Wilmington, NC · Member since 2018 · 26 posts · 5 votes
I'm looking at a condo purchase where the legal owner is in some way incapacitated and her attorney is conducting the sale. The asking price is under market and has the "right things wrong with it" such that if I buy it and sink 5k and a month of work I can expect to force appreciate it by about 15%. So the numbers are tempting, financing is in place but I am struggling with this "10 day Upset clause". As I understand it, this clause permits the seller to accept my offer and put a 10 day block of time AFTER due diligence is completed, to potentially field other offers. Should they get such an offer, then they can decline mine with no penalty. Earnest money is returned but none of the due diligence (Appraisal, Inspection, Pest Inspection) expenses will be refunded. This strikes me as arbitrary and in bad faith. Can anyone share their experiences/insights etc?
Lender · TX · Member since 2018 · 936 posts · 713 votes
8y
@Brock W. Again, if you are buying this as a foreclosure, then this would pertain but if this is a standard transaction and not from a formal foreclosure preceding then it should have no part of the contract.
Here is the NC State Article concerning the sale of property (see page 15 in subsection .22).
Here is also a link to the results page from searching "10 day upset clause" in google.
Lender · TX · Member since 2018 · 936 posts · 713 votes
8y
@Brock W. I was curious about your post and had no prior knowledge of this before. I don't know what kind of research you did but after 5 mins on google I was able to figure out this is something specific (or at least it being called a "10 day upset bid") to North Carolina. This only pertains to foreclosures and it allows after a foreclosure sale for another party to come in and bid $750 or 5% more than the sale amount (whichever is greater). This is not part of a standard real estate contract from any state I have heard of. I think you are dealing with an attorney who is writing his own contract of sale. Something fishy is going on. I would just review your state's general practices and make an offer without that being part of the contract to purchase property. Who are you using to seek advice in the purchase of the property, i.e. broker, lawyer, or going solo?
Wilmington, NC · Member since 2018 · 26 posts · 5 votes
8y
@Ryan Blake, thanks for your input. Working with a broker whom I trust, She has been very upfront about the associated risk. I searched?googled as well but was less adept at finding this info. If you have a link I'd love to get it and forward it to my broker.
Lender · TX · Member since 2018 · 936 posts · 713 votes
8y
@Brock W. Again, if you are buying this as a foreclosure, then this would pertain but if this is a standard transaction and not from a formal foreclosure preceding then it should have no part of the contract.
Here is the NC State Article concerning the sale of property (see page 15 in subsection .22).
Here is also a link to the results page from searching "10 day upset clause" in google.
Asheville, NC · Member since 2018 · 3 posts · 0 votes
8y
Hey Brock, how did things go?
I'm a new investor from the opposite end of the state from you, Asheville, NC. I'm looking at properties on Auction.com and I see in the Terms and Conditions a statement noting that upset bids can be accepted by the clerk of the superior court the following day and the original winning bidder has the opportunity to place another bid after that. I'm not sure how thing work after that? I'm curious to know how your deal went so I can prepare myself in the event I win an auction in the future.
Investor · Asheville, NC · Member since 2015 · 187 posts · 112 votes
8y
For NC tax and foreclosure auctions the 10-day upset rule is in play. But I agree that it's strange, and probably shady, to see it in a regular contract.
Wilmington, NC · Member since 2018 · 26 posts · 5 votes
8y
Hello All- Briefly, this is what I've learned: Most of this info was relayed to me via MY real estate agent who, in turn, was informed by the seller's agent.
In this instance the owner/seller is in some way disabled or incompetent and the sale is being administered by an attorney retained by the family. This 10 Day Upset was court ordered to insure that "we all do our jobs, and a 120K property doesn't sell for 50 bucks." So somehow this is meant to safeguard the indigent owner.
There was an offer of $115 k vs a sales price of $119k so now I am in position to "Upset" the offer if I choose. I must, however, satisfy some stipulations: 1) my offer must exceed the previous by 5% 2) I must put 5% down with the county clerk at the time I make my offer 3) I have 10 days to close 4) If i fail to close I forfeit the 5% down payment and also am required to make up any shortfall between the eventual sales price and the original offer 5) My offer can in turn be upset by another bidder or the original bidder.
Long story short there are too many questionmarks for my taste at this point. The property is a decent deal but far from a once in a lifetime type of opportunity. I will likely pass this one up.
Javier, I hope that is of some use. Everyone else, thanks for your input.
PS- One note: because this is a court ordered sale, somehow the buyer's agent is no longer entitled to a commission, so my agent is understandably less gung-ho.
Asheville, NC · Member since 2018 · 3 posts · 0 votes
8y
Thanks for responding Brock. I ended up calling the clerk of the superior court and was informed of what you have just stated. Like you say, there is a new 10 day upset bid period after each upset bid! In theory this could go on forever, lol. With the few houses I've looked at on Auction.com they all have this clause. I'm sure there are deals to be had but I'm not comfortable with this process. And, after looking at reviews for Auction.com I stopped having second thoughts. They get like 1.3 out of 5 stars.
And, btw, my agent pretty much said I'd be on my own for this type of deal since she couldn't collect a direct commission from the sale and didn't feel comfortable with it to begin with. After reading the reviews I honestly don't blame her.