Seller wants to change the terms

[<Steve> 82]

Excellent, Steve.

Thanks MC, I come up with one every now and then.

 

This is a good thread. I think this buyout clause is great as I have maybe one or so sellers a year bail out of my agreement with them. Typically it is a result of the seller's past marketing and they land a buyer. I typically let the deal go.

 

With my "poker face" firmly in place, I believe she "tipped her hand" here. I think they're trying one, or both, of these tactics:

1) They're stalling for time. They know that I have until July 31st to find a buyer and get the deal done, or I'll have to walk away with nothing.

2) They're trying to go around me and deal directly with the buyer. She was very interested in TB's wanting to view the home, which we agreed they would handle.

I say keep your 'poker face' and play your hand for a quick buy-out if you still can.

[jhanson8 0]

FINAL UPDATE (hopefully)

 

They are officially releasing me from the contract. The husband called last night and gave his "final offer" and I rejected it. He wanted me to raise my purchase price $5k. Not gonna happen. Now I'm drawing up a release addendum and I'll be faxing it over to them on Monday. They've decided to just rent the house for now and sell when the market gets going again. Good luck to them...

 

Wow! Jhanson8, I don't envy you or wish you anything bad, but I do want to say thanks for sharing all the nitty-gritty details of this deal you're working on. I have to say that I've learned a ton reading this thread.

Well, I'm glad I could help. I've learned more from my mistakes and interactions than from all the fancy book-learnin' (MC's manual excluded). Nothing ever goes as planned and this business is no exception. This forum is a great resource for learning all the what-to-do's, but also the what-not-to-do's.

 

 

I think this buyout clause is great as I have maybe one or so sellers a year bail out of my agreement with them. Typically it is a result of the seller's past marketing and they land a buyer. I typically let the deal go.

Contract clauses are like fire extinguishers; you have them hoping you never have to use them.

[Gordon Holtner 0]

Hi

 

i only have one thing to say about this twice a seller has tried to take my profit after finding how much I make because they felt it was their house. I would suggest when it is time to make an offer you say something like I am going to try and make a profit of _________ on this house is this a deal breaker for you? If they balk tell them that you have the contracts and the knowledge and that if they don't need your help tell them that it would probably be in both you best interests and call it a day and stop talking. If they have no problems and commit to that position they will never bother you about this again. Just try to find this out beforehand. Honest people don't find fault in an investor or business making profit and helping them.

 

Gord

[dionwisn 0]

Where is this buyout clause you guys keep talking about?

is this the eary termination clause on the residential lease with option #21

or did you folks ad something?

[jhanson8 0]

I would suggest when it is time to make an offer you say something like I am going to try and make a profit of _________ on this house is this a deal breaker for you? If they balk tell them that you have the contracts and the knowledge and that if they don't need your help tell them that it would probably be in both you best interests and call it a day and stop talking.

Thanks Gord, I'll give that a shot. I've been telling people I'm out for profit, but I've been reluctant to say just how much. Maybe getting it out early will save some headaches and keep me from wasting my time. The $1,150 I'm making from this deal doesn't seem nearly worth it.

 

Where is this buyout clause you guys keep talking about?

is this the eary termination clause on the residential lease with option #21

or did you folks ad something?

I added several clauses into MC's contracts. My buyout clause has been inserted as #22 on the Residential Lease with Option to Purchase Agreement. I changed #21 to "Early Termination by Buyer/Tenant" and made #22 "Early Termination by Seller/Landlord."

 

My #22 reads:

The Seller/Landlord shall have the right to terminate this Agreement at any time prior to the subletting and/or assigning of the property by Buyer/Tenant by providing the Buyer/Tenant with no less than two (2) business days written notice. Total liability in the event of early termination shall be an amount equal to one month’s rent.

 

That clause is basic, but it works. I'm considering a rewrite. Does anybody have a better one?

[MichaelC 160]

That clause is basic, but it works. I'm considering a rewrite. Does anybody have a better one?

Basic is often best. Keep it simple. That one serves its purpose just fine. The more verbose the paperwork becomes, the more likely the homeowner will be to say no or to get an attorney involved.

[jhanson8 0]

That nightmare is finally over. I met with them this morning (at their lawyer's office) to sign the release. This has to be the hardest $1,150 I've ever made. I may photocopy the check and frame it above my desk.

 

Basic is often best. Keep it simple. That one serves its purpose just fine. The more verbose the paperwork becomes, the more likely the homeowner will be to say no or to get an attorney involved.

So true! Years ago an attorney told me that the best, most solid contracts are the simplest ones. Everyone thinks that legal documents have to be complicated because we're used to seeing credit card or mortgage contracts that go on for pages and pages but really don't say anything. The longer the wording, the more likely someone's trying to play you. Just think it through, determine what you want from that particular section, and use straight-forward language and you should be just fine.

