A friend of mine is wholesaling a property and he is under contract with seller. The assignee which he is assigning to knew he could not close in the time period so 2 days before his contract was up he filed a memorandum to cloud title.
To my knowledge only the person in contract with seller can file the memorandum.
I would like some advice on this. What can be done?
Hi,
Ok, I am missing something if your friend had a contract on the property and assigned it how come he was not orchestrating the sale ??????
When I wholesale I am either selling to another investor or I am wholesaling the house to an end buyer!
When an investor steps up and wants my wholesale property I get a non refundable deposit, I take the assignee into escrow and introduce that buyer to the escrow officer and make the assignment agreement a legal party to the contract; and I work with that buyer to make sure they have a hard money lender who can perform or I bring in my hard money lender from my network and I make sure that all the paper work is in order, the buyer transfers (Wires) his 20% to 25% into escrow and that everything closes in 2 or 3 days.
If I am assigning my contract to an end buyer who is using conventional financing I am probable limited to a maximum 7% mark up on my original contract as most end buyers have a threshold that is to be met and an assignment fee can not be included on the HUD 1. Now I orchestrate my end buyer as I generally require a 50% minimum payment on the assignment, so a $100k contract requires a non refundable $3,500 minimum and generally I get $3500 upfront and my earnest money deposit and my time is paid upfront.
I make sure the buyers inspections take place, that the appraisal takes place, that there underwriter approves their loan and that escrow is preparing documents and all issues or problems are worked out before the closing date; as I want to get paid.
Now if I am selling the property for say 15% more than my underlying contract (Kind of splitting the FMV and my wholesale purchase) I will arrange transactional funding and still walk through all the steps in the above paragraphs. I want the buyer to be known to title, I want the assignment agreement or sales agreement to become legally part of escrow and I want to orchestrate the process so I get paid!
I am not sure how anyone wholesaling gets to the point of being two days before closing and does not know what’s going on???
GR
It sounds pretty crazy to me to. I just think the end buyer knew he could not close by the time the contract was up and thats why he filed the memorandum.
I guess my friend will have to get a lawyer.
Your friend is an idiot.
He can’t ‘legally’ file an open-ended memorandum, unless the agreement is open-ended. If there’s an expiration date on the purchase agreement/option, and he failed to meet the requirement, then he is required by law to remove the lien forthwith.
If not, the property owner can sue to quiet the title, and ask for damages in court, along with all legal fees and costs …and he’ll get them, and he’ll really get them if the lien is interpreted to be bogus.
Its actually the buyer that filed the memorandum 2 days before contract was up. My friend had the purchase contract with seller.
Either my friend or the seller will sue this loser since he does not want to release the bogus lien.
OK, now I understand. Your friend had a contract to buy, and assigned that contract to an assignee. And the assignee filed a lien against the property. And now he can’t perform.
When you assign a purchase agreement, the assignee effectively has a legal contract with the original seller. If not, there is no assignment, and the assignee cannot close.
If the assignee files a lien against the property, the lien must reflect at least the terms of the agreement made with the original seller.
Any variations on the agreement, made between the buyer and his assignee are junior to the original agreement.
For example, if the original purchase agreement had a 14-day close, and the buyer assigned the contract, but changed the closing to a 30-day close, the longer closing date is not enforceable AND the assignee cannot base a lien on the junior terms of his assignment contract.
Meantime an assignee can certainly record a memorandum against a property to protect himself from a crooked wholesaler, whom attempts to offer shop, or assign the contract to more than one assignee at a time. Worse has happened.
Notwithstanding, the original seller has a right to a marketable title, once outside the limits of the original sales contract he signed. That is, once the terms of the contract are abandoned, the seller has a right to a quiet title.
Hope that helps more than confuses.
P.S. This is a matter of negotiation, but I specifically start out disallowing any memorandum or lien to be filed against my property on a sale. If the buyer does it anyway and I find out, I weigh my options, but the deal technically becomes null and void.
That’s a good idea to put that in contract not to file a memorandum. Makes a lot of sense.
Thanks for the advice.