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Old 12-03-2011, 08:52 AM
 
Location: LEAVING CD
22,973 posts, read 25,551,422 times
Reputation: 15623

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Ok folks, I figured I'd come here since there's been a good collection of "brainiacs" over the years on this forum.

We're selling our house in one of the worst hit states (arizona) and have a buyer. We bought the house 1 1/2 years ago as a REO and had only planned on being in it for 4 years but things change and we're ready now. We are breaking even on the sale even though houses have/are dropping some since we bought. We paid $120k and REO's are now going for around $100k, new are base priced at $150k.
We could rent it out or do a lease/lease purchase but really don't want to be long distance landlords if we don't have to.
Our realtor had a couple she knew who were looking to buy and they love the house. I'd suggested doing a lease option until they could qualify to assume our FHA loan or refinance. The realtor called yesterday and suggested the wrap around deal as the buyers were nervous that we could back out of selling it to them if the housing market increased and boot them out to re-sell it.
Where we're looking houses have dropped some as well and we can cut our mortgage by $50k so that's good. We do qualify for both loans at the same time btw.
They will escrow at least one month payment so we'll know before hand if they don't pay AND there's a requirement that if they miss just one payment the house reverts to us.
Ideas? Suggestions? warnings?
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Old 12-03-2011, 01:30 PM
 
Location: Just south of Denver since 1989
11,654 posts, read 32,624,785 times
Reputation: 8589
an attorney
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Old 12-03-2011, 07:37 PM
 
Location: LEAVING CD
22,973 posts, read 25,551,422 times
Reputation: 15623
Why an attorney? I'm not trying to be funny or act stupid but if the title company and my realtor are filling out the docs which I've got to think are pretty standard (for them) then what's the issues? If an attorney is really needed I've got no problem using one BUT I do hate paying someone for something I don't really need.
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Old 12-04-2011, 09:06 AM
 
Location: Austin
7,238 posts, read 20,587,682 times
Reputation: 9988
In Texas, Realtors can only write the purchase/sale contracts or the lease contracts. We cannot write something that would combine both as that's practicing law. We cannot put terms in there about rent to own stuff, as it's practicing law. Anything that is not the straight-forward state contracts, is practicing law... hence, in Texas you would need an attorney. More than likely, you'll need an attorney there in AZ too for the same reasons.
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Old 12-04-2011, 11:56 AM
 
Location: Rural Michigan
6,343 posts, read 13,709,697 times
Reputation: 10537
Quote:
Originally Posted by jimj View Post
Ok folks, I figured I'd come here since there's been a good collection of "brainiacs" over the years on this forum.

We're selling our house in one of the worst hit states (arizona) and have a buyer. We bought the house 1 1/2 years ago as a REO and had only planned on being in it for 4 years but things change and we're ready now. We are breaking even on the sale even though houses have/are dropping some since we bought. We paid $120k and REO's are now going for around $100k, new are base priced at $150k.
We could rent it out or do a lease/lease purchase but really don't want to be long distance landlords if we don't have to.
Our realtor had a couple she knew who were looking to buy and they love the house. I'd suggested doing a lease option until they could qualify to assume our FHA loan or refinance. The realtor called yesterday and suggested the wrap around deal as the buyers were nervous that we could back out of selling it to them if the housing market increased and boot them out to re-sell it.
Where we're looking houses have dropped some as well and we can cut our mortgage by $50k so that's good. We do qualify for both loans at the same time btw.
They will escrow at least one month payment so we'll know before hand if they don't pay AND there's a requirement that if they miss just one payment the house reverts to us.
Ideas? Suggestions? warnings?
In the scenario you've proposed, you are still (effectively) a long-distance landlord, with no potential to gain from future appreciation, a financial "cushion" that is too small to protect your property from a tenant/buyer that trashes or fails to maintain the property, and a potential major problem evicting a tenant/buyer who fails to pay. Even if your contract requires the tenant/buyer to maintain the property, if they have no money, they can walk without any recourse to you at the first major repair, tax increase, grumpy neighbor, or when they've just worn-out the carpet.

As "buyers", they'll have the mentality that since it's "their" house, they can paint the interior purple, and the exterior pistachio green. They can start a "business" collecting carpet scraps for recycling and fill the yard eight-feet deep before code enforcement sets in and starts fining (you). They can have cousin Bob build an "addition" on the porch, without a permit, out of leftover pallets. They can move out at a moments notice and sell all of the cabinets, fixtures, doors, etc on Craigslist for gas money.

Yes, you'll have a right to sue, but you know already that they either have bad credit or unstable income - otherwise they could buy the house like you did, by getting a loan from a bank.

Run. FAST.
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Old 12-04-2011, 06:34 PM
 
Location: Tempe, Arizona
4,511 posts, read 13,039,471 times
Reputation: 2200
Quote:
Originally Posted by FalconheadWest View Post
In Texas, Realtors can only write the purchase/sale contracts or the lease contracts. We cannot write something that would combine both as that's practicing law. We cannot put terms in there about rent to own stuff, as it's practicing law. Anything that is not the straight-forward state contracts, is practicing law... hence, in Texas you would need an attorney. More than likely, you'll need an attorney there in AZ too for the same reasons.
Not true for AZ. The AZ constitution gives licensed agents the power to draft contracts and leases (documents incident to a real estate transaction) without attorney involvement.

However, I recommend the OP consult with someone that has expertise in drafting non-standard contracts, such as a lawyer.
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Old 12-04-2011, 08:53 PM
 
Location: Austin
7,238 posts, read 20,587,682 times
Reputation: 9988
Quote:
Originally Posted by rjrcm View Post
Not true for AZ. The AZ constitution gives licensed agents the power to draft contracts and leases (documents incident to a real estate transaction) without attorney involvement.
And this supersedes the Realtor Code of Ethics that says a Realtor will not practice law, unless they're also a licensed attorney as well?
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Old 12-04-2011, 08:57 PM
 
Location: MID ATLANTIC
8,429 posts, read 21,695,591 times
Reputation: 9952
One month is not going to cover squat if they stop paying for any reason. I would insist on more on deposit, and I would be very clear that they understand they have bought the home in that contract - that they understand they are responsible for repairs and maintenance. A wrap can be a great vehicle, but useless when basic issues aren't addressed.

Do yourself a favor and insist on the real estate company pulling a credit report for you.
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Old 12-04-2011, 10:30 PM
 
Location: Tempe, Arizona
4,511 posts, read 13,039,471 times
Reputation: 2200
Quote:
Originally Posted by FalconheadWest View Post
And this supersedes the Realtor Code of Ethics that says a Realtor will not practice law, unless they're also a licensed attorney as well?
What is legal and what is ethical may be two different things. It is legal in AZ for a licensed agent to draft and modify RE contracts (AZ law says nothing about Realtors ). However, it is not ethical or advisable if it is outside their field of competence (as stated in the Code of Ethics).
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Old 12-05-2011, 10:13 AM
 
Location: Austin
7,238 posts, read 20,587,682 times
Reputation: 9988
Quote:
Originally Posted by rjrcm View Post
What is legal and what is ethical may be two different things.
You've got a point...
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