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I have noticed a broker near me, that seems to be using a strategy of very long closings to his advantage. I happened to notice this for 2 empty lot sales, and I realized it is a tactic that works in his favor, at the expense of the seller. This is what I noticed...
- get into contract on an empty lot (I assume some % of down payment)
- make the contract say for 120 day closing
- add a contingency to the contract dependent on getting for example building dept approval or anything that adds value to the lot
- have riders in the contract allowing for extensions in case there are issues getting the approvals
Once you have this setup, as a buyer you have made a small commitment (the down payment) and you have now locked up this property, without owning it. The seller is still paying the taxes etc. Your big bucks needed for the full purchase can be invested elsewhere, and the buyer is stuck waiting, losing the time value for these funds.
You can now take your time getting approvals or permits, or doing whatever you need to add value on the buyer’s time and dime.
If the time and all of the extensions, and whatever other delays you throw in run out and you find you can’t add enough value, or maybe prices have fallen, you can invoke your contingency clauses and get out of the contract. You get your small deposit back and move on.
The first property I noticed this on, took a year to close. I could see that during that year the buyer applied for permits and approvals. The same month the permits were approved, the sale closed, and the new owner put the property up for sale 50% higher. The main selling point in the ad was the approvals for a large house.
So in the end the buyer was able to lock in a year old purchase price, spend that year working on cheaply adding value, keep his funds invested elsewhere, and immediately re-list to flip.
I now see this same broker doing this on another property which has been in contract for around 10 months now, same strategy.
We looked at a house and wanted to make a low-ball offer at about 25% below asking. We didn't bother even though it seemed fair because we thought it would be a waste of time. But we kept watching it. It was contingent for a bit and went under contract. From there it was over 200 days to close.
What would take so long to close? I've never had anything drag on longer than 90 days. Title issue maybe?
It sold at EXACTLY what we would have offered btw!
I'm a mortgage broker in Florida - it happens, however, we hate it also.
I'm not. I kinda feel like it might be the buyer because of some of the information we got. They had put in an offer on the house and the seller rejected because it was low and contingency. But they came back again after we were mulling it over. We didn't want to deal with a multiple situation so we just didn't do anything. I think they might have been struggling with the financing. But would a seller really wait for 200 plus days?
oh my. you never made an offer, it seems. you decided it wasn't your house then. you could have made a backup offer and probably been privy to more details. oh well.
I have noticed a broker near me, that seems to be using a strategy of very long closings to his advantage. I happened to notice this for 2 empty lot sales, and I realized it is a tactic that works in his favor, at the expense of the seller. This is what I noticed...
- get into contract on an empty lot (I assume some % of down payment)
- make the contract say for 120 day closing
- add a contingency to the contract dependent on getting for example building dept approval or anything that adds value to the lot
- have riders in the contract allowing for extensions in case there are issues getting the approvals
Once you have this setup, as a buyer you have made a small commitment (the down payment) and you have now locked up this property, without owning it. The seller is still paying the taxes etc. Your big bucks needed for the full purchase can be invested elsewhere, and the buyer is stuck waiting, losing the time value for these funds.
You can now take your time getting approvals or permits, or doing whatever you need to add value on the buyer’s time and dime.
If the time and all of the extensions, and whatever other delays you throw in run out and you find you can’t add enough value, or maybe prices have fallen, you can invoke your contingency clauses and get out of the contract. You get your small deposit back and move on.
The first property I noticed this on, took a year to close. I could see that during that year the buyer applied for permits and approvals. The same month the permits were approved, the sale closed, and the new owner put the property up for sale 50% higher. The main selling point in the ad was the approvals for a large house.
So in the end the buyer was able to lock in a year old purchase price, spend that year working on cheaply adding value, keep his funds invested elsewhere, and immediately re-list to flip.
I now see this same broker doing this on another property which has been in contract for around 10 months now, same strategy.
I do feel as though some of this might have been in play. The property was tied up for a long time with no results for the seller. It could have been a strategy....
Our first house we made the offer in January and didn't close until July, at the seller's request. They were in the process of building and wanted to take their time and get it done and move in without feeling the pressure to put their stuff in storage. Since we were renting at the time, we were fine with the 6-month closing.
With our second house, after a long distance move, we had a 100-day closing because, once again, the sellers were building in another part of town and wanted to ensure the build was done and they were moved in before we closed. And once again, since we were renting, we were fine with the longer closing timeframe.
This was an estate sale. They may have needed to wait till the property was out of probate before title could be clear to close. This is not an unusual situation.
We looked at a house and wanted to make a low-ball offer at about 25% below asking. We didn't bother even though it seemed fair because we thought it would be a waste of time. But we kept watching it. It was contingent for a bit and went under contract. From there it was over 200 days to close.
What would take so long to close? I've never had anything drag on longer than 90 days. Title issue maybe?
It sold at EXACTLY what we would have offered btw!
A waste of who's time? Realtors are in business to write offers on homes.
Next time don't sit on the sidelines. Asking prices are just that, asking prices. They don't mean anything, because rarely does anyone not accept less. You won't know how much less until you make an offer.
I sold a house, the first offer was some silly low-ball offer. I rejected it, and the next week got a great offer which we accepted and sold the house. No time was wasted, that's called doing business.
Originally Posted by emotiioo View Post
We looked at a house and wanted to make a low-ball offer at about 25% below asking. We didn't bother even though it seemed fair because we thought it would be a waste of time. But we kept watching it. It was contingent for a bit and went under contract. From there it was over 200 days to close.
What would take so long to close? I've never had anything drag on longer than 90 days. Title issue maybe?
It sold at EXACTLY what we would have offered btw!
A 200 day close is not a title issue problem. Such closes set up at time of purchase is due to it would be most convenient to either the buyer, or seller.
If I had to guess, issues with a clear title. A family member dealt with a year long close. The house was a foreclosure, but the previous owner fought the foreclosure to the death, and then afterwards filed a lien against the property. Totally ridiculous. Eventually, the REI Company that bought it from BofA pushed through a quiet title action. While the buyer expected it to take longer than normal to close, he was thinking 4 months tops.
I lived in a property that was under contract for 8 months. But, it was a commercial property (Apartment Building) and the sale was contingent on buyer getting approval to build what he wanted to build on it. The Demolition permits were six months old when the sale closed.
But, an estate, divorce, short sale situation could all cause these things to draw out.
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