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Updated 7 months ago on . Most recent reply presented by

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Travis Andres
  • Investor
  • Los Angeles
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HELP? End-buyer backed out of assignment

Travis Andres
  • Investor
  • Los Angeles
Posted

Hi, hoping someone can help answer this challenge...(am I still on the hook or is the end-buyer?)

I'd gotten an on-market property under contract, but I found out it had massive foundation issues so I decided to assign it. (I never gave EMD as the listing agent didn't demand it)

A wholesaler that I know did a JV with me and brought in an end buyer, (I have a fully-executed assignment agreement stating non-refundable EMD due, etc)

However the end buyer didn't deposit and wanted to walk away, this is after the inspection period ended.

Title agent says the end buyer is the one on the hook for the EMD, but if he's not responding to them and doesn't forfeit the EMD, does it somehow fall back on me?

Any help (or referral to a RE attorney would be appreciated)

Thanks!

  • Travis Andres
  • Most Popular Reply

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    Andrew Syrios
    • Residential Real Estate Investor
    • Kansas City, MO
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    Andrew Syrios
    • Residential Real Estate Investor
    • Kansas City, MO
    ModeratorReplied
    Quote from @Kevin Sobilo:
    Quote from @Andrew Syrios:

    Did the contract say you needed to put down an EMD? I should note that generally speaking, without some form of "consideration" (i.e. an earnest money) a contract is not considered valid and so it's arguable that there was never an executed contract in the first place. That being said, if it's in the contract but you just didn't deposit it, then you would simply be on the hook for it.

    Same goes for the end buyer. They are on the hook for the earnest money whether they deposited it or not. You should start by demanding it. If they refuse, then send a demand letter. If still they refuse, take them to small claims court. 


    I think you are misunderstanding "consideration" with relation to a contract like that. Consideration isn't based on payment of money (or something of value), just the promise of. The idea being that if you just sign a sales contract that states "I will sell you my house in the next 30 days" it is unenforceable because there is no "consideration" cited in the contract making it unenforceable.

    EMD's are generally not required at all with a sales contract. That could be different in some states, but in my state (PA) specifically they are not required at all although they are customary.

     Looks like you're right. I guess I had just heard that several times before but when actually looking into it, like here: https://www.creuniversity.com/articles/earnest-money-vs-lega..., earnest money is a form of consideration but just the offer to purchase is also. Thanks for correcting me on that. 

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