Posted by Laure on February 22, 2001 at 08:41:50:
.
How NOT to do it when dealing with buyers - Posted by B.L.Renfrow
Posted by B.L.Renfrow on February 20, 2001 at 21:27:36:
Had a buyer a couple weeks ago who was supposed to have $4k for downpayment on a property I was owner-financing to them on a land contract. They showed up with only a personal check for $1500, but said the rest would be coming shortly from their income tax refund, and brought along the tax documents to verify it.
I told them I’d have to go back and re-do all the paperwork, and prepare a note for the remaining downpayment due, since I’d written the contract, note, etc. to reflect a $4k downpayment. They said OK, and we agreed to meet again in a few days to sign off on everything. I didn’t think much about it. After all, I’d done all my usual due diligence…employment and income verification, credit checks, previous landlords. Except for minimal credit history, they looked fine. They’d been honest on their application, and everything checked out.
The wife INSISTED on giving me the check for $1500 right then, even though I told her it could wait until our next meeting. I had no receipt or anything with me – though in retrospect, I should have written on a paper towel – anything. But I didn’t.
As soon as I got home, I immediately called the buyer’s bank to confirm the funds were available. They were. However, I decided to wait 2 days before depositing the check, in case they flaked out or changed their minds. When I heard nothing more from them, I deposited the check on Feb. 7.
I called the buyers a couple times to reschedule closing, but they put me off…should have been a warning sign.
Found out SATURDAY the check was returned – not for NSF, but because of a stop payment…which was placed the DAY AFTER the check was written!
Of course, the as@#oles won’t return my messages or pick up the phone. Unfortunately, they were my ONLY serious buyers on this deal…and I pulled the ad after accepting their deposit, and like a fool, told several later callers the property was almost certainly sold.
And, that’s not the worst of it. I had written checks against their deposit, after waiting a few days then assuming it had been paid by their bank. So now I have to scramble to cover those checks I wrote.
I have a call in to my attorney to discuss whether it’s worth pursuing, since I have sustained losses due to the bad check. But since there was no paperwork, I am quite sure I’m SOL. At least I wasn’t dumb enough to let them move in.
So for the benefit of those who haven’t had the joy of an expensive seminar, here are the lessons:
- Don’t take personal checks for the deposit/downpayment.
- If you ignore #1, don’t wait to deposit it.
- Never, never, never take any money without completing the appropriate paperwork.
- Don’t assume that just because buyers check out OK and seem decent, that they won’t screw you.
- It’s not sold until ALL the money is received and EVERY document is signed…no matter how much the buyers tell you they love the place and can’t wait to move in.
Frustrating thing is, I know all this stuff. I could recite it in my sleep. But, I got sloppy, cut corners and failed to do things by the book, the way I always do them on any other deal. And it cost me. Lessons learned.
Brian (NY)
Thought I was the only one with expensive seminars - Posted by Dee-Texas
Posted by Dee-Texas on February 21, 2001 at 12:52:02:
Hi Brian!
Just remember the good deals and learn. Seems like I have times of forgetfullness also and it usually hits me in the back pocket.
I’m soooo much more careful now. I always get certified funds as option money, no rent credits (on L/O’s) until option money is totally paid, high interest on promissory notes, check and recheck place of last residence, drive by residence now, Hmmm let me see, what else…Learning the hard way to cover my assets. Ask me how I know this?..smile
See you in Atlanta
Dee-Texas
Making the right choice… - Posted by Carmen_FL
Posted by Carmen_FL on February 21, 2001 at 09:20:39:
We had similar buyers. We did deposit their NON-REFUNDABLE $1,000 personal check, though (and it cleared). They were supposed to come up with another $3,000 by the 15th. What day is it? Oh, yeah, the tax refund is in transit (I hear). We extended one week - if they don’t come up with it by tomorrow, NEXT! I must admit, though - they asked if they could move in on the 15th anyway if they gave us another $1,000 - and we actually CONSIDERED it, until common sense prevailed and we said ABSOLUTELY NOT! We asked ourselves “what would we do if we had to answer to a manager/boss/president of a company? What would a bank/apartment complex do?” The answer was obvious. But the fact that we even CONSIDERED it still scares me … 
GREAT post Brian! - Posted by SusanL.–FL
Posted by SusanL.–FL on February 21, 2001 at 08:57:50:
You brought up a good point—doing our ?due diligence?.
