Re: How to get them to make some more payments - Posted by Jim IL
Posted by Jim IL on June 19, 2001 at 15:11:42:
Well, I noticed this post when it was first posted, and then again today.
I gave this some thought, because I’ve done this same scenario a few times, and each time I question things about it, trying to make it more secure.
So far, I’ve been lucky, all the sellers have paid as the agreement stated they were to.
I was not sure until I read your post what you were asking? Where you looking for a way to talk the sellers into making the payments? or where you asking what to do to insure that they pay after they agree to?
You said: "How do you get them to do this?
Just in case your asking how to “pitch” the idea, I’ll try to cover how I do that. I tell the sellers that my funds, time and energy will be going to obtaining a qualified person to buy the home, so I can get my profit, and the loan can be paid off entirely as soon as possible. This will take some time, as well as a rather large expenditure on my part, so they need to make a few more payments. If they claim to not have the money to do this, we talk about what they do have and see if we can liquidate something.
Anything they can contribute helps, and it helps them.
“Do you just hope they do as they promised after you’ve been deeded the property, or do you have them sign an unsecured note? Without a note, I can’t see how you can expect the sellers to continue making payments on a house they no longer own. Or, do you just tell them you won’t be making any payments for X months, and let them know their loan will go into default if they don’t do as promised?”
I have done some of each of these. On the first one, I just had the purchase and sale agreement include a clause stating that they were responsible for $x amount in payments, and I would start later. I also had the agreement state that they were to pay me driectly, not the lender. This way I could be sure they sent the money in or not.
It worked, they paid, but there was really no recourse for me if they did not. I knew this, but was okay with it, because I bought right.
On one other one, I had a note written up for the amount of payments to be made, and secured it with the sellers car. He paid me too.
I’ve also had them sign an unsecured note, as well as the purchase and sale agreement with this in it.
This way, at lest IF we did go to court, I could show where the seller acknowledged the agreement to pay TWICE. Not fool proof, but it seemed to get the importance of paying across to my seller, because they paid as well.
To me, if the seller has another property they are buying, then maybe a second will work on that to secure you better.
But, most of the sellers I deal with in Subject to deals are not going to have another home, they are in financial stress and will probably rent for while.
I try to buy the homes with enough room in them to allow for the sellers not paying anything, and just consider the money they do send, if at all, as gravy.
If you come up with a good solution, please let us know here, I’d certainly be interested in adding it to my toolbox.
Thanks for the post,