LAWYERS!!! ARGH!!! Why do they not like REI's!! - Posted by Jim IL

Posted by Stacy (AZ) on July 29, 1999 at 01:16:34:

An ex Cop that rides a Harley, and sells real estate? The drinks are on me, both of you, next convention, Saturday nite.

I hope I can peel away the folks talking to you and Piper to pull it off. I think I got to speak to Piper for about 2 minutes in Dallas…

Stacy (AZ)

LAWYERS!!! ARGH!!! Why do they not like REI’s!! - Posted by Jim IL

Posted by Jim IL on July 28, 1999 at 13:59:43:

Hello all,
Pardon me while I vent!
I was calling ads the other day and left a message for a home we saw “For rent or For sale”.
The seller called me back yesterday, and informed me that he had the local number set up on voice mail only, and that he was actually out of state.
I was excited, but did not show it to the seller.
We discussed his home, and what he needed.
The seller insisted that before we proceed to talk further, he wanted me to go see the home.
He stated that a friend was living in it and showing it last night to another possible buyer, and could I PLEASE go look NOW!
So, I did!
The place was great, and the terms he offered were pretty good.
The seller also insisted that I call him after viewing the home, that same night, no matter how late it was. (can you say, “motivated”?)

So, we talked more, and he agreed to “go with me”.
He asked me to draw up the agreement, and fax it right to him.
After he got it, he called me back and asked if it was okay to send it back tommorrow, so that his wife could read it and sign it. She was apparently at work.
No problem, I am “flexible” and could wait 24 hours.

But, today I get the agreement back via fax, and this seller has taken it to his “brother in law the lawyer”, and they changed almost EVERY SINGLE clause in the agreement, by adding to or deleting certain items.
He even changed the numbers a bit.
I can live with the number changes, they were not that much different. (besides,we will just pass that on to our Tenant/Buyer anyway).
But, the guy basically wants me to jump thru hoops!

Examples:
In my L/O agreement, it prevents the seller from encumbering the property any further.
The seller’s lawyer says that that MUST be changed, allowing the seller to encumber the property to as much as he wants but not to exceed the option price.
(I may bend on this a little, but it does scare me)

The seller also wants to be able to “assign” the contract, and not allow me to assign it and be released from liability. OBVIOUSLY, we will not bend here. IF we assign it, then we want to be free from it.

The seller is also demanding that we carry “liability insurance”, even though the home is insured, and he was told that we require our T/B’ers to carry renters insurance.

The seller also wants a security deposit, which we may agree to, but make it payable after we find an acceptable T/B’er.

Our agreement also says that the seller must add us as an “additonal loss payee” on the home insurance, and the lawyer says that this is not possible, and that the lender will not allow this. (He is wrong!! It has been done before)

These are just a few of the “changes” that are requested, and frankly I’m an inch from walking away.
The only thing preventing me is the location of this home.
We have a HUGE demand from buyers for this area, and I know that it will fill up FAST!!

The seller also has several other people interested in the home, so he says, and I belive him, because I know the demand here.

What would you do?

I at first told my wife we should take a hard line, and not compromise much if at all. Our deal was good, and we already agreed to pay $50/month more than we first proposed, and met his asking price.
But, my wife says, bend, and get the deal, we need a shot in the arm right now!

What would you do?

Thanks,
Jim IL

P.S. We normally write up our L/O’s for 24 months with 2 renewable periods, and this time we went with the sellers idea of 24 months and 1 renewal. The lawyer changed that to reflect a $5k price rise for the second term and rent going up by $75/month also in the second term.

THE FUNNIEST LAWYER JOKE EVER TOLD! - Posted by Bill Gatten

Posted by Bill Gatten on July 29, 1999 at 13:16:33:

A guy goes to a lawyer to have him look over a Purchase Contract. The lawyer puts on his glasses and reads it over very carefully, and says: “This looks just fine to me.”

