Posted by Shawn Dostie on May 14, 2002 at 12:17:28:
Those were along the lines I was thinking, I just wanted to hear someone else say it.
Thanks,
Shawn
Selling on Land Contract What can go… - Posted by Shawn Dostie
Posted by Shawn Dostie on May 13, 2002 at 16:33:40:
Wrong? I bought a Duplex last year for $30,000.00, financed it w/ another property. It needs approx $20,000.00 rehab (10k siding, 5k windows,5k roof). Have renter that is interested in purchasing for $60,000.00 2k down, 12%, 30 year amortization pmts $596.60 per month.
O.k. fine, What happens if they don’t pay? What is it going to cost me to get the property back? Should I lease option it? What forms are best or should I pay my atty the $150.00 and learn the paperwork later? Can I record the lien myself? Can I, like the bank, escrow taxes and insurance?
Thanks in advance for all your assistance.
Shawn Dostie
Re: Selling on Land Contract What can go… - Posted by Craig (IL)
Posted by Craig (IL) on May 13, 2002 at 21:45:37:
Just because someone doesn’t qualify at a traditional lending instiution such as a bank or credit union, doesn’t mean that a good mortgage broker with many more options available to him or her won’t be able to qualify your tenants.
The right broker will work with you and your tenant-buyer to quailify them. This inlcudes what he or she would need in the loan or L/O documents. You may have to ask around to find the right, experienced broker.
You say these people have been good with payments desite a credit problem in their history. Have they? If you’re truthful in what you say, this is good news to certain mortgage brokers who specialize in this kind of thing.
With the permission of your tenant-buyers, you can show this mortgage broker their credit info and other financial info, and he or she will work with you and them to strucure a deal that will cash you out in 12–24 months. People with past credit problems can rectify them with one of these plans providing the buyers make zero–I mean zero–late payments.
Your eperience working with bankers, the things–the “absolute” rules, etc,–they have been telling you, may actually get in your way in your thinking. You’re talking about accepting a level of risk some traditional types won’t accept. Can you handle this?
Lots - Posted by Anne_ND
Posted by Anne_ND on May 13, 2002 at 17:23:55:
Shawn,
How long does it take to foreclose in your state? How much does it cost to do the paperwork? What is the redemption period? What happens if your buyer has work done; doesn’t pay the vendors and then makes you foreclose on him/her? Do the liens stay with the house after you take it back?
I suggest that you spend the $500 to get this done properly by someone who knows the laws of your state and who can advise you on the best way to sell. In my state I love to buy on CfD, but would never sell that way; the laws are very pro-buyer here. What about your state?
good luck,
Anne
EVERYTHING! - Posted by John Behle
Posted by John Behle on May 13, 2002 at 17:20:23:
Contracts sales can be wonderful, but your post concerns me.
First, do not under any condition record or draft documents yourself. Not only can you lose all of your profit on a contract deal, but more also. Not that a contract deal is inherently bad or dangerous, just that it can be - and is - if you do not know what you are doing.
Second - Do not trust your attorney!!! It’s unlikely he knows anything about contract sales and yes, he will be there to help if there are problems - FOR A VERY LARGE FEE! Most attorney’s are not anywhere near adequately trained in mortgage law or real estate. Even those that specialize or claim to can be very ill-prepared.
Third - I didn’t read a word here about the tenant’s qualifications for the large loan you are looking at extending. You are considering a $58k loan to someone that for all we know is a career criminal. Maybe, maybe not. Probably not. BUT, tenants are tenants for reasons. It usually means they do not have the cash, credit or desire to own a property. A scam artist could get into the property for a couple thousand, live for many months, in some cases even years, without a payment and then finally leave you with a trashed out property, thousands in attorney fees and even thousands out of pocket to pay the underlying mortgages.
Now, is this going to happen? Maybe, maybe not - the point is you don’t know.
You must:
1- Qualify the tenant. You need to know what you are dealing with. You need to verify whether they are willing and able to make payments. Employment is important. Credit tells alot. Whether they have had bankruptcies or foreclosures in the past is important. Do they have judgements against them? Even a criminal record check would not be foolish. At least a check of the courthouse to see what pending lawsuits and problems might currently be going on or might have happened in the past - like with the last person they bought a property from.
Basically you need to know what you are dealing with as far as the tenant so that you might make an “informed” decision as to a potential sale and seller financing.
