When Assignments Fail

Not long ago, I received an email from a panicked client asking what they should do now because the deal on a property they had under contract and thought they had successfully and legitimately assigned to another buyer was in trouble. The assignee had suddenly disappeared. Yes, that person had paid a small deposit of earnest money at the time they signed the agreement accepting the assignment of the contract as the new buyer; yet, shortly after signing, they completely disappeared.

My first response was, “Well, what does your Assignment Agreement indicate? Is there language in it that says if the new buyer/assignee fails to perform in accordance with the time frame set forth in the contract, the assignment is now null and void and the earnest money forfeited? Do all contractual rights revert to the original buyer/assignor?” This client sheepishly admitted to using some cheap form they had gotten for free from the internet, and it didn’t contain that kind of language which would have been included had they worked with a knowledgeable real estate investor or attorney           

My final comment to my client was to remind them that the next time they are in a situation in which they are going to assign a contract, the very first thing they need to ask from the potential new buyer/assignee is for proof of funds. That is a litmus test to help you discern who is a legitimate buyer and who is a broker/joker trying to daisy chain your deal.

I had to tell them that their options were very limited. They needed to go back to the seller, and on the day that the contract expires, they would need to negotiate a new Purchase and Sale Agreement with the seller, thereby cancelling and replacing the now void and unenforceable contract that had lapsed due to the passage of time. No, it was not a perfect solution, but it was the best I could give them in their situation.