All Forum Posts by: Cathy Malmrose

Quote from @Lydia S.:

@Cathy Malmrose

All else aside, your son is essentially a landlord for this time and he could put together a lease agreement immediately (ideally with the help of an attorney), which outlines a security deposit in case of damages, requires the prior owner to obtain renters insurance, who pays utilities and any daily rent- especially a daily amount that’s high if they stay beyond a certain date.

This would at least cover the primary points in a leaseback.

I’m curious about when and how the sellers made the request to stay past closing that your son agreed to - was it just between the two parties or was the Realtor part of that conversation?

I was out of town so it was just my son and his realtor at the closing table. The realtor was there convincing him it was a good idea. The sellers didn't mentioned it until they were at the closing table and it was end-of-day. They asked for "just a few days", then as they were leaving said they'd be out in a week. Closing was on Nov 1st. Now he's saying "they'll be out by the end of the month". He is extremely conflict avoidant, has always been generous, and he trusted the realtor. She is one of the super sweet, soft-voice, always on your side (but will slice you if it gets her a better commission) realtors. Personally, I've been through the process 43 times and I appreciate the ones who at least have a gentle approach up front, but now that she has her commission, she is responding with shame. "Be patient. Moving is hard. If it was you moving, you'd want a break too." My son is in Utah and I've only done 4 homes there, but it was awful. The final home I sold in UT went through a title company where they changed the purchase amount on the closing docs AFTER I SIGNED. The secretary at the title company explained, "Oh, they didn't want to pay that much so they changed it." So... not my first rodeo with both realtors and title companies trying to get away with doing blatently illegal things. I do appreciate the note about the RE agency having insurance. I wish I could have been there for him on closing day. No (explitives deleted) way the realtor would have tried to pull this if she hadn't had a kind, helpful client.

My son bought his first home, $400k, and took possession, but the Sellers asked for another week to move. For some reason the realtor didn't suggest a lease back to cover this time period so now my son "owns" a house but has not taken possession and was not given the keys. He is a very generous person by nature so I wasn't surprised to hear he is allowing them time to move because he is single, doesn't need to move right away and is busy with work anyway. What is the shortest way to explain to him (without stressing him) that tells him the realtor dropped the ball? Big time. So far I have: 

1. This is a holdover seller situation and the realtor put him in a situation of liability.  

2. Who has insurance on the home while they are moving out?   

3. Who covers any damages that occur to the home during move out? 

I don't know what else to point out. All I know is that the Mama Bear in me is furious. This is in Utah, a state where I bought and sold only two SFRs, but both times were problematic. (The last transaction ended with the disbursement check amount being different from what it said on my closing docs -- I was the seller, I signed first. I didn't notice until I had driven away and when I went back to the title company, everyone else had left the office and the clueless secretary said "Oh, they changed what they wanted to pay because the buyers said they didn't want to pay that much." They changed the dollar amounts on the document AFTER I had signed.) 

Quote from @Ashish Acharya:

If your seller financed the deal, you need to report this as an installment sale. Not a DYI Project. 

Thanks for the feedback, very helpful. I went through a RE lawyer to write up the Land Contracts and paid regular Title Companies to do the sales (and stayed within the Dodd-Frank limitations). The Title Companies all sent 1099-S forms listing the full sale price. I file my taxes through a CPA who has been in business 32 years but I want to make sure I know the terminology upfront. Did the Title Companies not do the transaction properly when sending me the 1099-Ss? It sure looks like a regular sale, no mention of installment sale on the form. 

I sold off a chunk of my portfolio in 2021 due to a heart attack (needed to slow down). I thought I would pay on the proceeds as the money came in, not the full sale price before any money had actually been paid on the property. For example, I sold three of the houses in a bundle for $650k. I did not get $650. I got about $1k at the closing table because of a small downpayment and commissions. My 1099-S from the title company shows I got the full sale price... I'm confused. How can I owe taxes on money I haven't even received? 

Quick note so answers can be useful and no one is wasting time -- please don't say "don't mix business and family". I always have & always will. Long track record of being each other's best supporters. Also, yes, you read that right. End result is 4 adult siblings in a 4 bedroom SFR. I know it will be messy. Not my first rodeo.

Thank you in advance for any advice that could help me understand what kind of mortgage to get to help me get from Point A to Point B. Much appreciated.  

What kind of solution would you use for this scenario? I think I need a mortgage that allows for 2 separate borrowers? 

