Buyer Beware is a term that has been used for over a 100 years in real estate transactions. To bad some things never go out of style.
I was called by a client who was forced into a corner to convert a land contract. Before I share much more, please be advised, I have had the Land Contract buyer consult an attorney.
The buyers felt so good at the time they purchased. The buyers blindly signed a land contract knowing they had credit
issues. They felt their only option to owning a home quickly with credit payments missed, a car repossession, health bills and other related divorce issues dotting their credit history a loan was illusive. Then add custody of 6 children and a dog to the mix, finding a place to rent in a safe area was also daunting.
So they spotted a Craig's List add, it jumped right off the search page, saying, "Rent to Own, Land Contract Terms". Little did they know this was a 9% monthly land contract. They also didn't know the person helping them was a real estate broker, using the name of his LLC company without sharing his interest in the company.
Oh yeah, you have to come up with $12,000 in cash and I'll calculate the taxes and interest in your payment for you. You'll be able to convert this loan to a bank loan in a year, with my help, they were told. So they scratched, borrowed and begged money from family, friends and worked overtime, 7 days a week for 2 months and raised $8000.00. The seller accepted that but want them to pay and extra $1000 per month on the land contract to make up the additional $4000.00 required for the down. They agreed and managed to meet the extra payments to payoff the down-payment.
The nice seller helped them by hiring a credit counselor for them, they paid for the service not the seller. This was to get their credit score up. They paid the monthly fee and did everything asked. Boy do I wish I had clients like this!
Their credit scores inched up but not enough. Three years have past with at one year land contract, payment structure and a 9% monthly interest rate. The buyer being an independent painting and remodeling contractor, asked if he could do some modifications to the home. Gladly the seller said, "Of Course". The buyer added 2 bedrooms, an egress window, a beautiful deck, stockade fencing, siding and a new roof for the safety and enjoyment of his family.
Now comes the seller, back into the buyer's life. You have to move Mr. Buyer your credit has not go up enough to get a loan. You have 15 days to move. Hence a past client, tell the friend (land contract buyer) to call me. I look at the land contract and fall over. I quickly run a sell price analysis on the home along with an estimated current market value.
What I find is the home without updates is worth what they wrote the land contract for 3 years ago. The updates and extra bedrooms added another $30,000.00 in today's market. The seller (land contract holder) offer's the current buyer's dad a real deal. Give me $25,000.00 and you can purchase your son's property for $136,000.00. The current payoff is $99,380.00, some deal.
I can go on with other issues but the bottom line is just because someone says they are doing you a favor, read
before you sign! Real Estate Contracts Buyer Beware is always in style. The seller, with the help of their personally selected credit counselor pulled the buyer credit score twice each month, safely keeping the buyers credit score lower than required. The seller also selected the insurance carrier for homeowners insurance and could not get it change to a combination policy.
I called a real estate attorney, the payoff was wrong, surprise. The seller had taken out a note on the property and had not paid the taxes, not a surprise. The land contract called for the buyers to be notified of any transaction or resale of their contract. None of these things happened. In fact the home was back on Craig's List for sale, listing all the updates the buyer had made to the property. Real Estate Contracts Buyer Beware your future could hang on your signature.
We can't save the world from people that take advantage of other people. All we can do is create a more informed buyer and seller. The buyer will close on the property using a private lender for the buy-out of the land contract in two weeks. The seller is a bit more insecure with an attorney looking over the land contract paperwork. No amortization schedules, no apr furnished, no disclosure of his ownership of the holding company. Lots of lose ends, go figure.
This could have been much worse. The kids were already informed the family was moving and they would have to room together. Each of the children had written letters to their friends telling them they would let them know where they would be living once they knew.
Everyday someone is cheated, make sure it isn't you! Exercise your buyer beware talents and read before you sign. If you don't know what the real estate contract says, get professional advice. It is up to you to protect yourself. Real Estate Contracts Buyer Beware is how you protect yourself. Most real estate professionals representing you are going to perform a great service. If the agent works for the seller or are the seller, seek someone else's knowledgeable advice.
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