All Forum Posts by: Jeff Copeland

I'm telling you this as a real estate broker/agent myself: You don't need a realtor for this transaction. You need a real estate attorney. Real estate agents provide assistance with marketing, due diligence, and negotiations in exchange for a commission, not legal services. 

You already live there, so I assume you aren't looking to have home inspections done and negotiate with the seller, correct?

You can either go to a reputable local title company (in the absence of a specific local referral, try Fidelity National Title - they are a reputable national firm with several branch offices in LA), or directly to a local real estate attorney (if you go to a title company, they will either have an attorney in house, or on retainer, to provide the necessary docs). 

Explain the terms of the deal, and they will help you prepare and execute the necessary paperwork. 

For a rough outline of the seller financing process, see https://www.biggerpockets.com/... (I say rough outline, because California is a title theory state, so the process will differ slightly, as stated in the post. But the general concept is the same).

Certainly not an ideal situation, but these are normal investor/landlord problems that happen all the time. Problems create opportunities: Hope (and negotiate) for the best, but plan for the worst. 

My first question would be does the tenant have a lease in place? (Hopefully you received and reviewed the leases as part of due diligence). If the lease has time remaining on the term before it expires, and the lease does not have a termination on sale clause, the tenant may actually have a leg to stand on and this becomes a much different situation. In the absence of a terminate on sale clause, the lease normally survives the sale. If the tenant is receiving federal funds such as Section VIII, it gets even more complicated. 

If the tenant does not have a lease (or the original lease has expired and/or she is otherwise month to month), and is not receiving any federal funding, then worst case this becomes a holdover eviction after she receives proper notice. 

I'm in landlord-friendly Florida, where it's relatively easy to evict someone, and even easier if they are a holdover. 

What you need to learn, very quickly, is how long does it take, and how much does it cost, to evict a holdover tenant in Massachusetts? Even though this may be Plan "C", now is the time to look into it and get your ducks in a row and paperwork (lease, notices, etc) lined up. Because the range of possible outcomes here seems to be:

1. The seller and tenant cave, and she vacates prior to closing, maybe with an extension that delays your move in date and renovations. 

2. You walk away from the deal and fight with the seller over your EMD. (BTW, for someone to advise this without knowing the specifics of the deal, or your current housing arrangement/expenses, is shortsighted...we simply don't have enough info to make this call.)

3. You get a concession from the seller to cover the cost of the eviction and lost rent, and work though the eviction yourself after closing with a MA attorney. 

As scary and terrible as Option 3 sounds right now, it's not the end of the world. In the grand scheme of things it's a small blip in the radar. It's likely a few months' worth of hassle, with the upside of:

-Not losing the deal

-Not risking your EMD

-Not risking your financing & rate lock

-Moving in on time

-Starting your renovations on the vacant unit on time

Even if the eviction takes six months, come Spring, you are are house-hacking a renovated duplex as planned. And you won't even remember the tenant's name 10 years from now.

BTW - What is your other alternative? Renting for a few more years? I obviously don't know - but it's a valid question and something to consider in terms of the overall cost (and opportunity cost) of walking away from the deal. 

@Tyler Jorgensen - The answer to whether you can: 1) get a HELOC (which, BTW, takes several weeks at best), 2) draw from it for your down payment, and 3) still qualify for another mortgage after doing so, will depend on the borrower(s)' credit, income, and debt-to-income ratio (before and after the HELOC). A mortgage broker can walk you through this after looking at your credit, income, and DTI.

You could absolutely do this deal with no realtors involved, and that could save the seller around 6% of the sale price. Just find a local title company or attorney's office who will provide a solid blank contract for you to use and will also work with you to close the transaction. 

(Note: I'm not saying you or the seller should or shouldn't use realtors. I'm a real estate broker myself and generally think the services of a great realtor can be worth every penny. But that wasn't your question. I'm simply saying you could do it without one.)

If he owes $100k on it, and needs to pay that off to reset his VA entitlement, he would need a $100k (plus closing and settlement costs) down payment just to walk away from closing breaking even and seller finance the rest.

I don't see any way the seller can help you (unless you are also a veteran and can assume his mortgage), so you'd need to look for someone such as an equity partner who can help you qualify for financing. 

If you have sufficient credit and income to qualify for a mortgage yourself, you could buy it with an FHA loan at 3.5% down, but you'd have to owner occupy, rather than lease it back to him.

I'm not sure what you mean by "in the same or surrounding cities of that photographer" (you wouldn't normally hire a photographer from somewhere far away). 

But, generally, yes, it is the listing agent's responsibility (and usually the agent's marketing expense) to have professional photos taken of the property, but this is negotiable between the agent and seller. Some agents may cover the cost of the photography, others may not.

For your typical SFH listing, the costs is often between $200 and $500+, depending on the property and options (video tours, 3D tours, day/evening combos, etc).

Of course, the quality of the photography can be very important, but there are exceptions, for example:

- For high-end luxury listings that may require staging and a much more involved photo shoot, this cost may be more likely to be passed on to the seller.

- For very low-end fixer uppers, cell phone shots may be fine. I'm not spending $250 on photos for a $100k fixer listing.

- Tenant occupied properties can be very difficult to photograph, and may not warrant the expense. 

Setting politics and conspiracy theories aside, there have been no changes to FS 83 (the landlord tenant act) here in Florida, and Florida remains a very landlord-friendly state. 

There has been some minor erosion of landlord rights at the county and municipal levels. For example, our local cities and counties have recently passed a "tenant bill of rights", but the only significant changes were things like requiring at least 60 days notice to tenants if their rent is increasing by more than 5%, and to give at least 30 days notice of non-renewal (up from 15 the days required by state law). 

Most Florida cities and counties have had laws on the books requiring occupational licenses (and thus, registration) of rentals for decades. That is nothing new. It's $18/year, and really a non-factor, here in St Petersburg, for example. 

@Nathan Gesner nailed it: https://www.hud.gov/program_of...

 I never said you did. 

I was just pointing out that either the lease itself, or a lease guaranty, is what would make you personally responsible, secondary to the LLC. It has very little to do with how you sign your name.

You would normally sign as John Doe, Managing (or Authorized) Member of Acme LLC.

Your LLC's operating agreement will determine who can sign on behalf of the LLC, and whether one managing member can sign, or whether all members need to sign, etc. 

Your lease (or a lease guaranty) will dictate whether you are also personally liable for the rent. 

Putting your assets in an LLC does nothing to stop you from getting sued. It just limits your exposure to the only assets lowed by the LLC. 

To prevent lawsuits, do things to prevent people from getting hurt or killed on your property:

-Inspect your properties regularly for trip and fall hazards, fire hazards, and other safety issues. 

-Repair things quickly to avoid any appearance of negligence. 

-Use licensed contractors (especially for things like electrical work)

-Limit tenant access to dangerous spaces such as the attic. 

-Check out http://www.evicttv.com/categor...

To protect your interests once an incident occurs and/or you do get sued:

-LLCs and other entities can limit your exposure, but aren't always feasible (for example, when using conventional financing properties may need to be titled in your own name).

-Property and casualty Insurance for the property itself insures you for things like fire and storm damage (this doesn't really have anything to do with getting sued, but is obviously important)

-Maximize your liability coverage on your homeowners policy (liability coverage insures you against wrongful death, injury, or scarring of someone on your property). Most homeowner's policies will max out at $300k to $500k for liability coverage, which may not be enough in the event of a wrongful death or personal injury suit. 

-Have an umbrella liability policy that kicks in where your homeowners coverage maxes out. $1M to $2M in coverage is fairly typical here.