Posted by TEST on January 16, 1999 at 05:05:23:
TEST
Have a L/O deal before I got the house-nowwhat? - Posted by JA (AL)
Posted by JA (AL) on January 15, 1999 at 22:49:39:
I have a contract on a house with the contingency that we find a tenant before closing. The bank has approved the loan verbally pending an appraisal, etc. Now I have someone wanting to see the house with intentions to L/O. He wants to know how much for the house. I haven’t really bought the house yet–the owner has agreed to taking a second for his equity (deferred w/no interest for 5 yrs.)and I will refinance the first mortgage once a tenant is found. He also wants a 48 hour “right of refusal” in case someone else offers more than me during that 2 days after a tenant signs a lease. (What HAVE I gotten into?) He will continue to look for a sale price higher than my offer (not likely to get it, I believe) but is very aggressive at advertising for a tenant for me. He has a contract on another prop. and can move at a moment’s notice. How many ducks can I get in a row to make this one work? Am I really out of my mind? The selling price is also being posted by the owner and I have no idea how this might affect my future asking price.
Any brighter ideas?
Re: Have a L/O deal before I got the house - Posted by JohnBoy
Posted by JohnBoy on January 16, 1999 at 17:43:27:
Sounds like you’ve gotten yourself into a bit of a jam here. You’ve allowed
the seller to control your deal. You agreed to give him a 48 hour notice
with right of refusal AFTER you sign a lease with a tenant. This means if
you where to sign a lease with someone else the seller can decide to
exercise his right of refusal which means your going to be forced into
paying him the price he wants. If you don’t you could be facing a lawsuit
from your tenant for breach of contract. Or the seller can take advantage of
you finding a tenant that was willing to pay more and basically steal him
away from you by exercising his right of refusal and raising the purchase
price high enough to force you out of the deal. Now your stuck with 2
options. Pay the inflated price to the seller or back out of the deal by
letting the seller honor your lease agreement with your tenant.
The question is WHY are you letting the seller advertise to find you a
tenant?? You’ve basically given the seller his cake and are allowing him to
eat it too! Its going to be a little tough to find someone willing to pay a
higher price than the current priced already being advertised, don’t you
think??
So now what can you do?
Assuming you’ve made a good deal on the purchase price and since you are
willing to purchase this property I would forget about your contingency on
finding a tenant. If you want to purchase the property then close on the
deal as soon as you can.
If you close in the beginning of the month your first payment won’t be due
for almost 60 days. This should give you more than enough time to find a
tenant/buyer. Call the seller and say, guess what? I got good news. I just
found a tenant and they’re taking the property sight unseen! They’re moving
in from out of state and need a place by the 5th of the month. I’ve sent
them the lease express mail and they will be sent overnight after they sign
it. So were going to close before the 5th. Now I’ll need you to sign off on
your right of refusal in 48 hours so I can get the appraisal ordered. I’m
not going to pay for an appraisal while you have a right to refuse this deal
and cost me the appraisal fee! This will force the seller into playing his
hand. If he has any intentions of pulling anything then he will have to do
it with-in the next 48 hours. If he comes back and says I want more money,
get his refusal in writing and then cancel your contract! If he doesn’t pull
anything then get him to sign off on the refusal and close the deal.
If your having 2nd thoughts about going through with the deal at this point
then don’t approve a tenant. If your contract is subject to YOU (NOT THE
SELLER) BUT YOU, finding a tenant, then I guess you just won’t ever be able
to find one that can meet your terms. You know, they don’t have $10k to put
down for option consideration, they can’t afford to pay $400 above your
payment, they don’t have A credit, etc. The point is if you want out, then
you don’t find a tenant that meets your criteria. If you want the deal then
close on it before you find a tenant.
I would recommend getting a real estate attorney involved with this and have
him read over your contract first. Explain the situation your in and what
you want to do from this point forward and be sure there isn’t anything else
in the contract that can hurt you.
Normally when you want to do l/o’s you would l/o the property from the
seller subject to you finding a “Suitable Tenant/Buyer” with-in x number of
days. Then you turn around and “Sub-lease/Option” to your tenant/buyer. The
only time you may want to actually purchase the home yourself is if you were
getting the property far enough below the current market value.
You stated the seller wants to try and get a better price if he can but YOU
said he’s not likely to get it, you believe? If the seller isn’t likely to
get it and he’s offering some terms willing caring back a second, then what
makes you think you can get a higher price than your paying?
How much is this property worth Vs. how much you’re paying for it?
If you don’t have any courses on doing l/o’s then I would STRONGLY advise
you to get one. Bill Bronchick has one available on this site you can get. A
few hundred today can save you thousands in future mistakes.