Wholesaling contract clause *question for a friend*

[Drake Espenlaub]

I work with a friendly guy from Australia that bought some inexpensive homes before he came over. He is aware I have my real estate license and dabble in properties, he asked me to look over a contract. After advising him I am not a lawyer and he should seek legal advice, I told him I would post this just to see what anyone thought.

This is a line in the contract from the sale to a wholeseller. They offered him 500.00 deposit, $200.00/mo with a balloon payment of 22k by march of 2018. They are now offering him to take the property back. He keeps all funds takes the property back, and they move on. While he is holding their feet to the fire on the balloon payment, and they will essentially be stuck with the property, as it is in an area where homes typically wont sell. He will have made a solid profit it it holds.

I was looking for a clause in the contract which allows them to escape and this is the line that jumped out at me. Do you think this line allows them to exit said contract and not be liable for the balloon payment, or would he have a case in court if he went forward given they dont pay.

7. DEFAULT: If buyer shall default on its obligations hereunder and suit is brought to either enfore or terminate this contract, the parties agree that buyer has made a substantial down payment requiring judicial foreclosure of this contract.

Can someone dumb that line down for me?

[Wayne Brooks]

Yes, it says what Tom Gimer said.....bottom line, they were trying to flip it, they couldn’t, and likely don’t have any money if he went the whole nine yards and sued, and got a defiency Judgment, if that is allowed in that state. This is why you should get a larger down payment.