What If Your Seller Won"t Come to Closing?
I frequently get calls from investors that they have lost their deal because the seller won't come to the closing table.
Sometimes it is the buyer's (investor's) fault because the closing agent was unable to get ready timely or the time has expired on the buyer's contract.
More likely, the seller has had a better offer from another investor and has been told by the other investor, specifically, not to go to closing because the original investor can't or won't do anything about it.
The seller calls the original investor and simply says he decided not to sell for some cockamamie reason - like "I decided not to move".
Another common occurrence is the closing date comes and the Buyer doesn't have his financing approved or the conventional lender is slow in getting the mortgage documents to the closing agent.
It could be late in the day of the closing so it must be postponed for a day, but the seller jumps at the chance to say the buyer has breached the contract and was not "ready, willing and able" to close.
There are a number of remedies for these situations, but suing the seller for "Specific Performance" is the most common way to resolve the problem.
This solution means you have to sue the seller for not living up to the terms of the Purchase and Sale Agreement.
Most contracts limit the liability of the buyer to the deposit amount on the contract, but the seller's liability is much larger because of the potential profit in the purchase, so a law suit may be needed to have the seller comply.
Here are a couple of problems, with their associated remedies, that an investor should be aware of: The buyer can't get the seller on the telephone and he checks the public record and finds the property has been deeded to another investor without his knowing it! The simple solution is for the buyer to file a Notice of Interest on every deal as soon as the contract is signed.
Some recording clerks may tell you that the document is invalid but ask for a Supervisor to get it recorded.
Other counties may be so cooperative that they record this document with only a notary's seal and no additional witness.
The purpose of this document is to simply "cloud the title" for the other investor's closing agent - if the seller tries to do a deal with another investor.
As soon as you get an inkling something is happening, get your attorney to send a letter to the seller and to the other investor - seller for Breach of Contract and the investor for fraud by inducing the seller to sign another contract.
I repeat, get your attorney to send the letter so it conveys sincerity and authority.
This has always worked for me, especially when I go ahead and make the complaint of fraudulent action to the Attorney General's Office.
A few investors do most of their business by deal stealing.
It's simple for them to just come in after the buyer has signed a contract with the seller and tell the seller the original buyer's contract is illegal or some other reason, usually "because he didn't give you a deposit, his contract is invalid" or "he didn't offer you enough money - he tried to cheat you".
The only goal is to get the seller to sign this investor's contract.
A contract may or may not have to be consummated for a monetary amount (i.
e.
$10) because other good and valuable consideration, which is also mentioned in the contract, has been upheld to be the actual purchase of the property! If you are shaky about this deposit issue, simply Xerox a $10 bill (oversize so you don't break Federal law) and have the seller sign on the copy that they got the $10 after you give them the actual $10 bill you copied.
Your next greatest threat is using a Purchase and Sale Agreement that may not "quite" be legal or doesn't have the proper clauses to protect your interests.
If the seller gets an attorney and you get counter-sued, the court will almost always favor the seller, especially if you have a funny money contract.
These contracts are found in office supply stores, from online sites that have contracts that are not state specific, or are from real estate gurus who supply contracts with their courses.
I'm not saying their contracts are bad, just that when one goes bad it is very expensive! If you are thinking you can sue them for bad legal advice, you need to read the fine print in their courses that say - This material is for educational purposes and is not legal advice, contact an attorney for legal advice and review of any contract in this course.
We always use a standard BAR Association and Realtors Association pre-approved contract.
Investors use escape clauses or weasel clauses as we call them, which gets them out of a contract before the closing without any monetary loss.
I sometimes hear that only realtors or attorneys can fill out a real estate contract! This is just more misinformation or urban legends from real estate training schools, or from some other misinformed person.
In summary, using the proper Purchase and Sale Contract is critical to your success as a real estate investor.
