The wholesaler can back out of the contract with the seller. This reduces their risk.
Contract Inclusions and Earnest Money
The wholesale contract should include:
- the parties involved and their signatures
- the property’s address, legal description and type
- purchase price
Most wholesalers make $5,000 to $10,000 per deal. The buyer pays earnest money, usually 1-3% of the offer price.
Contract Termination and Seller Backing Out
Wholesale contracts have provisions allowing either party to back out if conditions are not met. For example, if the buyer can’t secure financing in time, the seller can back out. Other contracts may not have back out provisions. To terminate, the contract would need to be breached.
To back out without legal repercussions:
- Review the contract for loopholes or clauses
- Communicate with the sellers, explain reasons for terminating
- Offer a buyout
If sellers change their mind, they may use an unfulfilled contingency or cancellation clause to back out legally. If not, and they cancel, the wholesaler might collect monetary damages.
Special Clauses in Contracts
The sales contract can include illness, death, property destruction, or admission into specific golf club clauses to give an out option. Almost no contracts include death clauses since it’s assumed heirs will close the deal.