Cash Buyer Trying to Steal My Wholesale Deal?

Question

Hi everyone,

I have a property under contract in NY state. It's under contract with the seller and under contract with the cash buyer. I am assigning the contract to the cash buyer.

The buyer has been delaying the process and given every excuse under the sun on why we don't have a closing date yet. Last minute he switched his attorney and now he's saying he needs another survey done. Recently I learned from other investors and wholesalers in the area that this buyer is notorious for getting the property under contract then letting the contract expire and going directly to the seller afterwards to buy directly from them or wholesale it themselves. He is also known for not paying contractors. Doesn't have a good reputation in the local RE community.

I have spoken with my attorney and he says there might be a way to put a quick time limit on the transaction to force the buyer to close within the next week or so before the contract expires. There's about 2 weeks until it expires and I'm getting extremely nervous. This is my first deal and I NEED IT TO GO THROUGH. I'm trying to see if there's a way to back out of the deal and assign it to another buyer asap.

If anyone has any ideas or feedback, I would greatly appreciate it! Thank you!

Barry Pekin · Answer

@Jeffrey Butler,

You need a better assignment contract.  Mine requires the full assignment fee as the buyer's EMD.  If they default, they lose their deposit.  There's no incentive at that point for the buyer to go around you because he's going to pay the fee either way.

Wayne Brooks · Answer

I see nothing there that lets you cancel. Your buyer, the Assignee, is now in contract with the seller.  I see no way you could undo that by what you posted.

Your first paragraph doesn’t seem wise “..herby assigns the deposit in the original contract to assigne”.  I’d think that shouldn’t occur until closing.

I assume your original contract had a closing date, so I’m not sure why you’re waiting for the buyer to set one?

Chris Mooney · Answer

Hey Jeffrey,

What protections do your contract with the end buyer provide you? Does it require a non-refundable EMD within a certain time after signing? Does it allow you to cancel that contract with the end buyer for any reason? I'd try to get out of that part of the contract ASAP.

Second, I'd keep marketing the property to other cash buyers, that way once you get out of contract with the cheat buyer, you have someone else lined up.

Always require a significant non refundable EMD (i.e. $5K or $10K or more) due 48 or 72 hours after signing with the cash buyer, if not the contract is cancelled.

If you lose this contract, consider it a great learning lesson, but do everything you can to close this deal!

Joe Villeneuve · Answer

If the EMD is non-refundable, why is it in escrow?

Jeffrey Butler · Answer

Some aspects of the contract which seem like I'm able to cancel the contract?;Assignor hereby assigns the deposit under the Contract of Şale to the Assignee. However, in the event the Down Payment hereunder is returned to Assignee, this provision shall be deemed null and void and of no further force and effect. Assignee may not assign this Agreement without Assignor's prior written consent, except to a new entity to be formed, which consent may be withheld for any reason in the Assignor's discretion.

If Assignor defaults under this Agreement and such default is not cured within five (5) days after notice, Assignee shall have the right to terminate this Agreement. Assignee's sole remedy for a default by Assignor hereunder shall be strictly limited to the return of the Down Payment. In no event may Assignee file a notice of pendency against the Premises. Additionally, in the event of default by Assignor, the return of the down payment is hereby personally guaranteed by a member of the Assignor.

Jeffrey Butler · Answer

@Chris Mooney I'm going to look through the end buyer contract right now and see what it says. I'm assuming that was not added to the contract bc I asked my lawyer if I can back out now and he said he wasn't sure, he'd need to look into it.

Yes, I required a 1% non-refundable EMD which is a little less than $5k (next time I will make it $10k) which is in escrow with my atty.

I'm reaching out to my cash buyers now but I also don't want to get into a situation where my other cash buyers want to move forward then I can't... anyway, gotta do what I gotta do at this point I guess.

I REALLY don't want to lose this contract and I'm going to do EVERYTHING I can to get it closed!

Thanks so much!

Cash Buyer Trying to Steal My Wholesale Deal?

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