Next - you need to know your state laws regarding contract sales and foreclosure. How long? A little over thirty days in some states and up to years in others. What is the proper form to use - IN YOUR STATE. Not some nonsense form out of someone’s home study course. Your state will have laws, policies, procedures and likely an approved form for seller financing. You need to know those things - and again - your attorney likely will not know. Even worse, sometimes an attorney pulls a form out of a book on the shelf or their tiny little course they took on real estate at “Gonzaga” University 20 years ago.
As a buyer of seller financing, some of the worst drafted forms and messes I have seen have been done by attorneys that are operating outside their specialty or claiming to specialize in an area they have no business being in. Like a Dentist saying “Sure, I can do brain surgery - there’s only a few inches difference”.
For example, in Utah, we haven’t used “Mortgage Notes” for many, many years. We are a Trust Deed state. The few times I have run across mortgages, they were always put together by an attorney that should have been off attempting to help someone in a field they were actually trained in.
In your state: You may use Trust Deeds or you may use Mortgages. “Contracts” as in seller financing through the use of a “Contract for Deed” or other form may be good or bad. Dangerous or not. In most states, a “Contract for Deed” has some built in risks and problems. You may be better off with an “All Inclusive Trust Deed” - but it all depends on your state. I don’t know the laws and documents for every state, so posting it here may not help. Things also change from year to year, so I would go direct to the Division of Real Estate, a Title Company, or the Board of Realtors in search for current information.
So, you need to know about:
1- The potential buyer
2- The laws and forms of the state
3- Proper professional help in drafting, recording, etc.
Don’t mean to rain on your parade, but your post concerned me.
Re: Selling on Land Contract What can go… - Posted by Shawn J Dostie
Posted by Shawn J Dostie on May 13, 2002 at 22:04:10:
I can accept the risk. The main 2 reasons I think a sub prime lender would turn this down is D/I probably close to 70%. However there are 2 sets of grown children living there… this ain’t the suburbs… 2. I am pretty sure the property won’t appraise for the 60k I can get for it. My thinking is, if they live in it until they screw up, no matter how much time passes, I’ll be there on the courthose steps to recover. Meanwhile, for the present, I’ll be free of landlording and evictions.
Thanks,
Shawn
Re: EVERYTHING! - Posted by JHyre in Ohio
Posted by JHyre in Ohio on May 14, 2002 at 07:31:41:
Shawn asked my opinion, so here it is:
I think John B’s dead-on. To wit:
The law is so complex and so huge, that even lawyers have to specialize to properly understand a (relatively) small piece of the law. I am a tax attorney, and focus and federal and state income taxation of RE nationwide, along with property taxes in about 10 states…a sub-specialty within the larger specialty of tax law. Given that taxation tends to drive choice of entity, I’ve also gotten proficient with non-tax legal issues involving corporations, trusts, etc. I’m strong with gift & estate taxes, though not YET so good that I’d call myself an “expert” on that topic. With all other legal issues, I have a darned good clue- but a darned good clue is not enough to advise people on those other issues…you will notice that when I comment on issues outside of my realm of true expertise I either flat out state that I’m offering an educated guess or hedge like crazy. Many clients think that a law degree makes one an expert in ALL things legal- it does not. Furthermore, many attorneys do not want to admit what they do not know- they do not wish to lose face or billable hours. Ethics and good business practice mean that an attorney should “stick to the knitting”. A good attorney will do just that, and a good client will think more of them for it, not less. John B.'s literal point (don’t trust your attorney) was overbroad- but his real point is don’t trust a non-specialist, and be doggonned certain that the “specialist” really is one. For foreclosures and the like, I use people who demonstrably devote much or most of their practice to that activity- they know most (but not all the answers) without doing research- because they’ve been there, done that. They also know the local judges and how their respective personalities influence proceedings and decisions. I find it far more efficient to pay these guys than to do the work myself. These are the same guys who review my contracts- who better to review, than the guy who will be paid by me to enforce it, or by someone else to shred it? I completely agree that FAR too many attorneys rely on forms that they do not INTIMATELY know, just to get the billable hours. I’m also of the opinion that using forms from ANY course without paying for at least an hour or two of expert review is madness- penny wise, pound foolish. In law, beware the jack of all trades and master of none- especially the jack who hasn’t the integrity or self-knowledge to know and admit to strengths AND weaknesses.