I didn?t due mine as thoroughly as I should have and it has cost me the last 4 l/2 years. Instead of putting EVERYTHING down in black and white (on a partnership deal), we let things slide (because of friendship). Instead of getting down to brass tacks and doing what we should have been doing, we sat around my pool eating crab dip on crackers and watching the ducks on our pond!
Sure as shootin?! Day or so after closing, they tried to NAIL our furry little butts!!
Ahhhhh, yes indeed. Hurrying through a deal before all the ?t?s are crossed and the ?i?s are dotted SURE can cost ya! A VERY expensive ?$seminar$? for me too.
HEY! Come to THINK of it, I haven?t been able to afford crab dip on crackers SINCE!
Thanx for sharing that, Brian. (P.S. Next time you see them in town, super glue their car doors shut!) oooooonlyyyyyy kidding!
Don’t deposit their check, - Posted by David Krulac
Posted by David Krulac on February 21, 2001 at 07:08:27:
take it to their bank to cash.
I guess I’m different… - Posted by Ron (MD)
Posted by Ron (MD) on February 21, 2001 at 07:01:18:
I do take personal checks.
However, I don’t even try to deposit them until the buyers meet with my loan officer for the loan app. If they look good to the loan officer, I put it in the bank. (By the way, I don’t write a contract in the first place without pulling their credit report.)
Like Laure, I don’t want to chase a buyer. It does happen that people get momentarily excited about buying a house, then quickly change their minds. I’m not going to keep their money, so I’d rather not even be bothered with putting it into my account (and accounting records).
The last thing I want is to have my house off the market for a month or more hoping that this buyer will make it to settlement, even though they don’t really want the house. The loan process is tough enough for a buyer who fully committed. An uncommitted buyer is likely to take six weeks and get turned down in the end, in which case I’ve had my house off the market for several weeks and I still have to return their deposit.
I do stop showing a house while waiting for my buyer to go to the lender (which is always less than one week), but I don’t stop pitching it to prospects that call. As a result, a cold-footed buyer can delay me for as much as a week. I don’t want their money, I don’t want to fight about it, I don’t want them filing complaints with the state’s attorney (or anyone else).
On the other hand, if my buyer gets a few weeks down the road and changes their mind, I have kept a few deposits. In this case, they have tied up my house for a meaningful amount of time and their deposit (which in my area, with my buyers, is typically only $500) only begins to offset my opportunity cost.
Ron Guy
State of Illinois - Posted by Laure
Posted by Laure on February 21, 2001 at 04:30:01:
In my state, a buyer has three days to cancel a contract. In this case, if you had gone to court, you would have to pay back the money anyway. I have even taken cash and had a buyer back out. Yes, sometimes I give a refund, or a partial refund. Depends on the situation. I figure I’m better off without them if they don’t want the house. I don’t want a buyer or a Tenant who I’m going to end up chasing for the payment, and that’s what usually happens in cases like this one. At least in my experience. They have problems you don’t know about from their credit check. Could be marital, or mental. But either way, these folks would have ended up being trouble. Life is too short. Move on.
Laure
memo to self: - Posted by BillW.
Posted by BillW. on February 21, 2001 at 24:05:17:
- Always insist on certified funds.
- Always have check made to title company or closing agent.
- Insert clause in contract that says: in the event the buyer fails to close,and seller is not at fault, buyer agrees to forefeit entire downpayment deposited and agreed upon as liquidated damages to seller.
This may allow you to pursue buyer in court for the downpayment and agreed upon downpayment. Sell the house to the next buyer, but get a judgement against the first flakes and attach their wages.
BillW.