Using a standard format that complies with your state's regulations will simplify your investing career and give you piece of mind when combined with specific clauses that further protect your interests.
Sometimes it is the buyer's (investor's) fault because the closing agent was unable to get ready timely or the time has expired on the buyer's contract.
More likely, the seller has had a better offer from another investor and has been told by the other investor, specifically, not to go to closing because the original investor can't or won't do anything about it.
The seller calls the original investor and simply says he decided not to sell for some cockamamie reason - like "I decided not to move".
Another common occurrence is the closing date comes and the Buyer doesn't have his financing approved or the conventional lender is slow in getting the mortgage documents to the closing agent.
It could be late in the day of the closing so it must be postponed for a day, but the seller jumps at the chance to say the buyer has breached the contract and was not "ready, willing and able" to close.
There are a number of remedies for these situations, but suing the seller for "Specific Performance" is the most common way to resolve the problem.
This solution means you have to sue the seller for not living up to the terms of the Purchase and Sale Agreement.
Most contracts limit the liability of the buyer to the deposit amount on the contract, but the seller's liability is much larger because of the potential profit in the purchase, so a law suit may be needed to have the seller comply.
Here are a couple of problems, with their associated remedies, that an investor should be aware of: The buyer can't get the seller on the telephone and he checks the public record and finds the property has been deeded to another investor without his knowing it! The simple solution is for the buyer to file a Notice of Interest on every deal as soon as the contract is signed.
Some recording clerks may tell you that the document is invalid but ask for a Supervisor to get it recorded.
Other counties may be so cooperative that they record this document with only a notary's seal and no additional witness.
The purpose of this document is to simply "cloud the title" for the other investor's closing agent - if the seller tries to do a deal with another investor.
As soon as you get an inkling something is happening, get your attorney to send a letter to the seller and to the other investor - seller for Breach of Contract and the investor for fraud by inducing the seller to sign another contract.
I repeat, get your attorney to send the letter so it conveys sincerity and authority.
This has always worked for me, especially when I go ahead and make the complaint of fraudulent action to the Attorney General's Office.
A few investors do most of their business by deal stealing.
It's simple for them to just come in after the buyer has signed a contract with the seller and tell the seller the original buyer's contract is illegal or some other reason, usually "because he didn't give you a deposit, his contract is invalid" or "he didn't offer you enough money - he tried to cheat you".
The only goal is to get the seller to sign this investor's contract.
A contract may or may not have to be consummated for a monetary amount (i.
e.
$10) because other good and valuable consideration, which is also mentioned in the contract, has been upheld to be the actual purchase of the property! If you are shaky about this deposit issue, simply Xerox a $10 bill (oversize so you don't break Federal law) and have the seller sign on the copy that they got the $10 after you give them the actual $10 bill you copied.
Your next greatest threat is using a Purchase and Sale Agreement that may not "quite" be legal or doesn't have the proper clauses to protect your interests.
If the seller gets an attorney and you get counter-sued, the court will almost always favor the seller, especially if you have a funny money contract.
These contracts are found in office supply stores, from online sites that have contracts that are not state specific, or are from real estate gurus who supply contracts with their courses.
I'm not saying their contracts are bad, just that when one goes bad it is very expensive! If you are thinking you can sue them for bad legal advice, you need to read the fine print in their courses that say - This material is for educational purposes and is not legal advice, contact an attorney for legal advice and review of any contract in this course.
We always use a standard BAR Association and Realtors Association pre-approved contract.
Investors use escape clauses or weasel clauses as we call them, which gets them out of a contract before the closing without any monetary loss.
I sometimes hear that only realtors or attorneys can fill out a real estate contract! This is just more misinformation or urban legends from real estate training schools, or from some other misinformed person.
In summary, using the proper Purchase and Sale Contract is critical to your success as a real estate investor.
Using a standard format that complies with your state's regulations will simplify your investing career and give you piece of mind when combined with specific clauses that further protect your interests.
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