What if your end-buyer doesn’t come to the closing?
You have only a couple of options to rectify the situation.
• Number one – get his earnest money deposit from the closing agent.
• Number two – get an extension from your seller and try to quickly resell the property.
• Even though you put on your contract that the end-buyer’s earnest money deposit was non-refundable under any circumstances, it doesn’t mean you’ll get his earnest money deposit at all
• Paying out the earnest money deposit to you is at the whims of the closing agent or closing attorney.
• If he pays you as the contract says, he runs the risk of being sued by the end-buyer, and if he doesn’t pay you the earnest money deposit, he runs the risk of you suing him.
• In most cases, he protects himself first and just holds the earnest money deposit until there is either an agreement between you and the end buyer or he receives a court order.
• The closing agent should provide you with a cancellation of contract and an earnest money deposit disbursement agreement to be signed by you and the end buyer.
• If the end-buyer won’t sign, you are deadlocked as to how to get the earnest money deposit you’re entitled.• Most Realtor® contracts first call for mediation and then civil court action.
• Typically in mediation, the mediator strives to have a settlement where each party gets one-half of the earnest money deposit.
• The better option is to find another buyer as soon as possible and move to close the transaction with a new buyer.
• One way to prepare for this consequence of the end-buyer’s default is to keep selling your wholesale deal and take backup contracts so you can build your buyers list at the same time.
• The only wrinkle that might happen is the original end-buyer may not sign a Cancellation of Contract and your closing agent will not do your second closing, with the new end buyer, without it.
• To get the former end-buyer to sign the cancellation, you may have to give up part or all of his earnest money deposit.
• Your option to solve this problem is to immediately transfer the closings (A-B and B-C) to another closing agent who is unaware the previous failed closing.
• Whatever the former end-buyer says as to why he isn’t closing, more than 40% of the time it’s because of his hard money lender not providing the funds for the closing as promised.
If you have any additional questions, contact me directly at DaveDinkelQuestions@gmail.com.
If you need hard money instead of transactional funding, contact me for referrals to private hard money lenders.
Be sure to check out BestTransactionalFunding.com for all your same-day double closing needs, including a list of Investor-Friendly Closing Agents in various states.
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