Seller Signed Then Changed His Mind!!..help!
Hello $Cash$ and other Sub 2 vets..
I've been assisting an investor put together her first (and mine too) sub-to deal. We got all the documents made up, had the seller meet at a bank to close with a notary, and everything went awesome.
A couple of days later when we contacted the seller about his move out date, ...he then informs us he has changed his mind about the deal, and has contacted the lender to tell them not to deal with our trustee (the property was placed in a land trust).
My friend (the buyer) then received a fax from an attorney representing the seller that stated taking over a property "subject to existing financing" is illegal (we all know it's not) and the seller wants out of the deal.
Has anybody dealt with this scenario and if so, would you recommend fighting for the property or just giving it back to the seller to avoid any possible legal wranglings?
Monty,
If you are like me, you are probably thinking, "Hey! They can't do that! We have a deal! That is MY house and I ain't giving it back!"
The facts are:
1. The seller deeded you the property in a totally legal and honest transaction.
2. You (or your trust/trustee) are now the legal owner(s) of the property.
3. As owners of the property, you are entitled to possession of the property.
Unfortunately, there are additional facts:
4. You have taken over a loan with a DOS clause.
5. The seller has apparently changed their mind, hired an attorney and will proceed to make your life hell for as long as they want to.
6. It will take considerable time, money, worry, and energy for you to get possession of YOUR property.
Given the sum total of these facts, if I were you, I would be very gracious and let it go back to the seller. I know you don't HAVE to do it, but in the time and energy spent dealing with these guys you could sign up many more deals from truly motivated sellers who will not change their minds.
You didn't say whether or not you had incurred any expenses to date on this deal but if you did, you might want to mention (bluff) to the sellers that you would unwind the deal for reimbursement for your expenses but honestly, even if they refuse, I would give it back. Life is too short.
_________________
WilliamGA[ Edited by joel on Date 07/07/2003 ]
Having been through the experience of a buyer backing out at the last minute several times, I agree with everything Monty has said. It is usually not worth the money, stress and energy to fight when a deal ends up not being a deal.
Go on to the next project!
Nancy
Question1 : Is the seller still in the house or gone by now? With Subject2, shouldn't the seller be out of the house by the time of closing?
Question2: Do you already have a buyer or T/B lined up or under contract?
If so, it seems like this situation might be different.
Any thoughts by William or anyone else?
Monty,
One of my philosophy's is "If a deal starts out bad it will only get worse."
There are many deals out there so just walk away, recoup any loses you may have by telling the seller you will re-deed the property when your costs are settled up. You are holding the ace card with the deed, if you are owed nothing then by all means give the deed back.
You can have the attorney call me as far as it being illegal, I have trained more than one attorney on how Subject To deals are done. If his strongest threat is it is illegal, then he is in for an education.
The last attorney that told me that, by the time I was done he told me he had bad credit, if I found a house he would be interested in buying it.
John $Cash$ Locke
Thanks for the great replies!
Would it behoove us who do, or wish to do Subject Tos to write up in the contract that the original owner may bail out if they accept the cost incurred by the buyer during the original transaction?
The way I see it, having never done any of this before, so forgive my possible ignorance, you could wither write the contract in that once they deed the house to you, they can't get it back.
Or you could write the contract so they can back out before a certain time. Which would be best?
The way I see it, they might not trust you, so I'd think you'd want to give them some "wiggle" room, thus writing up the contract so you may re-deed the house to them if they bail, considering a time limit, of course.
--Mike
dd,
I sign up sub2s all the time where the seller is still in the house. The only time I have to have possession before I will close the deal is when there will be cash paid to the seller. In that case, they will be out and I will have the keys BEFORE the check is handed over.
As far as how to handle the tenant/buyer, if I sign a t/b up in the case where I haven't gotten possession (closed) the property yet, I always let the t/b know that this deal is subject to the completed closing of the sale to us. If the sale isn't consummated, the t/b can either get their deposit back or use it toward another one of our homes.
_________________
WilliamGA
www.Sub2Deals.com[ Edited by WilliamGA on Date 07/01/2003 ]
Giving the seller "wiggle room" allows them a psychological advantage. Writing it tight is always better.
Write it tight knowing you MAY still let them walk all the way up to giving cash and getting keys is far better than planting the idea of wiggling out of the deal at the beginning.
My main worry is when the seller has remorse AFTER I give cash and get the keys. Then what?
Ca$h?? What then?
$coso
So, how exactly do you redeed a house back to someone? And if there are any costs to that, who pays that and/or any lost $?
being that he likes his attorney so much (and as long as you haven't lost any money on the transaction) I would allow his attorney write up the documents to redeed.
Should be real straight forward. Just make sure that you will be held 100% harmless for any claims...
Good luck
This isn't a failure, just a step in the learning staircase that takes you one step higher. It was your first deal. You carried it out successfully to closing. You are to be congratulated.
You have just learned a lesson that you will probably not repeat. Make sure the house is vacant at closing!
** As a side note a sale was voided in court because the new owners claimed that the house was haunted and therefore "not empty" as per contract. They prevailed. I have also seen this with termites as inhabitants. Weird but true.
Thank you to every one for all of the helpfull comments. This all really helped me get through a current situation.
Why would you give back YOUR house. I would call the lawyer and explain subto to the guy and then wait a few days. The lawyer will probably explain to the jerk that he doesn't have a leg to stand on. Once the owner realizes he no longer owns the house he will probably back off. Just my .02.
Monty,
One question that was not asked is did you pay any back payments, or give the seller any funds at the close? Or was this just a straight let go of the property because of no equity, and could not handle the payments?
The other question is how much equity is there in the property? If enough is it worth it to get your own financing and pay off the existing balance on the loan, and get him evicted? You do have to worry about damage to the property, and time.
You do have the title, and like everyone else says if you get your money back you can give it back to them.