In re Ohio LC law- I’m familiar with it because it interests me, but not so familiar that my opinion should be relied on. That may change as I become more involved with such matters in a direct manner once I’m out on my own. Until then, I’d trust JT-IN’s opinion on the matter- though a layman, he deals with it constantly and is much sharper than the average bear. But I’d still get the expert help, for much as I respect JT, he IS a layman.
John Hyre
You just wowed me… - Posted by Shawn J Dostie
Posted by Shawn J Dostie on May 13, 2002 at 18:32:00:
with such an in depth, and fast response. Thank you kindly.
-
You said not to record doc’s myself, nor to trust my RE attorney who represents my local bank, My Car Lot, and did the forms on my prior residence (I L/C’d for $114,900.00) Who should I have do this?
-
I qualify people for a living and work very closely with my bankers on a daily basis. These are currently my tenants, and while they are a credit risk, they have lived up to the obligations I have placed on them so far. The reason I am asking what happens if I have to take the property back, is because I don’t know that arena, not having experienced it. I have no intention of selling this note, nor do I expect them to have any work done w/out my knowledge. I don’t think that they can qualify for a conventional type loan, although they are a perfect candidate for the weatherization grant money going around our neck of the woods, besides, any improvements will benefit me if the house comes back.
-
I am in Ohio, J Hyre do you know the time and etc… of forclosure in Ohio, also whether it is a taxable event if I resell it in the same tax year after forclosure?
-
We had a title company in town but they left. I will contact a friendly realtor tomorrow to enquire about forms, recording etc… also will check with a friend who has sold many many properties this way.
Your feedback wasn’t anywhere close to what I expected, but that is why I visit this forum 3-4 times daily, so I can learn and absorb what everyone thinks.
Again, thanks so kindly for the input.
Shawn Dostie
Re: EVERYTHING! - Posted by JohnBoy
Posted by JohnBoy on May 14, 2002 at 14:24:02:
Very good!
The biggest problem seems in being able to determine whether any attorney you consult with is qualified enough to fit the needs in relation to the subject matter you’re interested in. Since a lot of attorneys seem to not like to admit what they don’t know, how does one, especially a newbie, determine whether they are consulting with the “right” attorney given this problem?
I’ve spoke to many attorneys over the years and some you can tell are not qualified, some come off in the beginning as sounding as if they are qualified, and some you just can’t tell for sure until after the fact if you use them only to find out later they weren’t the right one to use!
I guess the best one can do is seek out others that feel they have the right attorney for your subject matter and spend time talking with a number of attorneys to get a better feel for being able to pick out one that seems to fit the qualifications best that you are looking for? Any other ideas?
Heck, I’ve talked with some attorneys that started out sounding like they really knew their sht, only to later discover after talking to them more, that they didn’t appear to know their sht as well as you first thought they did! Seems finding THE attorney can be a bit of an undertaking, especially for those that are just getting started in a field they themselves have little knowledge about.
You got any ideas or tips that may help people to sift through this decision making process in finding a decent attorney to work with?
Re: You just wowed me… - Posted by John Behle
Posted by John Behle on May 13, 2002 at 22:23:22:
1- The person/entity to go to to record forms is whoever standardly does it in your area. In most areas that is title or Escrow companies, but in others it is attorneys. Without knowing anything about who your attorney is, I wanted to caution to make sure he/she were capable and experienced. Sounds like your attorney might be. It’s just that people turn to their attorney like “OZ” at times thinking they know everything.
2- Sounds like you have the experience and capability to check your buyer out. Even though they might have been a good tenant, I’d still want to view credit, etc.
3- John Hyre’s probably a great resource. I’d also check the internet. Your state laws may be easily accessible there.
4- Your Realtor and friend ought to be able to point you the right direction.
Best of luck with it all.
Do not do # 4… - Posted by JT-IN
Posted by JT-IN on May 13, 2002 at 20:12:05:
#4: Contacting a Realtor to get forms, recording, etc… Even the most knowledgable of them will know little about this area of specialty… You have experts that have been through this with their eyes shut, right here on this board; why go to a novice…?
Shawn:
You should not sell this property on CFD… You should sell it via L/O. Why, and what is the difference…? There is very little difference, until something goes drastically wrong. With a CFD a buyer has a higher standing, potentially. In a L/O, the buyer is really a Tenant, and if and when the deal melts down, you file an eviction, instead of potentially filing a foreclosure. In Ohio there is a tremendously HUGE difference in eviction and foreclosure… about $ 2500 difference to be exact, and about 8 months time difference. Why would you want to take the risk, as the seller…?
