When wholesalers or investor buyers write an offer or enter into a purchase agreement or contract with a seller, they often build themselves “outs” or escape clauses into the contract. These clauses allow them to break the contract without penalty, and often without having to provide a specific reason.
Sellers on the other hand, usually are not afforded the same ability, nor are they aware that they too could ask for an out.
In many real estate transactions, the sellers are not very experienced in the business of real estate buying or selling. Sometimes they have inherited a property having never owned one before, or maybe depended on a spouse, family member or Realtor to handle all the details when they bought the property originally. Also, those who choose to sell their property at a significant discount often have a compelling need to sell.
There are occasions where a Seller changes his or her mind about the decision to sell, even after entering into a purchase and sale arrangement with a specific buyer.
Sometimes when this happens, wholesalers will record a Memorandum of Contract (or Understanding) with the local court clerk, therefore, clouding a title to a property making it unable to be sold. In many cases, this forces the seller to sell to that buyer or pay a ransom in order for the cloud to be removed from their title.
I find situations like this to be unfortunate and discouraging, to say the least..
What this tells me is that the buyer and seller really never achieved a meeting of the minds, it tells me that the seller was not really “sold” on the buyer’s offer but agreed to it anyway.
It also tells me that perhaps there was a drastic change in the seller’s situation that the wholesaler does not know about. In this episode, I review strategies to help prevent this situation from happening to you.