1 - You can’t buy a contract like that. Course sellers have to make the contracts general enough so they can be used in all states. You can readily find lists of pro-buyer clauses. The problem is that many of these are mutually exclusive. That’s why a good RE lawyer is worth high billing rates.
The one I use is the result of many years of legal consultations and countless hours reviewing contract law. It is constantly evolving to better fit my needs and as a result of new case law. It isn’t that the seller’s attorneys don’t object, they go ballistic, but it’s after the fact and the deal is on.
I never give out a copy so someone can use it as a purchase contract. It isn’t that I’m mean or selfish. I buy with an uncommon assortment of terms. When I?m with a seller I build an offer from scratch. I need total flexibility prior to, and after closing. I have a hard time explaining what it is that I’m thinking about doing. At times, I don’t know what I’m going to do with the property until after the contract is signed. By putting everything I might need in the contract all I have to worry about is getting the best deal that is acceptable to the seller. Sellers don’t read the contract. If they did they would need a RE legal background to fully understand the implications. By giving me total control the seller is taking a great risk. I’m assured that I am not actively trying to steal (60% of FMV isn’t stealing) his property and ruin his life, but I have no control over the actions, covert or inadvertently naive, of others. I don’t want to see my contract on Sixty Minutes.
Bottom line; learn enough to write your own and stay with more traditional deals in the interim.
2 - I use a corporate general contractor because I don’t want to be the one filling the Mechanic’s lien. There is probably a way to do the work yourself, but I don’t know a way with which I would be comfortable. That doesn’t mean that there is no way.
Without going into details, in one part the purchase contract the seller(s) give a mortgage on the subject property to secure their performance on the terms of the contract. I give them the right to opt-out of the deal by paying me money. If they pay, I have to take the cash as liquidated damages and release them. If they try to cut me out, they are in default and I foreclose. I’ve had to file for foreclosure a few times, but it never takes too long before they recall their obligation. I haven’t had to take over a property by this route. Not sure if I would want to. Don’t try something like this without thinking it through and getting counsel.
I am working a deal with a bank REO which will allow pre-occupancy so I can begin renovations of a mixed use property before settlement. They will also allow three months deferred mortgage payments. What major risks will I have in rehabbing before settlement? What should I make sure is in the contract? Thanks
First of all you should do a title search to know whether or not the bank is going to be able to provide you with clear title. If the title appears to be clear, then I would put a clause in the contract that states the seller guarantees you clear title. If they can not provide you with clear title that they will be responsible for all of your costs, losses, etc… associated with the transaction, including costs to renovate the building.
If you can not get a clause to this effect in the contract, I would not renovate the building prior to settlement.
Although it wouldn’t fly with a bank, here’s what I do with private sellers.
The purchase contract gives me the right to make optional repairs, improvements, and perform other maintenance upon acceptance of the contract. Another clause gives me daily access. There are other inter-locking clauses to address timing and control.
The seller is given a list of repairs and acknowledges that the work is to be done by a corporate general contractor, and that any repair or improvement money due will be paid by me at closing. The general contracting corporation is owned by an unrelated, but interested party. Like many contractors, they put a mechanic’s lien on the property for the full cost of the jobs being subbed, intending to remove it when they get paid.
The idea isn’t to rip-off the seller, but to protect me. If the property owner starts acting stupid after the place is repaired, the mechanic’s lien will recover my costs. His performance mortgage will get the property.
These houses are the ultimate fix-up because that’s all you’re paying for. The property purchase comes later. I don?t believe I would take the chance on expensive improvements or a major rehab.
Where can I get a contract Like what you describe? Also is there any way to do the work myself and not lose out after they see how good it will look if they decide to back out?