With a 2K down payment on a 60K property, you have little more than a rental deposit anyway. If you know these people and you have a level of comfort with them, great. Just have them underwritten by a mortgage broker to see how far away from being able to qualify for a mortgage that they really are. What will they need to cure, or invent, to get a new mortgage in a year or two…? The mtg guy can surely tell you this.
You can set up the payments and all the rest exactly the same way with the L/O as with the CFD… One more thing; “Forget about recording anything”. You are the seller, and it does not behove you to have things recorded in this deal. What you need is a good Lease and and an Option contract; two seperate documents. If you don’t already have this, you should consider getting hold of Bronchicks or Kaisers, et al L/O course, so that you have working examples of these docs. They are invaluable.
Absent that, I can help you further with docs, if need be. Just ask.
Just the way that I view things…
JT-IN
Re: EVERYTHING! - Posted by JHyre in Ohio
Posted by JHyre in Ohio on May 15, 2002 at 07:36:49:
Once again, John B. is on to something. I’ve not used the method of excluding the speaker’s firm…I just have a lot of attorney aquaintances (big surprise!) and poll them informally…ditto with investors.
How to Q&A an attorney? I’m usually technically proficient enough that I can spot a rat. I will ask a few general questions that should be top-of-the-head, we-do-it-everyday stuff. I expect quick and correct answers on those questions. I will then dig a little deeper and find an area of the law that is more complex…once I’ve gotten the attorney to admit to familiarity with a certain code cite or case that I’m also familiar with, I’ll ask some questions to see if they REALLY know the cite-I also will test how they think. On the basic questions, I do not expect much in the way of “I don’t know”, and on the deep question, I want to see how they think. The object is to give my “gut” lot’s to go on. I like forthright people with forthright answers- and I especially like it when I ask on off-the-topic question and get the response “I don’t know”…if the attorney seems to know everything on a broad array of topics, I get nervous. Attorneys who read up on numerous topics (I do) can convincingly BS their way through many topics, sounding like experts in all topics to laymen. I’m a bit harder to fool. Someone who opines on everything and anything without caveating (e.g.- “I’m no expert in this area, but I can give you a clue”) is not to be trusted. I have explicitly told prospective clients (for example, I get lots of divorce questions, over which I haven’t the faintest clue, along with non-tax estate planning issues, with which I am not currently expert) that want non-tax (and sometimes even tax work) done that they would be better served by using someone more familiar with the topic. The only way for you to know whether an attorney has the integrity to do that is to push him off of his specialty and see how he reacts.
Summary:
- Investor recommendations;
- Attorney recommendations, especially via John B’s method;
- Lots of questions on bread and butter issues, looking for immediate and good answers;
- One or two “deep” questions- you will have to know your stuff here;
- Seeing if they will advise you off-specialty or portray themselves as knowing more than any single person possibly could.
- Watch for caveats- off-topic they are a sign of honesty. On-topic, some are acceptable, but too many means that they are in fact off-topic!
John Hyre
Finding a good attorney - Posted by John Behle
Posted by John Behle on May 14, 2002 at 23:46:44:
Finally, after all these years, I found a way to find the right attorney for a situation. At times past, I’ve asked around and people recommend their neighbor or partner or … and you regret the day you got the referal.
My attorney mentioned his approach one day. He calls other attorneys and says there could be a conflict of interest with his firm - who would HE/SHE recommend?
When the attorney you are asking and their firm are excluded, they tend to give a more objective referal. Once the same attorney’s name comes up several times, he knows he has a good lead to follow.
Re: Do not do # 4… - Posted by Shawn Dostie
Posted by Shawn Dostie on May 13, 2002 at 21:24:47:
This was more the feedback I was expecting, Thank you.
Have you heard of Jeff Beau**** and his Lease to purchase Program.
He has tons of forms that my attorney has gone over.
If my tenants don’t qualify after 3 years, could I at my option, do another L/O?
Although I like these people, I do not ever think that they will qualify for a mortgage, although at some time in the future I might be able to sell the mortgage at a discount. The Duplex I believe appraises at approx $40,000.00 currently. The reason I am considering this is to regulate my cashflow and to reduce my time involved w/ managing the property. If they do fail to make payments as agreed, which I believe could happen very easily if something happened to one of them, I can afford the time w/o income, as well as the legal fee’s with the income from my other investments.
Now, back to the L/O. Can I structure it so that they “escrow” taxes, ins, utilities, etc in the payment? (sorry, of course they can) Can they still getgrant assistance to weatherize the home under a L/O?
