Posted by Brad Crouch on November 02, 1998 at 14:16:43:
KE,
A receipt may indicate “ratification” of an oral agreement, but it does not show a “meeting of the minds”, which is required for any real estate contract to be valid… In other words, you got “nuthin” … (my opinion).
If the guy has changed his mind on the price or terms BEFORE he committed his signature to a contract, you’re not going to be able to “force” him to adhere to the original oral agreement . . . the one that YOU liked.
It’s great to have the luxury of being able to “stick to your principals”. I guess you’re already wealthy and can afford to take “time off” to persue making this guy change his mind back to your original oral agreement. How many other deals will this folly cost you?
Although since you didn’t have contracts handy when you really needed them, and are now facing the aftermath of that . . . you may have learned something that will make you a more effective RE investor in the future.
Count your blessings that you learned a “good” lesson (cheaply too!), and keep on truckin’! The thing to do now is develop or modify various contracts and print them out. Then start carrying them with you wherever you go. So this senario will NEVER happen again.
If you can’t make a profit with the new numbers and terms, and you can’t negotiate things so you CAN make a profit . . . MOVE ON to the next deal.
I know, it’s said land is not a good investment, but we are buying 40 acres tomorrow, subdivided and are going to slowly put in driveways, wells, septics, and build on them for rent or resale. May sell 10 or 20 acres with driveway access to get our money back quick! I have a purchase agreement, which we’ll complete and sign tomorrow. Purchase price 25,000, $5000 down, 10-year land contract for remaining $20,000 at 7.5% interest, subject to title satisfaction, our satisfaction regarding zoning ordinances, etc. We’ll put down $100 until all contingencies are met, at an agreed-upon time. At the time we give them the $5000 down, do we then complete the “Contract for Deed” and register it at the County Court House? I don’t think an attorney is necessary for such a simple, straight-forward procedure. Also, I believe it is a Quit Claim Deed we will receive upon satisfaction of the contract, rather than a Warranty Deed?
Anyone know the answers for sure on how to go about this?
Let me add to the excellent advice already provided below. Your post stated that you would get a quit claim at the end of the contract. Be careful here. A quit claim is worthless if the seller does not have clear and undivided interest. A quit claim only conveys whatever interest the seller has, if any. It may be none.
Check with a title company. Get owner title insurance. If they do a title search and find that the seller has clear title, then they may insure based upon a quit claim deed. For better protection however, I would want the seller to provide a warranty deed.
Also, have a real estate attorney review your contract to insure your interests are protected. Does your contract for deed prohibit the seller from pledging the land as collateral for a loan before title is conveyed? Will the contract be recorded or unrecorded? These and other issues should be discussed with your lawyer before signing this contract.
Re: Help Quick! Buying land tomorrow - Posted by JohnBoy
Posted by JohnBoy on October 31, 1998 at 17:49:02:
First you have the contract for deed drawn up and approve of the terms and conditions written in it, then once everything in the contract is agreed upon you put down the $5k at the time you and the seller sign the contract. You as the buyer would sign a quit claim deed to the seller at the time you enter into the contract for deed. You would have this held in escrow along with a copy of your contract with a 3rd party. Either a title company or an attorney could hold this. The purpose of you signing the quit claim deed back to the seller is in the event you were to default on making any payments. If you were to default on the payments the seller would contact the title company holding the escrow and have them record the quit claim deed and the property would then go back to the seller. You would get a warranty deed when the contract is paid off.
The problem you may have with your plan is in most contract for deeds on land, you cannot build or sell off any part of the property until the contract is paid in full. It will depend on the terms in the contract. But I would guess this would be highly unlikely that seller would agree to those terms. Would you?
Is the seller willing to allow you to sell off sections of the property before he is paid? Is he willing to give you clear title to each section you sell off? Why would he want to do this??
You say the property is subdivided? If the property is already subdivided you might be able to divide up the property with seperate contracts so you could get clear title to each section you sell at the time you go to sell them. Otherwise I don’t see how you could sell off part of a property you have under one contract before the contract is paid off and you have clear title.
Does the seller know what you want to do with this? Before you jump in and sign the contract you should speak with a real estate attorney to see how you could set this up properly to allow you to sell off sections at a time providing the seller is willing to go along with this.
We were hoping to get the permission from them right in the C/D to do improvements. Hadn’t thought about selling off parcels being a problem. You’re right.
Seems another interested party has just spooked them, giving them the idea that we will put liens against the property if we start to do improvements. We could stipulate that we won’t start improvements within the first 6 months (can’t anyway) and then will only put in driveways and possibly wells/septics within the first year, with either lien waivers for proof of (pre-payment) We do ALL the work ourselves with the exception of drilling wells!
We put in a driveway and built a home on our homestead during the first 3 years of a 10 year c/D and I bet the seller wished we would have defaulted! Doubled or tripled the land value, which not only had to access but was land-locked, and put up a $150,000 home! Maybe we can use him as a reference!
You’re points on selling off sections is a good one. Actually, if we put down $6,250, one 10 acre tract would be paid for. We could probably work out clearing title individually, except it is, I believe, ONE title. Any idea how we would go about getting separate titles to each tract?
