All Forum Posts by: Susan Kelley

Quote from @Alex Olson:

A note on seller finance. They almost never work. Buyer must give seller everything they want and then some in order for it to ultimately close. A lot go under contract almost 0 close. I have done a lot of it and helped buyers do it. Extremely rare. 

Please correct me if I'm wrong... it's my understanding amortized repayments spread out capital gains over the course of a loan. If so, I'm thinking the short term benefits of 1031 exchange could be minimal.

Quote from @Russell Brazil:

"My lawyer canceled the contract because of (intentional?) unresponsiveness from Seller's attorney. The cancellation was rescinded soon after, and the contract was restated."

If your lawyer cancelled the contract, they cant just reinstate it without the consent of the other party. When its cancelled, that's it, it's dead.

Yep, it was mutually restated, albeit with extreme ambiguity from listing agent and Seller attorney. There's painful lessons in this transaction. However, there's enough to cloud title until a judge would decide. My main point is I'd prefer avoiding such, by offering win win solutions.

Quote from @Chris Seveney:

@Susan Kelley

Question is you had an agreement and was it contingent on seller financing? Did it require approval on underwriting?

Did you ever get an approval from them on the seller financing portion

We ran into this in selling a home and had some seller carry and it was contingent upon full underwriting - buyer never completed app etc so we rejected the loan and they threatened to sue but it didn’t go far as they had no leg to stand on

Thank you! I'll read the contract again, but I'm fairly certain there's no mention of buyer qualifications. Honestly, I was quite surprised the Seller swiftly accepted my offer without any modification. Neither my lawyer nor I were under the impression I was expected to do anything besides include Seller as mortgagee on insurance policy and wire half the purchase price prior to closing. Seller failed to provide signed leases or property disclosure, and I planned to address such at closing. My lawyer asked Seller attorney 10 days before closing for the pmm documents, but never heard back. A few days before closing, my lawyer asked the Seller (also a lawyer) directly, via email if she wanted him to prepare the loan docs. It's incredible that neither the Seller nor her attorney responded in any way regarding my lawyer's inquiries. My lawyer finally realized we had a serious problem when the Seller sent him a peculiar and long list of creditors she wanted me to cut checks to, including $350k to a 1031 exchange broker. Now that the listing agents are arguing about enforcibility, they want to return my earnest money. However, no one mentioned returning my deposit until a few days after the closing fiasco.

Quote from @Bryan Hartlen:

Quote from @Susan Kelley:

My lawyer canceled the contract because of (intentional?) unresponsiveness from Seller's attorney. The cancellation was rescinded soon after, and the contract was restated.

I’m not a lawyer, but, assuming the cancellation was a unilateral right you had in the original agreement, then unless the rescission and restating was mutually executed, I think the agreement may be canceled. I don’t think you can cancel and then say never mind. 

I hear you, and I'm concerned about fighting anything in court. I've personally never had a real estate lawyer act on my behalf, nor on behalf of any of my clients, in Georgia. At a typical closing in Georgia, the only lawyer involved technically represents the lender. I'm worried things are done differently in New York State. I might've unwittingly vested too much power in my counsel. To date, I haven't personally signed anything other than the original offer and a W9 for buyer agency (self representation as GA broker). I would very much appreciate reliable information about the differences in procedure between GA and NY. It's possible my lawyer is saying the contract is enforcible while hoping he's not held to the fire. I should ask him why he believes my agreement is enforcible, but I'd rather spend my time finding a solution the Seller can agree to without litigation. 

Quote from @Joshua Christensen:

Have you considered a Master Lease agreeement with a lesser down payment in the form of a non-refundable & applicable option consideration FEE, and a 12 - 24 month Option to Purchase at your agreed price? At the time of exercising the Option to Purchase, you would put the larger down and get a DSCR at that time to pay them out completely. The seller technically hasn't sold it and you get control of the property to prepare it for the purchase allowing them to step into their 1031x. If you go in a direction like this, I highly recommend that the Option to Purchase is recorded (clouding title) and that all payments are made through an independent 3rd party escrow service to manage the contract. Build some of the monthly lease payment in as monthly "Option Consideration" fee that is non-refundable & applicable to the final purchase.

I'm not familiar with NY laws, and it would seem to me that a mutually ratified contract cannot be backed out of or renegotiated 1 hour before closing.  That time came and went when you cleared your contingencies and due diligence period.  In NM, where I am, the seller cannot terminate a contract.  It's a legal matter and may just be a letter from your attorney to the effect that they do not comply with the terms of the original contract, it will be placed before a judge to decide.

 Thank you! Yes, I've superficially considered MLO. I quickly dismissed as a solution because I don't trust a Seller who either didn't read a simple contract, failed to get clarity or is feigning ignorance. However, I see from your post there are solutions for protecting my interests I hadn't considered... specifically, recording the new agreement and making payments to an escrow agent. The only other disadvantage I can think of right now is a further reduction in bonus depreciation. I pressed hard for a 2023 closing to take advantage of 80% bonus depreciation. Now it's 60%. It's worth considering my tax position if I were to finally close late in 2025 at 40% bonus depreciation or 2026 at 20%. 

Thank you! Since my lawyer says the contract is enforcible, the threat of litigation is at least leverage. Worst case scenario, we wait for a judge to decide in a year or so. Everyone will suffer, especially the property. This is why I'm hoping for amicable resolution in the very near future. And so, I'm brainstorming alternative proposals. I've already urged the listing Broker and agents to educate Seller as to the benefits of pmm... higher sales price, ultimately more money from interest payments, relief from liability and dealing with awkward leases, putting an end to nearly 2 years of marketing, etc. Unfortunately, the listing Broker and 2 agents seem defensive, arguing about the enforcability of the contract. Even though I might be able to take the property by force, it's preferable if the Seller is convinced as to the fairness of the deal, given the property condition and economic environment. My credit score is close to 800 and I've got plenty of property management and ownership experience. There's only a very tiny pool of potential buyers that could be better buyers. The property is only worth what someone is willing to pay for it. It's just a matter of engaging the Seller with reality.

