Re: Contract for Deed with bank loan - Posted by Eric C
Posted by Eric C on August 13, 2002 at 09:47:28:
Nate’s solution is a good one and is done all the time.
On the other hand, any particular reason you’re set on selling CFD?
Ten percent downpayment isn’t bad for a pure RE play (the building), but it’s a very (VERY) small downpayment for a business. In another life, I used to purchase notes created when a business was sold and the owner carried back some (or all) of the financing. I never experienced trouble with any of those notes where a large down was made (50%) wasn’t unusual, but … you can fill in your own conclusions.
I’m unsure how the CFD would be helpful to you. If you sell the business, then they will be incurring a lot of liabilities just to stay in operation. You know inventory, customers, premises, etc.
Just because you can get the business (and building) back easily (without much of a fight)doesn’t necessarily mean you will want it back, understand?
I’m assuming you have a profit here, or you have a live prospect. In either case, you are making a judgment call as to whether these folks (1) have the financial ability to come up with the DP; (2) understand the business well enough to successfully continue operations until you’re fully paid; and (3) that there will be no “air bubbles” in either your cash flow until then. These could come about due to your fault – needing more money for some reason; their fault – just lousy business people; or nobody’s fault – the economy continues to sour or the market no longer likes their product or service).
I hope you’ve cleaned your crystal ball lately.
There are always alternatives. Split the deal into a RE component and biz note – this will make the RE note more marketable or bankable. The biz note won’t be worth very much (in most cases).
Or, you could write their whole involvement (or most of it)as a second. You would maintain some control (not a lot, granted)and the foreclosure process is pretty much clear cut in most places. Writing a second would also give you a chance to bump the interest rate (I would) and insert some face-saving (or other anatomy friendly)provisions.
PS - I would probably speak directly to their attorney and get the word from him (her). I would take this time to point out that a second would not place his clients in any better position, and in fact, might cost them some money. In other words, I would thank him(her) – always throws them for a loop.
Have you got an attorney here? If not, why not? Accusations of misrepresentation down the road won’t accomplish much to put money back into your wallet.
It you’d like more, tell us more.