All Forum Posts by: Randy Chang

@Joe Splitrock, I appreciate you insight. I’ll double check the contract again, but I don’t believe I get title to the land or anything at all with a deposit so I’m not sure my deposit is protected by anything.

Once again, I have no issue with hefty deposits up front, it is the insisting of waiver of escrow that I’m uneasy about.

If an escrow was set up to hold the money, and the buyer backs out, then the escrow just sends the money to the seller/builder per the contract.

Maybe you are right in that the builder doesn’t care about whether I buy or not, as there will be another buyer lined up. I’m just curious how many people didn’t even read the contract and have no idea what they just signed up for.

@Simon Collins, thanks for choking in from a builders point of view. Brings up a whole new perspective that buyers don’t usually think about.

I just feel like so much can happen between now and next year, given today’s volatile market, and especially if I’ve only seen raw land; I might sleep better at night insisting on the money being held in escrow.

@Caleb Heimsoth, thanks for chiming in. You helped articulate in words my own concerns better than I could of.

I don’t mind sharing the numbers with you, but I was hoping to keep this discussion on point relating to the question at hand of waiving an escrow and not deviate on a tangent about evaluating a deal.

@Jay Hinrichs thanks for your expertise.

I’m not customizing anything in this deal, and the builder wants $50k up front.

Although I prefer not to have the whole $50 be no refundable when someone hasn’t even broken ground yet, but I’m reluctantly okay with that.

What I’m having reservations about is the waiver of escrow. If there was an escrow set up to hold the money and builder fails to deliver, then escrow just gives me the money back. However if I waive escrow and builder takes the money and somehow can’t/doesn’t perform, then I’m left to sue a now defunct and probably insolvent builder to get my money back.

Am I analyzing this the right way?

@Simon Collins.  The builder appears to be fairly large and reputable to my untrained eye, so I'm suprised that they would have such one sided contract that I can't imagine anyone signing.

@Bill F. thanks.  The contract does not specify any remedies for non-performance, (I read it very carefully), and when I brought that up with the builder, they reluctantly said they will add the language below:

• "If Seller shall be in default under this Agreement, all deposits held by Seller shall be returned to Purchase as liquidated damages"

HOWEVER, the contract doesn't even define "seller default" within the contract itself.  

@Greg Scott, thanks for your reply.  When I questioned this provision with the builder, I was told "this is how it's done" and that is non-negotiable.  

Wondering if that's a red flag to run for the hills.... =(

Hi Everyone, 

Relatively new investor here. I currently own 5 SFR as rentals and was just exploring a deal to acquire my first 4-plex. I found a decent deal from a provider in Jacksonville for a new construction 4-plex in a nice part of town. The builder has not broken ground yet and they are planning to build 26 4-plexes in a brand new sub-division to be completed 12 months from now.

Anyway, my question relates to the purchase contract. More specifically, the contract contains a provision relating to deposit and escrow that I find very odd especially given the context of SFR that I've purchased. The contract language is reproduced verbatim below:

• Deposit. THE PURCHASER OF A ONE-FAMILY OR TWO-FAMILY RESIDENTIAL DWELLING UNIT HAS THE RIGHT TO HAVE ALL DEPOSIT
  FUNDS (UP TO 10 PERCENT OF THE PURCHASE PRICE) DEPOSITED IN AN ESCROW ACCOUNT. THIS RIGHT MAY BE WAIVED, IN WRITING, BY THE PURCHASER. Purchaser hereby expressly waives the rights set forth above and acknowledges that the deposit and future deposits have been or may be in the future paid directly to Seller for deposit in Seller's general accounts. Purchaser further agrees that in the event Seller does not apply for permits necessary to construct the Property within 30 days or does not start to construct the Property within 90 days,  after the date the deposits are made, Purchaser agrees to such longer period of time required by Seller to take such actions.

Is this type of language normal for multi-unit construction? 

Am I just being paranoid?

Thanks in advance for everyone for your $0.02 to help out this new investor trying not to lose his shirt over his first multi-family deal.

Hi @Account Closed, I have a couple of SFR's in the DFW area and use a local property management. Please PM me and maybe we can share local contacts?

Thanks

Randy