The Dark Underside--buyers Who Won't Make Their Payments
Well, I guess I bit off more than I could chew. Try as I might, I haven’t found any Sub2 houses, just aren’t that many foreclosures around here. So I’ve spent my own money and credit and bought two promising houses from motivated sellers. I resold them quickly at a nice profit—presumably—on CDs with two year refi balloons. Both buyers had mediocre credit and refs—which I supposed to be typical—and have missed their first payments, aren’t taking my calls, and on reflection I probably shouldn’t have sold to them, but I was excited about getting them sold. Sigh.
One buyer never got insurance and the other’s insurance was cancelled, which violates the contract. I know I need to see a lawyer soon and get on this quickly, but I’ve been led to believe that due to buyer protections, it will be months before I can legally get them out. I don't want them to get mad and trash my houses on the way out. I need to figure out a way to entice them to leave on their own, by offering $$ or whatever. But how do I entice someone to move out if they know the law and are hoping that they’ll now be able to stay through the winter at my expense while the legal wheels grind…slowly? Any suggestions will be most helpful!
My advise is that - Send out notification of default by certified mail and demand for immediate payment. That usually do the work, if they ignore, then you'll have no choice but start legal action.
Don't get too concerned, in MN, the CD is the fastest way to get someone out of the house, there is a 60 period, however you should be able to get them out in time for you to have vacancies in November.
You'll want to get insurance ASAP - if they end up damaging the property, you should be covered.
Hopefully you got a reasonable DP, and if so, then I'd certainly stop by the properties and let them know they are 1 phone call away from their CD being cancelled and having the sheriff toss them out.
Hopefully at least 1 of the buyers will see the light and start paying; don;t hesitate to let them know that a public record will be filed against them when the CD is cancelled which will make it nearly impossible for them to buy again.....
One caveat we use when selling LO (we don;t sell on CD's); is that we reserve the right to enter the property during regular business hours to prepare the house for sale when a default has occured - then we send in a few guys to do some rehab which will cause them to reconsider damaging the property and staying without paying. I know this is water under the bridge now, but perhaps you can add this in the future.
If you need an attorney that has experience cancelling CD's in MN (mpls based), let me know and I'll refer you to one I know. But almost any indepentant atty should be able to file the papers for a nominal cost.
GOod LUCK!
I entice someone to move out by reminding them of the terms of the agreement and if I have to offer to pay them to move.
I look at it this way by spending money in the legal system or offering payment to them to move has been more profitable than using the legal system.
Thanks for these ideas. I guess I know what I need to do, but I'm not so good at kicking people out. JohnMichael, what's the best way to finesse the "I'll give you some move-out money as soon as you're out" proposal when you have a whiny buyer (now squatter) who seems bent on milking this gravy train--at my expense--for all it's worth and staying as long as possible? I'm planning a two-prong approach; offer the carrot--the $$--while preparing the stick--the legal process.
I agree with you that kicking folks out is a tuff process!
Let me share with you how I had to deal with the removal of a tenant not so long ago.
The tenant continued to be a nuisance to other tenants so I approached the tenant with the terms of their lease and how I could take them to court for lease violations but would like to avoid this if possible I then stated that I know you did not intend to cause a problem and that I would like to help out with them having to move by giving them $500 to help out if we have no other problems and they do this in the next 3 days they agreed and I gave them $500 after they moved. This money came out of the security deposit they made.
Your two-prong approach is wise so they delay will be lessened if they fail to work with you. I would also suggest making your offer to them documented so that if you have to use the legal system you can prove you tried to work things out with them.
I agree with JM about paying them to leave being less hassle and faster if they accept.
That said, paying them out of the security deposit is risky in most states. In Oregon there are treble damages against landlords who use the deposit for anything other than repairs on the property and a strict accounting must be made.
Check with your local RE club and get some ideas that are specific to your area about the best way to do this.
Randall
[addsig]
That said, paying them out of the security deposit is risky in most states
Randall, while I agree with you that the landlord should know their state laws concerning this (and renting in general), if you agree to pay a tenant to move out, what are you paying them with if it is not the security deposit? I mean, they paid it to you so you can say that it isn't from the security deposit if you want, but it's essentially the same as taking money from your right pocket and putting in your left and saying you made money.
In practically every l/o agreement I've seen, the deposit is considered forfeited to the landlord as liquidated damages for any lease violation where an eviction or lease termination is necessary to remove the tenants. So if the deposit is considered forfeited anyway, then it's not really their money anymore at that point.
Again, as the landlord, know your state's laws and cover yourself properly. Don't skimp on areas where it is in your interest to have an attorney.
Roger