Seller and Wholesaler Keeping Investor Earnest Money

[Kristine Cassar]

Hi All,

I have a problem that hopefully this community can help me out on. My partners and I recently found a property through a wholesaler. We executed a LOI with this wholesaler with a 14 day option. We sent $10,000 earnest money to the title company. So far, so good. We received the rent rolls, financials, etc 2 days after this. We started our due dilligence and decided on the 10th day that this investment was not a deal that we wanted. We then signed a release with the wholesaler and sent the signed release to the title company. 13 days later we got an email from the seller (who we did not know or have any dealings with) stating that he would not release the earnest money because we had tied up the property for 23 days. We contacted the title company and the wholesaler to try to figure this out. We were under the impression that the EM was being held at the title company under our contract with the wholesaler. Not a word was said about the title company putting the money in escrow under the original contract that we had nothing to do with. Now the wholesaler has gone dark and we just need to find out if anyone else has experienced this or something similar, and how it was rectified. By the way, avoid Dandre Butler (wholesaler) and Michael Johnson (seller). We've been told online that this is a scam they have been running.

[Patricia Steiner]

Geez...and this is one of many reasons that wholesaling is considered illegal in my state.  Who is your contract with?  Who is your seller?  It sounds like the wholesaler has a contract with the seller and you placed HIS escrow with the title company.  Your contract will stipulate when the inspection period is over and your escrow is no longer eligible for return.  I've never seen an inspection period longer than 15 days and in my market, it has been cut to 5-10 days if you fight for it.  Unless your contract gives you the right to an inspection period of 23 day - or whatever the seller is claiming - you have no legal right.  If your contract states something different, your cure would be with the wholesaler.  You're going to need an attorney if you're within your contractual rights.

And, go get a Realtor/Broker who works with investors and quit paying a wholesaler who has no skin in the game.  You need bench strength - not an unlicensed middle man.