Even bigger lesson… - Posted by Charles Steed
Posted by Charles Steed on February 20, 2001 at 22:34:42:
Never accept a check made out to you. I’ve been at this for more than a few years and I ALWAYS close at a title company. (I also get title insurance on every deal. It’s a small price to pay to avoid some potentially big hassles, but that’s another topic) Any earnest money or deposit should be made out to the closing agent. Had you done it this way, the title company would be after these folks now instead of you. Live and learn.
Re: How NOT to do it when dealing with buyers - Posted by JohnB_NJ
Posted by JohnB_NJ on February 20, 2001 at 22:11:59:
Brian,
I would have taken that check directly to their bank and cashed it. If the bank was not in the local area, I would have insisted on them having certified funds.
I never permit access until I have either cashed their check at their bank or I have cerified funds. Its my way or …well you know the rest.
Lessons are learned… and atleast you don’t have them sitting in your home. So, in this case you are lucky… Get another buyer and the best of luck to you.
Sincerely,
John Bittel
Re: How NOT to do it when dealing with buyers - Posted by Mark (WV)
Posted by Mark (WV) on February 20, 2001 at 21:38:18:
Thanks Brian that is a wake up call. I’ve caught my self doing the very same thing
as fast as you can!!! nt. - Posted by evelyn
Posted by evelyn on February 21, 2001 at 07:44:16:
evelyn
Another Great Ron Guy Post! Thanks (nt) - Posted by WayneMD
Posted by WayneMD on February 21, 2001 at 07:59:38:
mnmm
the clause - Posted by Laure
Posted by Laure on February 21, 2001 at 04:33:07:
Yes, the clause stating keeping the money as liquidated damages will probably cover you for keeping the cash in a lawsuit. I just think the hassle factor clutters my mind, and eats my time keeping me from making another deal elsewhere. Life is complicated enough without me making it harder. I like things simple. " You want the house or not?" NEXT !
Laure
Ditto!!! - Posted by SusanL.–FL
Posted by SusanL.–FL on February 21, 2001 at 10:02:38:
Newbies should save a copy of some of these posts in this thread. Really good info!
The three day rule does not apply to RE - Posted by Jim IL
Posted by Jim IL on February 21, 2001 at 19:05:46:
Laure,
I had a seller try to back out of a deal two days after they signed the home over to me.
I wanted the house BAD, there was a ton of equity, and I knew they were trying to get out of my deal to sell for more to someone else.
Anyway, after talking to my attorney, he said, get over to the county and record the deed!
They cannot back out.
A Real Estate contract in Illinois is binding the minute it is signed by all parties.
They cannot back out after signing.
I just had my lawyer write them a strongly worded letter, and copied it to their lawyer as well, saying we intend to start our work on the home ASAP, and that the agreement is binding, especially since we recorded the deed already.
Now in the case here, with a buyer, I’d make them sign something saying the relinquish ther claim to buy, and then let them go.
You are right, they sound like bad news waiting to happen as buyers or tenants.
Just a little C.Y.A.
Anyway, just thought I’d pass that along to you.
Ask your attorney to verify this of course, but mine said it was true, and made it stick in that one deal.
Take care,
Jim IL
Re: The three day rule does not apply to RE - Posted by Laure
Posted by Laure on February 22, 2001 at 08:44:59:
I don’t know about being the seller…I ALWAYS WANT TO SELL ! HA ! I know in a refinance situation, I have to wait three days after signing at close before I get the check disbursed to me. That is in case I back out of the deal in the three day time frame.
When I sell a house, I get the check that day because the buyer’s three days had lapsed a long time ago.
Going to Mexico tonight. be back in a week. Little R&R
Laure :-}
Depends on state! - Posted by Redline
Posted by Redline on February 21, 2001 at 22:52:37:
Here in NJ all RE contracts have “3 day attorney review” clause. Anyone can back out for any reason during that time with no recourse.
RL
Have a Tequilla Sunrise on me! [nt] - Posted by SusanL.–FL
Posted by SusanL.–FL on February 22, 2001 at 14:46:00:
nt