Simple 4 page executed contract provided for purchase money mortgage (pmm), seller financing $375k @ 4%, repayment monthly amortized 30 year, 15 yr balloon, no pre-payment penalty. Seller's P.O.A. is a non practicing lawyer who claims she was unaware of commitment to ppm. No counter offer or objection to 50% financing was made until 1 hour before closing. 

I wired $370k to closing attorney 2 days before closing. My $10k deposit was submitted and cleared at least 3 weeks prior to closing. All Buyer commitments were completed. I am a Georgia Real Estate Broker, representing myself as sole member of the LLC Buyer.

Listing Broker claims  contract is unenforcible. My lawyer disagrees. My lawyer canceled the contract because of (intentional?) unresponsiveness from Seller's attorney. The cancellation was rescinded soon after, and the contract was restated. The only document I signed thus far is the simple, standard form, 4 page original offer, which was accepted without modification.

At a minimum, I could choose to make it very difficult for the Seller to close with another buyer. Litigation is time consuming, expensive and without guarantees. I understand it's in everyone's best interest to renegotiate an agreement the Seller will actually follow through on, preferably amicably. 

The P.O.A. is my next door neighbor at 2 locations within our small city of 50k residents. I'm trying to move past sheer disbelief that a law school graduate did not read a 4 page contract or consult with her 2 listing agents, her lawyer or her parents (the owners of record) before executing the agreement.

That said, I do have some leverage, and I don't believe there's another legitimate buyer on standby. No one is pressuring me to sign a termination and release. 

Objections expressed regarding Seller financing include dissatisfaction with the terms, as well as a 1031 exchange - first brought to my attention an hour before closing. The Seller bought the property for approximately $365k. My contract price is $750k. I'm only superficially aware of 1031 rules, and I'd appreciate guidance as to how it pertains to this deal.

The property suffers from mismanagement. The slate roof is leaking in several places. There's a total of 9 legal apartments, but at least 4 are unoccupied. Two of the occupied units are leased to the Seller's employees or contractors. I think they're bartering services for rent. Per NY law, it will take at least 90 days to remove them. One of them is a hoarder and has been using 2/3 of the 5000 sf basement as his "office",  without a lease permitting him to do so. His apartment is on the 2nd floor. The Seller has provided me with an unsigned lease for his unit, which does not include any mention of his rights to occupy the basement.

Because this property is a 9 unit multifamily, financing is challenging. Interest rates will be higher than conventional, as well as for larger mutifamily commercial deals. Its too small for commercial lenders to get excited about. Because of the disrepair and vacancies, DSCR financing is currently virtually impossible.

If the Seller is primarily concerned with reaping the benefits of a 1031 exchange, the purchase price should be adjusted to reflect a 100% cash price. The Seller's broker proposed a price reduction of $50k, which pissed me off. I estimate the value of the ppm in the contract to be approximately $300k, but I don't think the Seller will accept a purchase price of less than $500k. And, if I were to pay $500k in cash, I'd have nothing to prepare the property for DSCR financing.

It's my understanding the Seller is open to bridge financing. I want at least a year, especially since I may very possibly have to evict and turnover the contractor units. Perhaps the Seller can boot their 1031, if I'm able to finance into DSCR in time.

Thanks for your thoughts!

Thank you! I hear ya. Whether wrong or right, I decided arguing with the police wasn't in my best interest. Do you have a link I may refer to for New York State? It seems there's important differences between NYC law vs. state law. 

Quote from @Nathan Gesner:

Quote from @Michelle Kuo:

Hi everyone! Thanks in advance for your help. Does anyone have a need to repair notice they can share? Also I have a tenant who is not answering calls or texts so I am planning to post this notice 24 hours before entering the property. What do I do if tenant still refuses entry? Change gate locks? Does anyone have a lawyer they can recommend? Thank you!

https://dcba.lacounty.gov/portfolio/landlord-entering-your-u...

The law requires you to give notice. It does not require you to get permission.

Landlords are allowed to enter to perform maintenance, conduct inspections, or show the home to potential buyers/renters. If the Tenant refuses entry, you can terminate their lease for refusing entry.

I try to give them at least 24 hours notice and I try to accommodate their schedule, within reason. For example, I will contact the Tenant and offer them a couple different times on a couple different days. If none of those times work, I tell them I will come in using my key and conduct the repair without them present. That's completely legal and they have to allow it.

For the Tenant that refuses to communicate, I would post a notice on their door with the day/time you will be there. Let them know you are coming in and that the law requires him to allow access. I would also include a demand that he respond to future communication or you may terminate his lease. When Tenants refuse to communicate with me, I terminate their lease and get rid of them. I know it's hard to do in California, but lack of communication is the first step towards major problems.

In Troy, NY, a policeman told me no one may enter my tenant's apartment, without tenant permission, no matter what the circumstances. New York State property law reform of 2019 removes many rights landlords took for granted. I'm worried about marketing the property for sale, without my disagreeable tenant's permission, no matter how "reasonable" my notice may be, even a week ahead of time. I'm struggling to grasp the new requirements for compliance in Upstate New York. Its my understanding California Tenant Law has changed substantially, if not similarly.