Bill

In my contracts… - Posted by Dirk Roach

Posted by Dirk Roach on July 29, 1999 at 02:02:38:

I always included a couple of sacrificial clauses which I can conceed in the negoiation process. Sometimes I have to use them, sometimes I don’t.
Dirk

Re: LAWYERS!!! ARGH!!! Why do they not like REI’s!! - Posted by JPiper

Posted by JPiper on July 28, 1999 at 19:02:20:

Jim:

Here’s a few observations:

“In my L/O agreement, it prevents the seller from encumbering the property any further. The seller’s lawyer says that that MUST be changed, allowing the seller to encumber the property to as much as he wants but not to exceed the option price. (I may bend on this a little, but it does scare me)”

I wouldn’t worry about this. The risk of encumbering the property further revolves around encumbering OVER the option price. As long as it is not encumbered over that, he can still deliver title if you exercise. Frankly, if you record a memorandum of your option, or a performance mortgage, I doubt a lender will do a new loan without some type of release from you.

“The seller also wants to be able to “assign” the contract, and not allow me to assign it and be released from liability. OBVIOUSLY, we will not bend here. IF we assign it, then we want to be free from it.”

Whether this is important to you would revolve around your intent for the property. If you’re planning to sandwich this, the assignment clause recedes in importance. Having said this, I don’t blame the guy for not wanting an automatic release for you IF you assign. How does he know who you’ll assign to? In my contract my clause says that I can assign, but that I am NOT released from liability UNLESS I have the approval of the assignee by the seller, such approval not be unreasonably withheld. Personally I can live with that, in fact I prefer it. I have doubts whether a “pre-release” of liability would stand up in court if it were tested. Perhaps you can give them a little of what they want, and get a little of what you want (if the assignment privilege is really important to you). Selling the seller a new assignee in return for a release of liability is not all that difficult.

I don’t know how profitable this deal is to you?.but liability insurance is not very expensive. Might be good for you to have anyway.

The lender obviously doesn’t care if you’re added to the policy. Who MIGHT care however is the insurance agent. You’ll need to convince him that you have an insurable interest. Obviously if the insurance agent has no problem with it, the lawyer would need to back away on this one.

You’re in a negotiation now?..so negotiate. Try to get the things that are important to you?give up the things that aren’t. Just because a guy doesn’t go with everything you want doesn’t make this a bad deal necessarily.

JPiper

PS. Personally I would tell the seller that it’s possible that his lawyer may blow this deal…but that you are willing to agree to a few, but not all of his points. I would ask him if he feels his lawyer is a rigid guy…and wait for the answer.

Re: LAWYERS!!! ARGH!!! Why do they not like REI’s!! - Posted by Rob FL

Posted by Rob FL on July 28, 1999 at 14:58:47:

I always use the standard Realtors’ contracts with my addendum when making a purchase offer. My addendum is titled “Standard Addendum to FAR/BAR Contract.”

My leases are titled “Standard Rental Agreement.” I have only done one lease option and the agreement I used was titled “Standard Option to Purchase Agreement.” From my observations anyway, the more “standard” or “legally correct” the document looks, the less chance anybody will question the verbiage on it. People like preprinted standard forms.

WAIT! Press the “pause” button - Posted by Hugh James

Posted by Hugh James on July 28, 1999 at 14:51:00:

Jim…We’re in the same state, Illinois. According to my attorney, lawyers in Illinois (at least) are prohibited from ammending dates or dollar amounts on a real estate contract. The principals can, but not their attorney(s). Now, here’s where you want to be very careful. I’m NOT a lease option specialist in any way, but it seems to me that if there were any number of cash offers or qualified buyers with the usual mortgage contingency clause he’d sell to one of them and wouldn’t waste his time with your lease option. Don’t get over anxious for a “shot in the arm,” your time and your deal will come. If this is really a SUPER GOOD deal then be reasonable and be flexible and get a GOOD attorney of your own. Otherwise let the seller know your offer is on the table, but you won’t tolerate a hatchet job from any attorney.

P.S.>>I know we could say this of almost any profession, but lawyers seem to stand out the most, with possible exception of real estate brokers. Here 'tis…Some of the dumbest (and I do mean STUPID) people I have ever met are practicing law. On the other hand, I must admit, some of the smartest, most articulate folks I’ve ever met are…practicing law. So be very selective and find yourself a good one.

