Can I get my EMD Back??

Question

I have a legal question about a contract I have with a wholesaler and the $5000 EMD

I was under contract for a property that I learned had liens on it..... it states in the contract that title must be marketable and if not, then I would get my EMD back..... However, even up until the day before closing I was  never informed whether the title was Actually marketable or how and IF the liens would be paid off from the proceeds of the sale.

I called and emailed the wholesaler's title company several times asking about this, BUT I never received a response   so I did not move forward and close on the property.

Now the wholesaler is saying my EMD will go to the seller because I didn't close. Do I have a case at all?  I am attaching the contract with highlighted section about this.   I am Just trying to understand if I should    fight them or not.  I have reached out to a few attorney's and of course they are saying I would have to put them on retainer before giving advice.

Kevin Sobilo · Answer

@Sonja Revells, a few thoughts:

1. Your EMD should still be with the title company if it was handled correctly. Did you write a check out to that title company for the EMD? As long as the money went from you to the title company it should be under your name and still belong to YOU until there is an agreement to release it.

2. If the title company won't respond, contact whoever licenses/regulates them in your state. They should be able to hold them accountable for how they handle their escrow accounts. That may shake things loose.

3. Yes, I believe you are entitled to the EMD back as the seller didn't provide you with marketable title.

4. Your agreement is with the wholesaler (Sharpstone Properties LLC). So, the actual seller is probably not the issue here. I might contact the actual owner and coordinate with them as well since they have may an completely different story and may be able to provide help and insight to you as well.

Russell Brazil · Answer

Nearly every property has liens. A mortgage lien being the most common one. The title company takes the funds from the sale, and then pays off those liens and clears them. You purchase title insurance in case there is a lien they missed.

It sounds like you merely defaulted on the contract. In which case, youre probably not getting your EMD back.

Lateefah Mathews · Answer

@Sonja Revells , after reviewing the agreement you uploaded, I realized it could be a bit tough to fight for your EMD due to these sketchy clauses. I am not sure if anyone else saw it:

• "Full and Liquidated Damages": This limits both parties to just the damages stated in the contract. So, if the seller can’t provide a marketable title, your only recourse is to get the EMD back, and if you don’t close, the seller keeps it.
• "No Specific Performance": Without the remedy of specific performance, you can’t require the seller to clear the title and complete the sale. This removes a major leverage point in enforcing the contract.

The contract verbiage looks really sticky. Sharpstone is listed there as "The Seller." I suggest contacting an RE attorney who can assess your options. Feel free to DM me if you need a few referrals.

Mark Munson · Answer

This is correct advice. Your EMD would not be released to the seller, it would be released to the wholesaler and their EMD to the seller (assuming they had one) would be released to the seller. The fact that they are saying it would be released to the seller is, more than likely, a lie.

Arun D. · Answer

If you would of closed at 255K Im assuming the liens would of been cleared. Assuming the liens were the mortgage, taxes, hoa etc and totaled less than the purchase price. So seller did have a marketable title. You have no case.If the lien was bc seller has a brother on title who won't sign off then you're owed your EMD back. Then seller didn't have a clear marketable title and the ability to sell the property.

So it really depends what the liens are.

Tom Gimer · Answer

KeyGlee was planning to double close here. The agreement specifically allowed KeyGlee to use the End Buyer's EMD to secure the underlying contract with the actual seller... and to forfeit that EMD if the End Buyer failed to close. That sounds like what happened here. I would be surprised if there weren't notices given to both the defaulting End Buyer (You're in default, you must close by X date or we're forfeiting your deposit) as well as the escrow agent (Buyer defaulted, see contract Earnest Money paragraph regarding release) prior to that actually occurring. If those things did not occur, some regs may have been violated by licensees.

Regarding marketable title, unless the "liens" were in excess of $255,000 IMO there would not be an argument that the seller could not deliver marketable title. And, even if the liens were in excess of $255,000, the seller could bring cash to close and deliver marketable title.

Chris Seveney · Answer

@Sonja Revells

They usually communicate to the seller there are liens and their proceeds would be less because of the payoffs. No different than if the mortgage amount was more than anticipated

The assumption here is your purchase price was going to pay off the mortgage and the other liens - If not you don’t cancel closing you let them cancel it because they cannot bring funds to closing

Sonja Revells · Answer

@Chris Seveney  I know there were liens because I saw them on Propstream and when I pushed the wholesaler on the issue he confessed (two days before the closing date) that there were a Few liens on the property.      Shouldn't the title attorney have communicated to me that there were liens and for how much and that they would be paid off from the sale of the home?      The title company has never once responded to any of my phone calls or emails about this.

Sonja Revells · Answer

@Russell Brazil shouldn't there have been something specific stating this?   When I wholesaled a property earlier this year, there were two mortgage liens on it, but it was spelled out that those would be paid off at closing from the proceeds.   The title attorney involved had open communication with all parties on this and an addendum was added to the contract stating this.

I was looking for partners in my network who wanted to JV on this property, but they wanted to know for certain that the title was clear since it was through a wholesaler and not "traditionally" through a realtor.   That is when I pushed the wholesaler hard and he confessed there were a few liens on the property.  I never was able to get ANY response at all from the title attorney's office.

Because of that.... I didn't pursue trying to obtain funding to close on the property.

Sonja Revells · Answer

Thank You @Lateefah Mathews.   I have contacted 4 different attorney's and none of them are interested in taking on the case if I try to persue it, or they say because I didn't close on the property then I don't get the EMD back.

I was under the assumption because I wasn't informed of marektable title Before the closing date, that maybe there was/is a way to get the EMD back, but based on your response to my post, it doesn't look like I can.

Can I get my EMD Back??

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