Re: Contract For Deed Help - Posted by John Behle
Posted by John Behle on October 18, 1998 at 18:19:26:
I hesitate to answer a post addressed to the experts. I think it’s kind of a pompous term, that I won’t call myself. To me an “ex” is a has been and a “Spurt” is a drip under pressure. I’m just having fun and have learned a few things in the process. I will call myself a pro, because I do all I can to be professional in this business.
With that said, I do use escrow services and insist on them for any clients. As far as any deals that are paid to me, I’ll (or an employee) do the collections (escrow) and make sure all of it gets paid. I would never trust a payor on a note to make his own payments on property taxes, insurance or assessments.
If I or a client are on the buying end, I would un-conditionally insist on either paying directly or having an escrow. In some areas, escrows are mandated under certain circumstances if an agent is involved. In Utah they press real hard for it, yet buyer and seller can make their own choices.
I hold a contract for it’s full term unless there is a reason it becomes un-desirable. For example, if the market began a large downswing, I would consider cashing out or selling to minimize risk.
Now, the full term has a different meaning to me. I do all I can with notes to shorten the term and increase my yield. If I have a discount involved, I want it back sooner. If it is high yield paper that I have created, then I look to keep it the full term.
Most lenders are not hung up on their DOS clauses. If I am buying a wrap with one in it, then I price and weigh the deal with a potential refinance included (worst case scenario). I also do all I can to make sure the lender is not tipped off just in case.
If I am buying a property with a due on sale clause, I will consider a long term lease with an option. The lease is to one entity like me personally and the option may be to a corporation or another party. To me, this is more defensible than a lease/option that is one contract to one person. There are also potential pitfalls with the one contract method two. For example, if they do not pay on the lease, the option can in some cases still be considered valid or if they had or chose to record the option or a notice, it is a cloud on the title. I know there are ways around this, but I still prefer two forms.
I always have a formal closing. Even if in some cases it is just at my office, but most of the time it is at a title company. The title companies profits are in the insurance. If insurance is a part of the deal, which it usually is, then they handle the closing and are quite reasonable. If insurance is not part of the deal (rarely), then they are still reasonable in their drafting of documents and handling of funds. Now for me this isn’t just any title company. This is a valuable resource I have cultivated and checked out that values my relationship, acts professionally, will jump through hoops to get a deal closed and many times has some free legal advice thrown in. For example, we had a recent deal where the title company drew up the “fence line boundary agreement” that we needed. I can figure out a “Metes and Bounds” legal description if you threatened my life over it, but I’ll avoid it if at all possible.
I avoid lawyers in my state. In some states they handle the closings. In mine, the best pros are at the title companies. We needed a good title attorney last week and it was a real challenge to find one for our deal. I spend a great deal of time straightening out the stupid problems created by attornies that had no business drafting a real estate oriented document. One that knows what they are doing is great, but they are rare and hard to find - and incredibly valuable once you do find one.