Whats The Worst That Can Happen If I Can't Close.
Hello,
If I get a house under contract with a realtor with no contingincies. Whats the worst that can happen if I can't find a investor to buy the house. Do I just lose my deposit or can they make me buy the house?
Also how accurate are those appraisals done by the county tax assessors?
Thanks in advance.[ Edited by LloydChristmas on Date 04/28/2004 ]
I don't know what the answer is, but hopefully it will get you 5 to 10 years.
Damn that Ogelthorpe started something. I supose problems should be expected after all the early settlers came from Debtors Prison In my family it is considered a mark of honor having a relative that came from Fleetstreet Gaol to the new world courtesy of dear Lord Ogelthorpe. You knew of course the man had a little problem with his hands. The original touchy feely guy.
If you wrote your contract correctly you point to the item and ask for your money back. If it is a really good deal, why continue with your sale and now market it out fully to the general market.
You are not the first to follow iinto the crack. Your market may be there and you just have not found it yet. Perhaps you can paper the occasion with a double borrowing on a first and second and thus be in for zip and thus market with a vengence.
Lucius
Easy question first; Tax appraisel is NOT a market value appraisel.
Your first question is basically, "Can I be sued for specific performance." In theory, I suppose it is possible if the language of the offer allows such recourse (which I would highly doubt). However, even if it was possible, it would never be financially worth it for the seller. Typically, forfeiture of the deposit is the seller's "sole remedy at law".
It is important to note that walking away from contracts to purchase or operating in "poor faith" is a very bad idea. I assure you that word will spread and your offers will not be taken seriously in the future. Keep your reputation clean- it is argueably the most important assett in the aquisition of listed property.
Good Luck.
When making an offer you think there is any chance you might want to weasle on it is vitally important to incllude a weasle clause.
. What that means, of course, is that on average the assessor under-values the value of property by about half.
In Illinois (and i assume elsewhere) the local tax assessors evaluation of your property value is adjusted by something called the "equalization factor" this number is assigned by the state assessor's office after long and complicated comparison of the assessed value vrs the actual sales price of each property that actually sold in the county in the prior year.
(the method by which they do this is extreemly interesting and results in a fairly large book each year recaping the statistics for each type of property for each county. This book is, in turn, extreemly interesting for those that like that sort of mind-numbing statistical research. The State assessors office will be glad to send you a free copy if you only ask so that you can see the sort of mind-numbing analysis which your tax dollars sponsor in an attempt to make sure the state continues to collect even more tax dollars the folllowing year.)
Well in Cook county where I happen to live the equalization factor has hovered right aroung "2" for many years (although almost no county in Illinois has an equalization factor of "1"
But of course we do not buy property "on average". As Lucius has pointed out each of out properties is a statistical anomily of one sort or another.
So imagine a property with a valuation of $50,000 the equalization factor would imply that the assessors valuation could be off by a factor of 100%. In other words the property could actually be worth $100,000 or $0.00.
This more-or less corresponds to my understanding of the governments general understanding of value of things. It could be off by as much as 100%.
So, no, I would not trust the tax assessor to value property for me.
In Seattle area MLS we use language that provides for liquidation damages in our contracts. That means that legally, you are only on the hook for your damage deposit. Further, there is a statute that reinforces that clause.
In other words, you, if buyer and seller agree and they always do, can only be held laible for damages equal to the amount of your earnest money deposit not to exceed ten perc ent of the purchase price.
Of course you should know what the laws and contracts are in your area. I do not consider it unethical to not close on a deal, but if you are representing that you have the money or means to get a loan and actually do not and are hoping to tie up the contract, you would be violating the terms of the contracts we use and guilty of fraud.
On the other hand, if you intend to uy a property, and choose to breach it for whatever reasons, but your intent was honest at the time of entering into the contract, like say you suddenly lost your job, i do not consider it unethical.
no one can MAKE you buy anything.
just take your lumps, learn from your mistakes, re-edit your offer letter for future purposes (including a few weasel clauses) and move on. sometimes you make friends, sometimes you don't. no one is perfect and stuff does fall thru at times.
I was just seeing. I'm not really in this situation. Just heard from the real estate tapes that worst is lose deposit and someone says something bad about you.
I am shocked and disturbed to see so many people condoning such a strategy.
I was so happy when I found this site, a bit of fellowship with like minded individuals sounded like a good deal. What I have found has been grating on me more and more, a lot of ethically challenged individuals.
Lets all help eachother figure out how to... advertise houses for sale that we don't own, cheat on our taxes, act like vultures preying on anyone who has a problem and call them names when they don't want to deal with us, help the ever abundant I'm broke and have horrible credit but I want to be in REI person figure out how to work some back handed deal when what they really need is an honest, "you don't belong in REI until you can balance a checkbook", laugh while we get a refi on an over appraised house and then whine when the bank won't short it because we are upside down on it, get redemption rights so we can snag one out from under the investor who paid cash at the auction, and now the brilliant new plan of signing a sales contract we never intend to keep unless we can manage to assign it prior to closing.
No matter what the legal ramifications may or may not be, some things are just plain wrong.
I agree with Mykle. You need to know what the worst case scenario will be with each Investment. If you can live with the Worst Case Scenario, then do the Investment. If you can’t, don’t waste everyone’s time and effort.
I use Weasel Clauses which will get me out of the Investment at any time prior to the Close of Escrow. They are to protect me if something is not disclosed and I am made aware of it after my Free-Look Period.
mykle,
Where in this string did you hear anyone say to use this technique as an investment strategy and all will be ok?
A question was posted, and answered. The first judgement I saw was in your post.
I have recommended in the past that we as investors should conduct ourselves with integrity and honesty in our lives, and our business, and continue to hold that as one of my values.
However, I am not naive enough to believe that everyone that I deal with will hold true to my value system. Therefore there is a need for me to protect myself if I wish to be profitable in this business and successful in life.
I'm just wondering what got you so upset!
This is America, next time come on down off that fence and tell us all how you really feel!
Blessings to all,
Jeff[ Edited by jeff12002 on Date 05/01/2004 ]