that can be substantiated

2. Always require WRITTEN bids from LICENSED contractors

3, Always require WRITTEN comps to substantiate ARV

4. NEVER pay a non-refundable fee

5. Always correspond via email so there is written record to bring suit in the event of misrepresentation.

Remember, these are middlemen trying to play RE agent without a license. Make sure they provide GOOD comps. Make sure if they are representing an ARV value make them provide ARV comps. If they make claims about rehab costs, make them provide WRITTEN bids from contractors. They are brokering real estate so make them PROVIDE good quality information like you could get from a licensed broker. Many of these unlicensed brokers simply make up figures that sound good but cannot back them up.

Unlicensed brokers generally have no insurance. From personal experience most just pull their ARV out of thin air. Lets see: claim it costs x and it will sell for y. If someone uses an agent, an agent won't provide or should NOT provide the BS an unlicensed broker does. They should not or do not provide rehab figures (to protect themselves). They should tell a prospective buyer to get their own bids. They can provide comps in some situations on an updated unit vs an original unit. Agents have something to lose, can be fined, and have their license suspended or revoked. Unlicensed brokers, acting as fringe operators skirting the laws have nothing to lose. They are acting as an agent without the laws, ethics requirements, education, and insurance that are vital IMO.

Under FL law people using contracts to circumvent licensing are breaking the law. It is a 3rd degree felony to broker RE without a license. Those using contracts are BROKERING. Here is the statute:475.43 Presumptions.—In all criminal cases, contempt cases, and other cases filed pursuant to this chapter, if a party has sold, leased, or let real estate, the title to which was not in the party when it was offered for sale, lease, or letting, or such party has maintained an office bearing signs that real estate is for sale, lease, or rental thereat, or has advertised real estate for sale, lease, or rental, generally, or describing property, the title to which was not in such party at the time, it shall be a presumption that such party was acting or attempting to act as a real estate broker, and the burden of proof shall be upon him or her to show that he or she was not acting or attempting to act as a broker or sales associate. All contracts, options, or other devices not based upon a substantial consideration, or that are otherwise employed to permit an unlicensed person to sell, lease, or let real estate, the beneficial title to which has not, in good faith, passed to such party for a substantial consideration, are hereby declared void and ineffective in all cases, suits, or proceedings had or taken under this chapter; however, this section shall not apply to irrevocable gifts, to unconditional contracts to purchase, or to options based upon a substantial consideration actually paid and not subject to any agreements to return or right of return reserved.

John Thedford · Answer

https://webmail04.register.com/promail/src/webmail.php

This is one of the perils of dealing with unlicensed brokers.

Pratik P. · Answer

No clue why it posted twice..

Pratik P. · Answer

I'm surprised no one has asked you this yet....What does the contract say??? You should have received the original contract when you signed an assignment agreement. That contract will determine if you get EMD back or not. If there is a due diligence period and you are within that period, you can cancel the contract and get EMD back from title....I'm hoping you didn't give that 3k directly to the wholesaler

Keric Allen · Answer

@Mary Woodman unfortunately this may become a $3,000 lesson in the importance of signing a contract that has been reviewed by a lawyer and you completely understand the risks involved, thoroughly vetting a wholesaler, and not letting anyone (wholesaler, agent, lender, inspector, etc.) pressure you into moving forward with anything until you have done your due diligence.

Even if that means you lose the deal.

If you lose the deal because it was quickly snatched up by another buyer then great, you are validated and it was probably a deal. If it’s still there after you do your own due diligence and you determine it’s a great deal, even better!

James Wilcox · Answer

@Mary Woodman that really sucks and sorry to hear this. If your money is with a title company then can probably get it back. If not you should spend no time coming after them directly to get the money back. We as a community need to hold wholesalers to a higher standard than that. They would need to put it in an escrow account to be used as an EMD not directly into their own pocket. Please let us know what happens.

Wayne Brooks · Answer

@Mary Woodman If you had no inspection/due diligence period, then legally you are likely done, unless you pressure him for his “illegal activity”...you caved in to “pressure to get the deal” without even seeing it.

Chris Salerno · Answer

I  would highly recommend calling a lawyer to help you with this process. It seems like the wholesaler was a scammer. Be careful moving forward with those types of deals.

How can I get my earnest money back?

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