Posted by JohnBoy on October 31, 1998 at 19:58:32:
Have the 40 acres subdivided into 4 ten acre parcels. You have the property surveyed to divide it into 10 acre parcels and have the first ten acres you would want to divide and improve upon staked. You will only have to pay to have each parcel staked as you buy them. To save on cost just pay to have the one ten acre parcel staked, then the others as you buy them. You will have to check to see what the cost would be to have the property serveyed.
Offer the seller the $6250 cash for the first 10 acres and get 3 seperate options, one option for each 10 acre parcel left. Figure out how long you would need to develope the first 10 acres and make the first option expire around that time. Extend the time period for the option on the third parcel to expire when you estimate you’ll be ready to develope it. And then the fourth for when your ready to buy it.
If you estimate one year to finish the first ten acres then make the first option good for one year to purchase on the second parcel. The second option good for two years on the third parcel and the third option for three years on the fourth parcel. Put up about $10 on each option to make the option legal and binding. You justify only putting up the $10 on each of the other three parcels by agreeing to pay cash for the first parcel. Everyone is happy. The seller doesn’t have to worry about liens being put against his property since you would have clear title to the first ten acre parcel. Then you pay another $6250 when you exercise the next ten acre parcel. Make sure you lock the $6250 purchase price in on each parcel since those parcels would be likely to increase in value as you devlope the parcel next to it.
This would be a better deal for the seller since they would get paid off in four years instead of ten. You wouldn’t have any monthly payments due since you have an option to buy the other three parcels. As you exercise your option on each parcel, then you have that parcel staked. The survey has already been done so you shouldn’t have to pay as much to have them come out and just stake the corners. (I think its about a $1000 here to have the property staked at four corners). Then use the $6250 to pay for the next parcel from the profits you made on the first one.
As you buy each parcel the sellers attorney would draw up a new deed for each parcel that you would get when you exercise your option on each parcel.
Check and see about the posibility of developing a mobile home park on the last 10 - 20 acres. If you can do this and made enough profit off the first two or three parcels to help you develope it you could create a nice income stream from the lot rents. Or you could just develope the park and after you get it mostly occupied you would have a major asset you could sell for a substantual amount of money.
Just thinking???
Hope it works out for you.
Where are you located? $625 per acre is an excellent price! Is that the norm for your area or is this an exceptional buy?
We are from Duluth, Minnesota. The usual price undeveloped land here is 18-20k per 10 acres. This is an exceptional price–that is why were are jumping on this and now frantically trying to hold onto the deal.
Talked to the seller again before reading your last message and here’s the latest. First, let me say I really appreciate all the time you are putting in to help us out. This is valuable information you are sharing!
They were offered $28,000 cash and now want to reneg on our verbal, but based on the handshake this afternoon (see agreement below - another ? arises) will give us the opportunity to meet the $28, with $5,000 and remaining $23 on contract. Says he has three separate titles, 2-10 acre parcels and 1-20 acre. Couldn’t we do it this way (I’m sure they wouldn’t do the option bit if they were’nt getting any monthly payments): Offer them 1/4 down, so we have clear title to one 10-acre parcel. Write up a C/D stating the purchase price, interest rate and 10 year term, with the stipulation that as each (dollar amount) is paid, we get clear title to one parcel, the last twenty acre parcel to be deeded over upon full payment on the contract?
About the verbal agreement: Met with seller at the land this afternoon after he agreed to $25,000, 10 years at 7.5% interest. The total he would be getting after 10 years is 33,488, when he was originally asking $32,000. Gave him the agreed upon $100 down until all parties meet tomorrow and sign the purchase agreement. He wrote out a receipt stating: “100 down for 40 acres on Wahl Rd. $25,000. 10-31-98.” (didn’t sign, I see). But we have a witness to the verbal agreement-handshake. Can we hold him to this original deal based on this?
I’ll be waiting for more valuable info. from you, but am going to go into the chatroom for the first time and see what I can find out. Time is running out!
Re:Exc.Strategy!New developmentsAGAIN - Posted by Brad Crouch
Posted by Brad Crouch on November 01, 1998 at 02:52:27:
KE,
According to the Statute of Frauds, any agreement concerning Real Estate must be in writing to be enforceable. At least that’s my understanding. I’m not a lawyer, but I’m sure I’m right about this.
Maybe carying a briefcase full of various contracts, in the trunk of your car would be a good idea. Remember the Boy Scouts? “Be prepared!”.
Would our hand-written receipt "Received $100 for 40 acres on Wahl Rd. $25,000 (no signature)considered “written” enough!?
Along with the check for $100 made out to him and the witness, I believe we may have a case.
Cuz now he’s saying $28,000 cash, no improvements until the land is paid for. Actually, we would be willing to go along with this. We would advertise the 10 acres w/driveway, sell it and then pay off the balance before closing so that we would actually have the title to pay it off. Basically told him we’d check with an attorney to see if we could hold him to the original “deal”, so probably won’t deal further with him under the circumstances. (talked to an attorney and he says we may have a case). Left a message with buyer informing him before he sells to the other guy he might tell him there may be a problem. See if we hear from them before pursuing it further. But I think we will pursue it as a matter of principle!