EMD placed with Title Company

[Latoya Pryor]

I just got my first contract signed. I was informed from another wholesaler that I should not have turned in my EMD to any title company cause if the deal fails I could be charged up to $2000 by title companies for them pulling title. Do they automatically pull the title? She is just holding my emd funds in escrow until closing as I discussed with her(title company). I was also told I could be sued by the owner if I did not have enough funds in my LLC to cover the cost of the contract!? This has me shaking in my boots because I for one learned the EMD was refundable provided the contract clearly stated. And for two I have the right to void the contract within a certain period of time if I do not find a buyer? I'm so confused now. You hear all of this you don't need money to wholesale then I'm being told I have to have the funds available and ready if I do not find a buyer. I'm worried now. I was excited at first. This info is from someone that I was contemplating on doing a jv deal on this property. But he suggests I use the law firm he uses since he has built a rapport with them. My guess is I would need to assign contract over to his LLC since he says he has the proof of funds available. Makes no sense to me. Can someone clarify to me what is going on?

[Lydia R.]

Quote from @Latoya Pryor:

I just got my first contract signed. I was informed from another wholesaler that I should not have turned in my EMD to any title company cause if the deal fails I could be charged up to $2000 by title companies for them pulling title. Do they automatically pull the title? She is just holding my emd funds in escrow until closing as I discussed with her(title company). I was also told I could be sued by the owner if I did not have enough funds in my LLC to cover the cost of the contract!? This has me shaking in my boots because I for one learned the EMD was refundable provided the contract clearly stated. And for two I have the right to void the contract within a certain period of time if I do not find a buyer? I'm so confused now. You hear all of this you don't need money to wholesale then I'm being told I have to have the funds available and ready if I do not find a buyer. I'm worried now. I was excited at first. This info is from someone that I was contemplating on doing a jv deal on this property. But he suggests I use the law firm he uses since he has built a rapport with them. My guess is I would need to assign contract over to his LLC since he says he has the proof of funds available. Makes no sense to me. Can someone clarify to me what is going on?

 First of all, dont panic. Panic only clouds your judgement and causes you to make a rash decision instead of an informed, rational one. 

First thing you need to do is have a conversation with your title company. Ask them if they charge a fee for title work that is completed for deals that dont close. This is a common practice with smaller title companies. Obviously your preference should be to work with a title company that does not charge you if your deal falls apart. I mean, what if the reason the deal falls apart is the title not being clear? That would be a situation beyond your control. 
Second of all, you really should have a better understanding of the entire escrow and title process because otherwise you are at the mercy of those who are more well informed and you are also susceptible to those who dont know what the heck they are talking about but because you dont either you believe what they are saying. When I was in college the girl who lived in the dorm room next to mine truly believed she could not get pregnant if she was on the top. Because of gravity. Yeah....thats what happens when you are uninformed. Please dont be this girl. And Im sure it wont shock you to learn that she got pregnant second semester and dropped out. 

Let me give you a quick crash course in the title and escrow process. The title company is responsible for, among many things, examining the chain of title and making sure there are no title issues or mistakes or unpaid debts that are clouding the title and preventing the eventual buyer from receiving a clear and clean title report on the day of closing. The typically begin this process right away in order to meet the closing date deadline. EMD is refundable but only in the circumstances laid out within your contract. So you might want to pull it out and read what it says about EMD.

You absolutely do NOT have the right to terminate the contract because you could not find a buyer. That is not a valid reason for termination and if that is the reason you provide, you will most certainly lose your EMD. You should read what your contract says about termination. It should outline the valid reasons you can terminate, including the seller's inability to provide clear title and structural defects found within the property that were not disclosed prior to the contract. Again, without reading your contract I cannot tell you for certain what the termination options are.

From the little bit of background you've given, it sounds like this person is just trying to steal your deal. There is ABSOLUTELY no reason for you to assign the contract to their LLC if you already have it under contract. My best guess is that this is an experienced wholesaler who can clearly tell how green and new you are and they are trying to take full advantage. Unfortunately this is a sharkey business and this happens more often than it should. If I were you, I would completely cut off communication with this person because they are quite literally trying to steal your deal.

I have a friend/investor in VA and I trust her implicitly. I can put you in contact with her, she might be a buyer for your deal but if not she can at least give you an education on the actual process in your state so you know how things go and you wont be such a target in the future. Knowledge is power for sure! Send me a PM and I will put you in contact with my friend, her name is Natalie. Shes a sweetheart and she will be more than happy to help you. Sorry this is happening to you but you came to the right place to get advice!