Re: THE FUNNIEST LAWYER JOKE EVER TOLD! - Posted by Drew-TX

Posted by Drew-TX on July 29, 1999 at 13:25:26:

That’s a good one. Here’s my favorite:

Q: What’s the difference between God and a lawyer?
A: God knows He’s not a lawyer.

Drew (a lawyer)

Same with IRS… - Posted by JHyre in Ohio

Posted by JHyre in Ohio on July 29, 1999 at 06:40:03:

take a few things that are not eagregious but still “off” (i.e.- the kind of thing that incurs interest but NOT penalties)…you know they’re gonna take SOMETHING, might as well be air in that something. Sometimes you even get to keep the air! This concept- as Dirk pointed out- applies to SOOOOOO many things.

John Hyre

What about the credits (if any)? - Posted by Brandi_TX

Posted by Brandi_TX on July 29, 1999 at 01:55:48:

Jim,

You said:

“I wouldn’t worry about this. The risk of encumbering the property further revolves around encumbering OVER the option price. As long as it is not encumbered over that, he can still deliver title if you exercise. Frankly, if you record a memorandum of your option, or a performance mortgage, I doubt a lender will do a new loan without some type of release from you.”

QUESTION: How would this affect any rent credits negotiated?
Example: The seller agrees to a 100k option price, currently owes 80k, and agrees to 300/mo credits to the buyer ($7200 over a 24 month lease.) When I exercise at 24 months my price will be $92,800. SO, if the seller goes out and encumbers the property up to 100k, then I am at risk of him not being able to close without coming to the table with $7200. (How do I know he will be able to do this?)

I know that this should be “his problem”, but when it comes to his ability to close… wouldn’t it then become MY problem. (Not to come up with the $$, but to worry about if the seller can.)

Any clarification would be great, see you in chat.

Brandi_TX

Re: LAWYERS!!! ARGH!!! Why do they not like REI’s!! - Posted by Jim IL

Posted by Jim IL on July 28, 1999 at 20:01:29:

Jim,
You know, after being a cop for so long, I am a little bit hard headed and not always the diplomat.
Thankfully, I have learned that it is best to deal with negotiating in a stand back and take another look kind of way.
I did just that, all day today.
I talked to my seller later on and went ahead and faxed him the “final offer” on our L/O agreement.
The seller had 15 points that they wanted changed, and we did go ahead and agree to a few of them.
The seller then got on the phone with me, acting all apologetic, and stating that his “lawyer” was his wifes brother, and therefore very rigid. He said that he felt I was not being unreasonable and that we would eventually see eye to eye and “get this thing signed”.

I am now sitting here content that I gave it my best shot. We can only decide once the agreement is back in my hands.
The seller asked if he HAD to come back to illinois to signthe document, and I assured him that for me, a fax deal was fine. The only request I have is that when I pick up a key, I be allowed to “inspect” the condition of the home prior to occupancy. He agreed, since his “buddy” the single guy is living thier now, and asked only that I advise him of any damage, so that he can make repairs.

Thank you so much for your insightful response, it REALLY helped as usual.
At the next convention Jim, I OWE YOU BIG TIME, some drinks will be sent your way sir!

Jim IL

P.S. I did learn today, from my latest conversation that the seller is the one squirming. He even told me that no matter what the lawyer says, he would VERY MUCH like to do business with me. this time, my cool head act, paid off. (someday I’ll outgrow this hot temperment…I hope)

Re: LAWYERS!!! ARGH!!! Why do they not like REI’s!! - Posted by Brad Crouch

Posted by Brad Crouch on July 29, 1999 at 01:46:47:

Jim,

As one who knows about this “temperament” stuff, let me say this about that. It takes LOTS of practice . . . and tongue biting . . . and just when you think you’ve got it licked . . . BAM! There it comes again! I seriously doubt it will ever completely dissappear, but it CAN get better.

Still biting my tongue,

Brad