Wholesaler wants $10k to remove a Memorandum of Contract!

General Real Estate Investing
3yFollow

Wholesaler wants $10k to remove a Memorandum of Contract!

Talmadge Billingslea
Member since 2023 · 7 posts · 1 vote

I have been working in the real estate industry since 2003, and I must say that I have never encountered the issues with wholesalers that I am currently facing. In March 2022, we entered into a contract to sell one of our properties. Initially, we believed the wholesaler to be the end buyer. However, after signing the contract, the wholesaler began negotiating and insisted on reducing the price. We were not willing to go any lower, but after prolonged negotiations, the wholesaler finally met our price.

Unfortunately, we encountered a problem with the title, as a cloud had been placed on the property by the city. As a result, we were unable to proceed with the closing. In light of this issue, my husband made the decision to repair the house and rent it out instead.

To our surprise, in late April 2022, we received a demand letter from the wholesaler's attorney, requesting the return of the binder and demanding that we sell the property to him. We complied and returned the binder, but the title issue still persists to this day. Now, due to personal circumstances such as a death in the family and funeral costs, we are in urgent need of selling the property.

However, the wholesaler is refusing to release the memorandum of contract unless we pay him $10,000. It's important to note that we never signed a memorandum of contract, nor were we informed in the purchase sale agreement that such a memorandum would be put in place. While I understand the need for protection against unscrupulous investors or other wholesalers, this situation does not fall into that category. I am uncertain of the legality of these actions.

Could you please provide guidance on whether this is a legal course of action?

0Reply
176 views

Most Popular Reply

Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
3y

there was just a big article on HOmevestors franchise about this very topic and Homevestors has let their franchisee's know that clouding title will not be allowed going forward.

Now dont know if this was a homevestors deal or not.

But you could counter back with a slander of title suit. 

But you will need a local RE attorney to review your contracts and advise you on best course of action.. Clouding title me is a very slimmy move if its just small deposits and you cant close.. Now if an investor gave you a lot of money and put a ton of time into it thats different.

Podcast Guest on Show #222
JLH Capital Partners51 Review
WebsiteView Page
3Reply
See this reply in the discussion

13 Replies

Jump to latestLatest
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    3y

    there was just a big article on HOmevestors franchise about this very topic and Homevestors has let their franchisee's know that clouding title will not be allowed going forward.

    Now dont know if this was a homevestors deal or not.

    But you could counter back with a slander of title suit. 

    But you will need a local RE attorney to review your contracts and advise you on best course of action.. Clouding title me is a very slimmy move if its just small deposits and you cant close.. Now if an investor gave you a lot of money and put a ton of time into it thats different.

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    3Reply
  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    3y

    You did business with a bad apple. There are wholesalers whos'e whole business model is to put property under contract, cloud title, and never plan to close. If you terminated the contract, the cloud should disappear. You technically can still sell while the wholesaler has clouded title, it is up to the buyer to take on that risk. You should negotiate the price down from the wholesaler. 

    1Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y

    @Talmadge Billingslea

    As mentioned get an attorney involved and let them handle it. What state is it in?

    7e investments53 Reviews
    WebsiteView Page
    1Reply
  • Talmadge Billingslea
    OP
    Member since 2023 · 7 posts · 1 vote
    3y

    We're in Florida, and I reached out to an attorney to forward him a letter. It remains to be seen how determined he is to escalate this matter, which could be resolved quite easily.

    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    3y

    @Talmadge Billingslea Yes, these memorandums of contract are often just a scam ploy by unscrupulous wholesalers. But, in this instance, if the wholesaler/investor IS ready to close, you have a problem. I’m sure the contract you signed doesn’t have an escape clause for you if you couldn’t provide clear title, in a reasonable time, like a standard farbar contract does. It seems like you Now can clear this city lien?

    It is not needed for the seller to sign a memorandum of contract that is recorded.

    You absolutely need an attorney to handle this.

    1Reply
  • Talmadge Billingslea
    OP
    Member since 2023 · 7 posts · 1 vote
    3y

    @jay hinrichs No, it was not Homevestors. Just another unscrupulous wholesaler. Unfortunately, I have contacted an attorney to handle this issue.  I just want the cloud removed. The attorney was talking about getting damages since the current contract will be lost.  I just want clear title back at this point. No more wholesalers for me.