 

Thanks to everyone for your support and counsel during this whole mess. I consider myself an "experienced investor" now. I'll be sure to return the favor.

[Mr Investor 0]

It maybe the hardest 1150 you made but you earned that money so take that into consideration.

[<Steve> 82]

Way to hang in there and get something out of the deal. Even going to meet with their attorney takes some guts. Kind of surprised the seller didn’t just wait to the end of the month when your agreement expires.

 

Nice going!

[jhanson8 0]

Kind of surprised the seller didn’t just wait to the end of the month when your agreement expires.

Same here. Their lawyer seemed like a conservative, cautious fellow. I figure he advised to get out before I had the chance to bring a TB into the equation. Of course, the bigger downside to all this is that my TB's lost some faith in me.

 

So, now I'm planning a focused restructuring of my business model. I see that my problem in this deal, and in a few other "almost" deals, centered around promoting an SLO rather than a CA. I know it's been said over and again that CA's are advisable to SLO's, but I had this picture in my mind of a "management" company rather than an investment company. Actually, I was probably operating too much like a business and not enough like an investor or consultant.

[Jason (AL) 1]

That's why I've never done a sandwich lease option (nor do I plan to).

If I'm going to have to be in the middle for an extended period of time,

I'm going to want more control over the deal and any situation that may arise.

 

So you're changing up to strictly CAs now?

Congrats, if so.

[<Steve> 82]

Am I the only one that does SLOs around here?

[MichaelC 160]

Am I the only one that does SLOs around here?

It does seem that way, doesn't it? But, no, you're not. I've done more in the past than I do now, but that's because the difference between the Albuquerque market ten years ago versus the south FL market today is vast. SFR's in my area do not cash flow, even with the 40% decline in prices over the past three years. I take what the market gives me, Steve, and right now CA's make a heck of a lot more sense.

[jhanson8 0]

If I'm going to have to be in the middle for an extended period of time,

I'm going to want more control over the deal and any situation that may arise.

That's what I'm starting to learn. I thought I would just act as a buffer for landlords who don't want tenants. I suppose that a subject-to strategy would be best for anything long-term, although I've been reluctant about using that technique ("So, I give you the title to my house but I'm still responsible for the mortgage? Sounds great!").

 

My problem boils down to my own sense of duty and ethics. If I do a CA, I feel responsible for the outcome of the deal, which I can only really control if I'm in the middle. I know that legally I'm out, but if something should go wrong I would feel awful. These people trusted me and they're even using my contracts. I want to do only CA's because I clearly see the advantages to myself, but not at the expense of others. You know what I'm talking about? Anyone else wrestle with this like I have?

[Jason (AL) 1]

My problem boils down to my own sense of duty and ethics. If I do a CA, I feel responsible for the outcome of the deal, which I can only really control if I'm in the middle. I know that legally I'm out, but if something should go wrong I would feel awful. These people trusted me and they're even using my contracts. I want to do only CA's because I clearly see the advantages to myself, but not at the expense of others. You know what I'm talking about? Anyone else wrestle with this like I have?

 

I'm right there with ya.

This, too, is my concern. I don't like to pass things off and expect everything

to go smooth for 12 months. I'll still be around to assist, even though (on paper) I'm out of

the deal. Like you, I still feel obligated to see things through.

 

After being away for a bit and deciding to to pursue CAs full time this year,

I almost quit again because of a deal that turned a little sour.

Even though it was out of my control, I still felt guilty of it happening because I set it up.

I will say, this most likely could have been avoided had I had the proper time

to screen the tenants. Against my better judgment, the seller rushed me through the deal

and putting them in there ASAP.

Hey, it was their house...their decision.

This caused me to rethink my strategy and my motivation to pursue a business

model such as this.

 

It is, in fact, a great model/niche. It fills that void that most other methods fail to do

or cover.

How many deals can you make money on that have little to no equity, virtually no financial

risk on your part, and doesn't require your buyers to plunk down large sums of cash to purchase?

Not to mention it alleviates a monthly mortgage burden for sellers and gets the house

sold for top dollar...at no charge to them.

 

Sure, CAs are an excellent model, but like any other niche it's not 100% perfect.

Nothing is. They each have their advantages and disadvantages.

However, there are a small handful of deal makers across the country (a good number being members

here) that do this full time and I'm sure have no qualms or hesitation in doing it.

Covering your bases, proper and thorough pre-screening, and being honest will curtail

the majority of the moral and ethical crossroads you may have with it comes to doing CAs.

 

I'd like to hear others' views on the biz.

Maybe they can add some of their experiences and how they deal with the

moral and ethical obligations...after the deals have been assigned.