While I’m not an expert on the legal aspects of posting here, I do have years of experience coaching students in real estate sales and investing.For anyone getting started in real estate, I always emphasize the importance of focusing on key steps before committing to a deal.

It's a lot easier for both parties and cheaper for the company.

There really isn't any "fair" cut of the profits, it's really just whatever cut each party is happy with.

I was one of the fortunate ones that was able to get out of the contract and after all expenses (forfeited deposit, legal fees, holding costs, etc) lost less than $20k.  

This is not tax or legal advice, just what I personally do, consult your professionals! 

Time is money and I prefer spending my time with my fam and friends instead of problem tenants and legal cases. 

(Unfortunately, the investor fell for this gimmick and did NOT get their own 3rd party inspections, appraisals or even visit the properties they were buying, against our best efforts to encourage proper due diligence and follow our check list for their own protection.)So now some people are stuck with properties worth half what they paid (not all RWN members), with no renovation done, and constant repairs and vacancies. 

Consult with competent legal counsel to guide you regardless of your choice here.

Based on your description, Party 1 seems like the safer choice.

Isn't it unlikely that a homeowner who cant afford a 2-3k tax bill would even challenge this legally?