Buyer 1 is ready to buy his first home. Salary allows him to get a $340k conventional. No downpayment yet. 

Buyer 2 is ready to sell his $220k home, currently owns it outright but is self-employed, small but sustainable income from investments. $220 will be his cash contribution to the home. No mortgage. 

Buyer 3 (me) has $1.5m in real estate holdings, mostly land contracts, that Net $7k/mo. I have $250k liquid. I don't want to get a mortgage but I can probably get another $250k in mortgage. 

House will be approx $650-750k  in South Jordan, UT. Buyer 1 & 2 are brothers with a long track record of working together well. Buyer 3 is me and while I wouldn't live in the house, I need a place for my 2 youngest to live while in college. A mortgage would be $2k/mo. Dorm rent is $2k/mo. I would rather invest in a home than toss money on rent. The area where the house is located is well-built out and about as stable as a RE market can be. 

Most of my question is in the timing -- The $340 from Buyer 1 can be available in a few weeks, depending on how long the mortgage process takes since it will be his first house. The $250 from Buyer 3 (me) is already liquid, just need to transfer to a single acct ready to go. The $220 from Buyer 2 won't be liquid until his house sells, probably fast but I never like counting on it, so, I am considering a mortgage to cover the gap while Buyer 2's house sells. What kind of mortgage should I get? A 5 yr balloon? Are there any other options for investors like me who have a portfolio but no W2? I am a sole-member LLC.

The Michigan Real Estate Investor's Network on FB is beyond fantastic. They're mostly Detroit investors but they are the kind of people who really answer questions with actual support. I've seen people asking "I need someone to fix a plumbing leak in the next 30 min and I can't make it to the site," or "Can someone please ___." The group is full of people who really understand how hard it can be and how many mini-miracles you need to pull off in order to get things rolling smoothly. My favorite in the group is a RE lawyer who actually cares and has a snarky sense of humor that makes my day whenever I see his posts. As long as you have a strong spine & can handle some humor, it's a fantastic group. I have never been to their meet ups in person but I have heard they are worth it. 

Originally posted by @Theresa Harris:

Originally posted by @Cathy Malmrose:

@Theresa Harris definitely. I hate doing this but I'll probably contact the realtor for the people who made the 1st offer (it was low but not too low) to see if those clients (wholesaler & investor) are still interested.

 Careful because if you are still under contract or their viewed it when it was listed with her, she may still get commission.  I'd try another realtor before you go to a wholesaler.

I'm 100% on board with her getting the commission even if she's dragging her feet rather than getting the deal to close. I'm fine with that. I did check in with an agent who presented a previous offer and my realtor got *mad*. Instead of checking to see if the original buyer was still interested (they were investors), she took it personally and didn't even check if there was still interest. She rage quit, sent the form to end the listing agreement and within a few hours I had other realtors calling me asking if I would list with them. The area is actually hot and 2 other homes on the same street, within blocks have sold in the last few weeks at or within single digit % of asking. 

People usually only get angry if they know deep down they've done something wrong. (If you have a clear conscience then there may be frustration or disappointment, but not anger.) She was furious, hyperventilating while chewing me out on the phone. Yikes. It's my investment and it's my job to look out for my own best interests.

Originally posted by @Scott M.:

Are you a licensed realtor?   Are you a licensed builder?  Do you personally own the homes?  The answer you seek depends on the answers to those questions.  Also, are you servicing the land contracts?  As I am now a broker I don't recall the numbers but in the early 2000's I was told by one of our lawyers that I needed to be licensed because we are over the limit and again, I forget the limit.  Was like 20 or 25 at the time.  But if you were a licensed builder you could do more as long as you did work on them.  Again, I get this isn't useful but yes, there is a number

There is also a number you can service.  You can service up to 75 before being a licensed servicer the last time I checked but you can only hold tax/insurance escrows on 10.  

I would ask your lawyer, not your CPA regarding this issue as it is license law not tax law.   

Thanks, that's helpful. No, I'm not licensed, just a small-time investor. Some are in my name, some are in the company name so that might help but I am a 1 person LLC, a disregarded entity, so, yes, I need to talk to a CPA.

Is there a limit to how many land contracts I can extend in a year? 

It's a good option for me. I'm 52, want the passive income but not the landlord responsibilities. I've heard there's a limit to how many & my CPA is still on vacation.