    0Reply
  • Talmadge Billingslea
    OP
    Member since 2023 · 7 posts · 1 vote
    3y

    Update:
    I spoke with the wholesaler and told him that I considered his $10,000 demand to be extortion. I explained that it was over a year ago and he had no interest in the property at that time. He seemed to be hyperventilating, which scared me. I asked him to calm down and call me back when he was feeling calmer. Instead, he texted me the following:

    Mrs. Billingslea, I appreciate you taking the time to reach out to me. However, let's stick to the facts. A legally binding document was signed by both parties, one party did not honor the document, I sought counsel, (which cost me money) to rectify that issue to which you and your husband gave no reply, I took steps to protect myself and business through the city (which cost me money), and the only reason we're speaking a year later is because clouded title has forced you to so I can remove it. Those are the facts. I have no desire to beat around the bush. This is business and so I wish to be direct. You inconvenienced me, my business, and my partners for over a year. There is a cost associated with that. If you have a counter-offer in mind, I'm all ears and willing to work with you to be done with this quickly. But I want to be clear, I will not release this property unless I'm compensated fairly for the time that was wasted and the agreement that was not honored. Thank you.

    Considering those were not the "facts" and I have written proof, I decided to give a factual response and let the attorney handle the rest. I'm dealing with a "live" one here who thinks he is a real estate broker.


    1Reply
  • Ed O.
    Investor · Statewide, MO · Member since 2011 · 824 posts · 428 votes
    3y

    I'm confused. You agreed to sell. Then you didn't honor your agreement. 

    "my husband made the decision to repair the house and rent it out instead"

    Was the wholesaler on board with this? 

    @Eliott Elias What did the buyer do wrong? I agree trying to renegotiate is scummy. But they agreed to a contract. How do you know this was their game plan, "to never plan to close." They don't make money that way. 

    How does this make the wholesaler bad?

    Full disclosure -  I have never been a wholesaler or purchased from one. 

    I've heard way too many stories of people agreeing to sell, then not selling, and ultimately, earning a lot more money on the later sale to someone else. It sounds like you might stand to make a lot more money selling it 13 months later. 

    0Reply
  • Talmadge Billingslea
    OP
    Member since 2023 · 7 posts · 1 vote
    3y

    No. There was a cloud on the property that is why we couldn't close.   Not a matter of us honoring the agreement. He could have just as easily said, he still wanted the property, he did not. On board with it? Don't believe like us, he had a choice. 

    0Reply
  • Ed O.
    Investor · Statewide, MO · Member since 2011 · 824 posts · 428 votes
    3y

    I don't understand...

    You agreed to sell. You did not remedy a cloud on title / fulfil your agreement to sell. 

    What was his choice? To walk away from a deal you both agreed to? That's not much of a choice. 

    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    3y

    @Talmadge Billingslea As I said before, often these memorandums of sale are just an extortion play, but….in this case it seems the wholesaler Was ready, able and willing to buy, the problem was on your end. The filing of the memorandum was legally legitimate.

    As I asked, what Exactly was the city cloud and how are you able to Now remove it but were u able to remove it before? This will be an important point if this gets in front of a judge. Is it just that now you can afford to settle the lien because you are selling for a higher price? Was the original,price enough to cover this lien and any others, or were they more than the sale price?

    0Reply
  • Talmadge Billingslea
    OP
    Member since 2023 · 7 posts · 1 vote
    3y

    Ok. Apparently the most important part was the "Cloud". 

    The cloud started in 2017 with a city citation.  That cloud affected us then in 2022 under this contract is still in effect and we are fighting now was an administrative fine (rolling) from the City.  For those that are not familiar with that term, it is when the city gets a judgement that covers all property owned by an individual until whatever citation caused the fine is repaired.  In 2021 we sold the property that had the citation (property "A"). the buyer (also a wholesaler) made arrangements with the city to pay $1,500 for a fine of $209,000. Yes, it was only a sale price of the house was $43,000. The city is like that. We gave them the cost of the fine at closing. It was on the closing documents "code enforcement". 

    However, the title company gave them the money and the cloud is still over our properties. This was the reason the deal in 2022 did not go through.  The property could not be insured by the title company.  I think you did not read the initial post.

    0Reply
  • Talmadge Billingslea
    OP
    Member since 2023 · 7 posts · 1 vote
    3y

    The wholesaler was not ready, he came back negotiating lower.  He did not have an end-buyer ready for a month.  The current price is not more that $5000 over what the contract had. It's higher because of the improvements made over the past year.  I think you missed the point that we were willing to sell it to the buyer.  He never asked.

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