Seller want's a "Simple contract", how can I wholesale?

Question

I've got a seller with some land in Elyria near the Western Stockshow complex that he wants to unload. There are four total parcels, three contiguous totaling 14k sqft & zoned ETU-B, and another adjacent lot  5k sqft also ETU-B all for under $700k.

The seller is an older gentleman who wants a very simple contract "even he can understand".  I want to make sure to get it locked in but I also don't want to scare him off with a bunch of complicated mucky muck.

What is the best way to tie this up for wholesaling purposes without putting too much paperwork in front of him?

Any thoughts are appreciated.

Account Closed · Answer

You'll have to figure out what you want to leave in to feel protected and what you want to strike to make it simple.  That's a judgment call.

Wayne Brooks · Answer

Okay, I'll bite.  I'm used to seeing expensive raw land for downtown condo developments, high rise, etc.  But what exactly can you build on less than a half acre that justifies a $700k land price tag?  Obviously, you'd need an extended option period for development review/approvals, etc.

Graham McBain · Answer

@Chad Benedict Thank you for the great reply!

You're absolutely right that we need a real RE contract to sell. I guess I should clarify that the seller is willing to sign all the long contracts but he just wants something that outlines the deal in plain english that her can understand.

In regards to being transparent, I've decided to make it a point in my deals to tell sellers exactly what I am doing, this one included. I'm glad you mentioned it because it's SO important and broaching the subject properly actually helps you gain trust rather than lose it.

Developers are exactly the target for this property, I've put it in front of one that I know well and they don't like this area as much as I do. The other developers I know I don't have as good a relationship with and something this messy seems like a bad first impression.

Thanks for the reply again!

Chad Benedict · Answer

Hi @Graham McBain

Congrats on finding these parcels. Without knowing the area, I can't comment on whether they're really a deal or not, and without knowing Colorado's real estate laws, I can't provide specific advice. But, I will say that most real estate contracts are detailed for a reason. You can do deals with short contracts as long as everything goes right, but if something goes wrong, you're gonna wish you had a more detailed contract. The standard residential contract here in Texas is nine pages, plus various required addenda depending on the property. Land contracts are usually different, but no less complicated, particularly when it comes to mineral rights, environmental issues, due diligence, zoning, etc., especially if you're purchasing four separate parcels as a bundle.

If I were you I'd consult a local real estate/land attorney to see if they have any suggestions on how to make it simple (although I imagine they'll advise against it). With the seller, I would just talk to him and let him know that you totally understand where he's coming from, you don't like paperwork either, but the contracts are there for his protection as well, and he may have future liability if the contract isn't executed correctly. Plus if you're going to wholesale it (all together, or in separate parcels?), your end buyer may want more standard documentation.

Also, $700K for land seems like a pretty big deal to wholesale, and land is usually harder to sell than houses, especially large lots, because only developers have the resources to buy it. Make sure you have a good idea how you're going to sell this before you put it under contract, or find a partner to help. And if I were you I would make sure the seller understands exactly what you're doing in case you can't get it wholesaled.

Best of luck!

Chad

(Disclaimer: none of this is intended as legal or financial advice.)