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Need your thoughts - Change to cash sale?

Posted by Applenutbutter (My Page) on
Mon, Feb 13, 12 at 22:33

Sigh. Sorry this is so long. Hopefully it will be entertaining enough to keep you engaged.

After a bit of online investigation, we felt fairly certain that our land contract buyers were actually who they said they were, and to all appearances responsible people who probably do have the wherewithal to buy over time. So maybe a little eccentric but in some ways that were working to our favor and likely to check out financially.

However, when given a qualifying worksheet to complete (identifying information, income and/or assets showing ability to pay, list of debts and liabilities, criminal background release and credit report release), they said they were offended and offered to pay us cash in full to get things done more quickly -- but at more than 10% less than what they signed in their P&S (which was contingent on us agreeing to a payment plan).

We've explained that we are not interested in and don't care about anything more than what they need to show ability to pay and that this request is pretty much crossing the t's and dotting the i's in terms of selling our house responsibly. That it only seems odd because it's a seller financed deal--after all, people hand far more info over to banks all the time. But still, they're offended.

Why would anyone think that we would execute a land contract with them without getting basic qualifying information? In our state, equitable interest builds with each payment - so even with protective damages clauses in the contract, the could be some risk if they defaulted and demanded their money back. A judge could decide the contract damages were inequitable and then we'd have to pay back some or all of the money that we'd already spent on building the new house and would probably have to do a fire sale on this one to swing it--which would mean nothing left to build with and nowhere to live.

For various reasons unrelated to the sale, we really do not want to receive the full amount this year, nor do we want to transfer the title now. That was the attraction of the original land contract offer.

The original price was already rock bottom even with the other benefits of the deal. If it were only that they didn't want to turn info over to a private party, we could have worked it out for it to go only to our lawyer or something, but there was no opening for that, although we might still try to suggest it.

Not sure what prompted all this, but "the deal" seems to be a constantly moving target with the buyers proposing payment idea after payment idea before we've responded formally to the first proposal. Our own attorney and the buyer's also may have mucked things up by starting (without a go-ahead from us) to engage in "negotiating" payment structure and terms [racking up a bill, I think] before (a) the buyer was qualified and (b) we'd sat down with him (our attorney)and got on the same page as to what we wanted out of the deal and in the agreement -- so there may have been some fallout from that, with our lawyer possibly bringing up "concerns" (his) that we didn't have. [He is opposed to doing a land contract even though we've told him that that structure is what makes the deal appealing to us in the first place and willing to come back on market for this buyer. If he has concerns, we think he should discuss the risks with us before telling the other side that it's not a good way to do it.]

So it now seems like a mess. We have wanted to stay at arm's length as much as possible with the buyers, and you'd think that would happen given that we have a REA and an attorney, but somehow not.

Tomorrow, I need to talk to our attorney to re-clarify (for the third time) that we only want to qualify the buyer first before spending money on developing a contract and that we want to sit down with him so that he can explain the various seller financing options and risks/benefits and work out those details before he engages in discussions with the other attorney.

Am I missing something, or is that not reasonable?

Everybody agrees to an orderly process, and then none of them stick to it. It's crazy making. If there's a question in here somewhere, I'm really not sure what it is. My head is spinning and some outside perspective would be appreciated. Thank you!


Follow-Up Postings:

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P.S. RE: Need your thoughts - Change to cash sale?

They seem to think that if they offer cash up front that then there would be no need for qualifying information or criminal checks. I would think that at the least we would still need to confirm identities, find out where the money came from and do the criminal check. Or is that too cautious? Maybe I overthink things, but it occurs to me that if the money is illicit, the title to our current house as well as the one under construction could be jeopardized.


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RE: Need your thoughts - Change to cash sale?

Something doesn't smell right about this deal. How did you verify the previous information from the last post? I thnk you're asking to be taken....


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RE: Need your thoughts - Change to cash sale?

I agree the whole deal sounds strange. You should definitely consult with your attorney.

Speaking generally as someone who has bought paying cash before I've been asked to provide proof of funds (basically we gave a redacted copy of the financial institution statement showing sufficient funds to pay) but I've certainly never been asked for a criminal check. When I sold my last house the buyers were cash buyers. They provided a letter from their bank stating they had $X in their account ($X being the purchase price of the house). That was enough for me to contract with them. Of course, they would have to provide good funds to the title company at closing.


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RE: Need your thoughts - Change to cash sale?

Well, it's been 25+ years since we bought this place, so I don't remember what all was required, but it was a lot of info. The thing is, we're not a bank; we don't have the same kind of resources available in case of default or other problem--especially not if we're using the money as it comes in on new construction.

This morning I am wondering two things: (1) How legal, complete and reliable are online background checks done without permission? And (2) Has anyone here that has done a land contract been able to enforce liquidated damages that were specified in the contract? These would be favorable to the seller for the reasons given above.


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RE: Need your thoughts - Change to cash sale?

I wouldn't rely on getting much help from a bunch of strangers online. Your situation definitely needs to be handled by your lawyer.

I can understand why they would be offended by asking for a criminal background check. It may not be that they have a criminal history, it's just the fact that you don't trust them is what is insulting. If they do indeed have a criminal history, maybe it was something small, they already served their time, it's done, it's over with, it will never happen again, it's embarrassing - and it's none of your business.

I understand your desire to have a full financial statement, and yes I understand that is what a bank would want, but maybe they don't trust you with this info?

This is a land purchase with a payment plan. Are they actually going to be occupying the land before they actually own it in full? Why does this contract have to be all that difficult? You can just keep it simple and say they pay $X per month, $X penalty for late fees, and failure to pay after a certain time frame results in forfeiture of all money paid, and land can then be sold to someone else. They don't own the land until it is paid in full - so why would you care if they stopped paying?

I would have no idea what legal repercussions you could have to deal with if their money is originating from illegal activity. It's not like you are business partners or helping anyone launder money, they are just buying land. I don't see how you could be held liable for anything. Again, you need real legal advice.

If you have a gut feeling something is not right, and if you feel they must have something to hide by being so offended, then just don't get involved.


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RE: Need your thoughts - Change to cash sale?

"They seem to think that if they offer cash up front that then there would be no need for qualifying information or criminal checks. I would think that at the least we would still need to confirm identities, find out where the money came from and do the criminal check. "

Why?

If they default they have nothing.

The title is not altered by the land contract, it stays in your name until the land contract is fulfilled.

This being one of the risks to buyers using a land contract, the seller may not be able to convey clear title when they finish paying.


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RE: Need your thoughts - Change to cash sale?

Again, this is state specific information about ILC's, however, it might help in answering some of your questions.

Here is a link that might be useful: Pitfalls of Land Installment Contracts


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RE: Need your thoughts - Change to cash sale?

The questions you are now asking are legal questions that you need to consult with an attorney in your state regarding.


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RE: Need your thoughts - Change to cash sale?

"If they default they have nothing.

The title is not altered by the land contract, it stays in your name until the land contract is fulfilled. "

OP says that in her state the contract buyer does gain equity with each payment, so this makes it much more like a seller-financed mortgage than a normal contract for deed. That makes it more reasonable to see financial info.

I think financial info, along the lines of what a bank would require, is reasonable. A criminal background check seems a bit much. I've never been asked for that to get a loan, and don't see the relevance.


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RE: Need your thoughts - Change to cash sale?

"OP says that in her state the contract buyer does gain equity with each payment..."

Then it is not a land contract, but a seller financed sale.

They are NOT the same thing.


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