Land contracts and "must have" clauses in them? (kinda long) - Posted by Jim IL

Real Estate Investing
1

Posted by Jim IL on February 12, 2000 at 22:52:29:

Bud,
Thanks for the input.
A performance mortgage will not be recorded, but a memorandum will.
We will handle the insurance two ways, as I always do.
The contract will state, and we will draft the letter ourselves, adding me as the “Additional insured” and get a limited power of attorney allowing us to get the funds.
And, we will get our own policy as well.
The closing docs will be prepared by my attorney and held in escrow as well.

And, the idea of a discount for early payoff is a good one, thank you.
The balance owed is approx. $20k, so an early payoff can get us in better.
The payments are high, and I thought about having the guy do a refi and lowering his payments. But, he was not too keen on the idea, so I let it go.

The market rents in the area are much higher than his payments, so there is room for cash flow.

thanks again,
Jim IL

2

Land contracts and “must have” clauses in them? (kinda long) - Posted by Jim IL

Posted by Jim IL on February 11, 2000 at 20:17:35:

Hello all,
Well, all the work and followup is finally, (fingers crossed) coming to fruition.
I had a seller call me a few weeks ago.
Went to look at the home, and did a thorough inspection myself. Went back for a second look with my brother/contractor and got some hard numbers on estimated repairs.
Took a few pictures also.
The seller lives out of state, and has been renting the place for a year or so, with bad luck collecting his rent on time.
As we went back the second time, the tenants were boxing up there belongings and appeared to be leaving.(thats good, cause I will not take posession until it is vacant and the seller knows this.)
So, I call the seller, and talk to him and gather info.
Did all my due diligence, and the deal looked alright, IF the seller would sell to me ALL CASH for LOW or on terms, and still low.
So, after talking to the guy a little more, and asking what his LOWEST price would be, I drafted a letter with 3 offers in it.
The home has an ARV of ~$80k, and needs at the most (BIG fudge factor in here) $10k in repairs. I’m sure if I do the repairs, it will be less, perhaps half of that.
The seller said he’d go no lower than $55k. Not a bad price, but still too high for me.
My three offers were:
All cash; $36k (close at least 45 days away)
Lease Option: $46k (no option money, $300/month rent credit, and no payments for at least 60 days.)
or
Land Contract: $45k, 4 years, no money down.

The guy called me today, and said, “No way!” to the L/O and CASH offers, but like the land contract idea.
Fine with me, they all work.

I have done Land Contracts before, and frankly always start out with a “Boiler plate” of sorts that is “buyer friendly”.
And then the exact terms we hash out during negotiations.
So, here is my question:
This guy said that for him, his ONLY requirement (his words) was that my payments cover his underlying loan payments. Not hard to do, I can calculate that and figure it up. He NEVER mentioned an interest rate, and neither did I, so I’ll make sure that it all fits right. Done that before too.
But, are there any REALLY GOOD clauses that any of you have used or added to your Land contracts?
I can make my own contract, and have done it before, but since it appears that this seller will sign anything that I put in front of him, as long as the sale price and payments are right in his mind, I want to make this the BEST L.C. I’ve ever written.

So, any input is appreciated.

Thanks,
Jim IL

P.S. I already have SEVERAL exit strategies for this home.
I arranged late this afternoon for a partner if I need them to cover the rehab, should I decide to keep the home. I then talked to the city, since the home is located in an area eligible for city grants, and learned the process for obtaining them.
And, I talked to a few of my previous “flip” buyers and told them about it briefly, and a few seem interested.
So, we shall see. Probably will not make cash from it before Atlanta, but sure is nice to know it will be on the way.

3

standard land contract - Posted by Bud Branstetter

Posted by Bud Branstetter on February 12, 2000 at 08:16:09:

Jim,

The problems with the land contract are usually insurance, recording, and performance. If you record a performance type mortgage to cut off liens or judgements it will help. Make sure you have an insurance policy that will reimburse you if a major loss of the structure. Try to get the closing documents signed and held.

You don’t say if you know what the balance on his note is. You could add clauses that give you the right to discount if you pay off early but you need to know what his bottom line is. You are probably close to it as he said he wanted to cover his payment.

4

Re: standard land contract - Posted by SS

Posted by SS on June 13, 2000 at 17:11:55:

I am selling my property and a lady I met while putting up For Sale signs said she likes to do land contracts. I am a newbie and want to make a little off of these properties (not much) to relocate.

Question #1: On the SELLER’S end, what are the risks?

Here are the numbers. As I said, I am a newbie and have made mistakes. Bought 9/10s of an acre with two older mobile homes on it. One (30yrs old) needed work but in very good shape (3br/2b,large room added on plus a floida room- 1800sqft under roof). Purchase price $49,000. Got the owner to take a $10,000 second to cover closing costs and downpayment. Total financed was $52,000. Six months later, found out that the septics were kaput and had 2 new septics installed along with re-plumbing (there were other hidden plumbing problems). Grand total there $10,000 (on going law suit over that matter). One mobile home was in bad shape so MY HUSBAND (his fault!) wanted to purchase a NEW 2000 (3b/2b, 16x80) model, fine, we did that. Boom, another $28,000 (great deal on new one with trade in). So, we are at $90,000 owed on total property. Each side rents for $600. Since we are selling, MY HUSBAND (again HIS FAULT) decided after our current renters left (also went through our first BAD Eviction) that we should leave them empty til they sell. We have cleaned it up, put new floors in, some painting. Property is now looking GREAT! We are asking $53,400 on Each side, paying all closing costs, offering Home warranty. Would like to walk away with $10,000 from it altogether. Again MY HUSBAND wanted to have a real estate agent handle it so that is why the prices are higher (that contract expires in August).

Ok, so here it is…

Question #2-How would you structure a Land contract that will give me what I want and protect me?

Please, Please help me. I want to relocate and my husband REFUSES to move until these properties sell. Of course, as soon as they went up for sale, interest rates started rising, along with other LOCAL market drops.

I would appreciate any help!

SS