Posted by Lonnie on May 08, 1999 at 23:46:19:
How did you word this in your contract?
Legrand L/O and Security deposit issue - Posted by Jim IL
Posted by Jim IL on May 06, 1999 at 09:58:17:
Well, today I talked to one of my L/O propspects on the phone. She is out of state, and has a problem tenant in her home. We agreed to meet in a week to finalize the deal and look over the home and determine what needs to be done before I take possession. (she says there is damage, but WE know it only needs cleaning)
I had previously faxed a copy of my L/O agreement to her, and she looked it over.
Today she metions that she NEEDS to have one months “rent” (or payment) upfront as a security deposit.
I gave her the usual, “We don’t pay those and this is why”…routine.
No success there!
She is adamant.
I do not want to give this woman a cent, but if I have to,how can I say that it will not come until I get my option money from my T/B?
What have others done when faced with a seller like this?
I’m tempted to just walk from this unless she lets up, but honestly I think there is still a deal here IF we sign.
Any input is GREATLY appreciated,
Jim IL
More… - Posted by Jim IL
Posted by Jim IL on May 06, 1999 at 12:33:44:
I just talked to my seller again, and got the REAL scoop.
Apparently she needs the “deposit” because there will be time between me occupying the home and her tenant leaving. She stated that she needs to cover her mortgage payment at least. (which is my rent amount anyway.)
Also, the current tenant has “torn up the place” and she states that the securtiy deposit she now holds will be used to clean it up.
I have thought about perhaps offering to do the “clean and fix up” myself, if she’ll forego the deposit she is asking for from me.
But, we need to actually see the damage first. apparently the damage is a broken disposal in the kitchen sink, (cheap and easy to fix), and the carpeting is trashed. (I can clean it maybe, it is only two years old).
So, we shall negotiate and see what happens. It all depends on her motivation and mine I guess.
Cannot really tell what will come, until we see the inside. The current tenant is being real uncooperative at this point. (and I don’t mind, because that only seems to increase my sellers desire to deal)
Thanks for all your input, as always, this board is invaluable to my business.
Take care,
Jim IL
P.S. one other side note, apparently the current tenant is HUD section 8. This woman accepted that because she wanted it rented fast when she transferred out of state. So, I’m not sure how the current security deposit works anyway.
Re: Legrand L/O and Security deposit issue - Posted by Russ Sims
Posted by Russ Sims on May 06, 1999 at 11:33:50:
Jim,
In one transaction I gave the seller a note for his $1500, with the due date open to when I could line up my tenant/buyer. It worked. In a transaction I’m working on now, I’m simply agreeing to split (the % is negotiable!) any down payment if and when I find a T/B. I love flexible sellers!
Re: Legrand L/O and Security deposit issue - Posted by Stacy (AZ)
Posted by Stacy (AZ) on May 06, 1999 at 11:19:47:
Yor are right that LeGrand’s style is to make sure to be in control with as little out of pocket as possible, hopefully zero. I like this philosophy. For example, telling your seller that you will put money into the deal as soon as you find a T/B, and no sooner. His theory is that most T/Bs are motivated and understand that you can’t make their payments while the house sits empty.
But even LeGrand will bend the rules for a good deal. Weigh the risks. If the deal is good, and the seller won’t back down, give-in and get her the security deposit.
Stacy
Well of course… - Posted by Sean
Posted by Sean on May 06, 1999 at 10:50:57:
…you’re going to give her one month’s rent as security. Remind her, however, that since you take over renting the place that her current tenant’s security deposit will be payable to you. Or, if that tenant is leaving, the new one will pay you a security deposit that will cover the cost.
Re: Legrand L/O and Security deposit issue - Posted by Brad Crouch
Posted by Brad Crouch on May 06, 1999 at 10:46:14:
Jim,
I don’t think this seller is being “unreasonable”. You might offer a few months of prepaid rent in advance, instead (you get that back right away when the tenant buyer pays monthly payments that you don’t have to “pass on”). The tenant buyer you put in there should have 3% to 5% (minimum) option consideration to put down immediately, so you would recoup your out of pocket expenses quickly (a nice little upfront profit, too).
Good luck,
Brad
Re: More… - Posted by Reif
Posted by Reif on May 06, 1999 at 21:05:29:
What’s her incentive for paying another payment? Can you get the deed, or does she have a lot of equity?
Reif
Re: More… - Posted by JPiper
Posted by JPiper on May 06, 1999 at 12:47:32:
I don’t see the problem here. The seller is telling you evidently that she can’t make the payment. Obviously it’s in your interest to see that the payment is made.
All things being equal, a security deposit is not a bad deal for you. It will be controlled by the laws of your state concerning security deposits…ie it’s probably returnable at some point by law. So you get it back in the end.
Meanwhile, when you put your new tenant/buyer in they will put up some upfront money which will put your out-of-pocket cash back in your pocket.
You don’t give any numbers so it’s impossible to say whether this is a good deal. But if it came down to it I don’t mind putting something up I’ll end up getting back…if I have to put anything up.
JPiper