Thanks for the input,
Shawn
Hey Russ - What’s “Fannie Mae?” - Posted by John Behle
Posted by John Behle on May 15, 2002 at 13:25:00:
I was walking through a law firm that purported to be great real estate pros one day. As we walked along, one of the attorneys called out to the one I was with and asked what “Fannie Mae” was.
That one has always kind of stunned me.
I’ve seen other cases where an attorney shmoozes his way through the initial interview and hiring in an area they are not truly competent in. They then bill at their exhorbitant rate and hire some young attorney at a lower rate to research the area and do a mediocre job. I’ve also seen them bill for their so-called time as well as for the assistant who actually does the work.
Another annoying one is where the so-called pro takes the job and somewhat dazzles you by their personality and expertise. Then they turn around and turn it over to some some mousy bookworm and you never see the “Senior” attorney again. The mouse then proceeds to get his tail kicked by the opposing side. The average consumer doesn’t always know or want to start out a relationship with “oh, by the way Mr. Attorney, I’m hiring you, not the lowest level junior assistant you can find to put on the case while you go golfing”
Had one recently that surprised me. The attorney just totally disappeared. He left the case hanging at a crucial time and his previous firm didn’t do a thing to pick up the ball. It was a crucial time, but not one that needed a lot of contact, so quite a while went by and damage occured before his absence was apparent.
Learned a little about politics a few years back when one very bright and highly recommended attorney just was kicked around every time he went into court. Later I was told his extremely prominent attorney father had alienated most of the judges in the area and they tended to take out their feelings on him.
It can be hard to find a good attorney, but sometimes they can be worth their weight in gold when you do.
Re: Do not do # 4… - Posted by JohnBoy
Posted by JohnBoy on May 15, 2002 at 24:17:54:
On the escrowing of taxes, insurance, etc. pertaining to a doing a L/O.
NO! You do NOT set anything up under a L/O where your tenant is responsible for the taxes or insurance. If you did that and your tenant was to default they could easily have the L/O reclassified as a sale whereby forcing you to foreclose VS a simple eviction.
They are just TENANTS. Tenants don’t pay taxes and insurance, the landlord does. Tenants only pay RENT!
So all you do is figure in the taxes and insurance and add that to the rent amount by making that amount the RENT they need to pay.
So instead of paying $500 rent, plus $100 taxes, plus $50 insurance. You just make their RENT $650 and then YOU take care of paying the taxes and insurance.
If you are selling on contract for deed then you would escrow the taxes and insurance in addition to the buyer’s payment. But not on a L/O.
Re: Do not do # 4… - Posted by Lyal
Posted by Lyal on May 14, 2002 at 07:25:07:
Shawn,
If you have questions about Jeff’s forms, why don’t you post on his web site? Email me if you need the url.
All the best, Lyal
Doubtful… about the grant assistance - Posted by JT-IN
Posted by JT-IN on May 13, 2002 at 21:57:32:
Shawn:
Unless this grant program is very loosely run and monitored, which is doubtful, then these folks will not qualify for any grant assitance under terms of a L/O. Why…? Because they are tenants and not owners. Now I am familiar with energy grants where the city will come out and winterize a tenants unit, based upon certain income limits, etc. This may be possible. However, anything that requires them to be the owner, will not legitimately fly, under terms of a L/O.
To answer your other Q that you posted, about Jeff B…
Apparently he was promoting his course online here, and become quite abusive to the staff when told not to. Beligerant… I think is the word. So, he is no more… not in any written form around creonline… as you found out.
When doing a L/O or a CFD, it is recogmended that you have a T/B, or Vendee in the case of a CFD, execute a Quitclaim Deed from them to you. In the event that push ever comes to shove, you have a deed where they have relinquished all rights to the property. If they refuse to execute the deed, that is simple… find another T/B or Vendee. The rules are the rules… adn the rules are, if you buy from me, you execute the deed. No deed, no house!
Just the way that I view things…
JT-IN
Re: Hey Russ - What’s “Fannie Mae?” - Posted by JohnBoy
Posted by JohnBoy on May 15, 2002 at 15:26:52:
LOL
“I was walking through a law firm that purported to be great real estate pros one day. As we walked along, one of the attorneys called out to the one I was with and asked what “Fannie Mae” was.”
So did the attorney you were with, yell back, “why it’s a candy store you big goof!”??? LOL