Author Topic: In a bind on a property  (Read 1438 times)

BTDretire

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In a bind on a property
« on: April 30, 2019, 08:59:26 PM »
 Here's a condensed story leaving out many details of how I got into this deal, because it is a long story.
The contract is with the pastor of a church and used as a church property.
I will be seeing a lawyer in a week, but looking for any possible options.
I have about $142k into an almost vacant property. I sold it on a land contract with $30k down and less than interest only monthly payment.  After 3 years I rewrote the contract I added all the accrued interest to the balance and bumped the payment up to an interest only contract for another 3 years.
The area had a hurricane 6 months ago, the church had spent money to do extensive repairs to a block structure that was standing on the property, but the hurricane destroyed it all. With no insurance!
 Now the latest contract has expired, the buyer can not get a mortgage because the property value has declined, significantly. I haven't had an appraisal yet, but some where around $80k to $120k, maybe on the lower end. He is trying to get me to lower the $155k price that is in the contract. He has a vision for the property, but can't see over paying for it, and I don't blame him, although, if he had kept insurance up on his construction, we may not have any problem. He freely admits he still wants the property, but the price is now, just to high.
At this point he has said he will continue paying the same monthly amount, but doesn't want to agree to any sale price. So we are basically
talking about a rental agreement. I'm thinking about doing that, although I'd need to bump the payment, to cover the taxes and insurance, that he was (or should have been) paying.
 So, any advice on the details so far?
 If I could get a 5 year rental agreement on the property with maybe a 3% yearly inflation clause and additional to cover the taxes,
what would be the value of a property with a $12,600 yearly income. Since there is no structure on the property, I would expect no maintenance.
But, now that I think about this, I expect he will want to build a structure back, so I don't know!!!
But, what would someone pay for a $12,600 return?
 We are still on good terms, understanding where each other stands. I have no interest in taking the pastor to court over a lawsuit, buy don't really want to loose any money either. I just don't see anyway that I come out of this without a loss.
  He called me today, saying I have looked over what I have paid, almost $80k and, I stopped him, saying that was just time on my money, I would have done even better if I had just put it in the stock market. He responded, OK, you don't see that as anything you could knock off the price. Me, "No".

waltworks

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Re: In a bind on a property
« Reply #1 on: May 01, 2019, 08:30:48 AM »
$12k a year to rent vacant non-farmland that you only paid $142k for? Rent him the land.

If he's going to build a building on the land, you probably better talk to a lawyer about this whole deal, though. It sounds like neither of you know what you're doing.

-W

BTDretire

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Re: In a bind on a property
« Reply #2 on: May 01, 2019, 08:57:58 AM »
So, are you saying $12k is a good return?
The reason I ask, is I want to get rid of the property, and wonder if I sign a rental agreement for the $12k
does that make the property worth $150k to a potential buyer.
It has been 25 years since I was very involved in rental/property values.
 The reason I want to get rid of the property is I'm retired, I can knock $12k
of my income so I'm better able to control my income. I don't want the liability.

  I just got a call from my insurance agent, a $1M dollar policy will cost me $690,
because of the church activities.
Taxes are $1,400. I would plan on getting another $175 in rent a month to cover those
expenses.

The previous contract was at 8% on $155,100. I was very happy with that.


waltworks

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Re: In a bind on a property
« Reply #3 on: May 01, 2019, 09:03:24 AM »
$12k is a great return for something where taxes and insurance are that cheap.

The idea of the church building something on land they don't own is a disaster waiting to happen, though.

-W

Xlar

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Re: In a bind on a property
« Reply #4 on: May 01, 2019, 02:29:01 PM »
$12k is a great return for something where taxes and insurance are that cheap.

The idea of the church building something on land they don't own is a disaster waiting to happen, though.

-W

Definitely figure out the wording in the contract so that it is clear what happens to any improvements to the land once the contract ends. For example: You sign a 5 year rental agreement and the church builds a $50k building on it. At the end of 5 years what happens? Do you know own the land and the building?

If your rent is $1,175 per month and your expenses are:

Insurance: $57.5
Taxes: $116.6***
Maintenance & Cap Ex: $0 (Really think about this one and make sure there's nothing you would be responsible for - trees, utilities, ect.)
Total Expenses: $174.1
Net profit: $1000.9

*** What happens to your property taxes if they make improvements? ***

This seems like a good deal. Assuming you figure out what happens to any improvements they make at the end of the lease, the potential property tax increase, and the duration of the lease. If you agree that any improvements are yours at the end of the lease: make sure you include in the agreement that they hold adequate insurance for both the structure and any associated liability.

BTDretire

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Re: In a bind on a property
« Reply #5 on: May 09, 2019, 08:17:24 AM »
 I met with an attorney, and I'm in a strong position he can't just walk away.
He missed the payment yesterday if he wanted to continue as it was.
However all that means is I need to foreclose and go after him for the money.
 He has no other properties in his name that I can find and has one small unsettled
lien that has been unpaid for 3 years.  He has a good job but has already told me he can
hide what he needs to.
 I hate to spend money on attorneys to get this taken care of.
In the mean time, I'm having trouble getting liability insurance,
the broker says I need him to give me a policy before I can get a policy.

former player

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Re: In a bind on a property
« Reply #6 on: May 09, 2019, 08:43:36 AM »
There's a concept called a "building lease", which is you lease the land with the right to build but at the end of the lease the value of the land and building revert to you.

I would grant this man a lease at $12k, include that he has a right to build, include an obligation on him to insure, and then make provision at the end of the lease period (5 years? 10 years?) for him to have a right to buy the land at a value which is less than the value of the land with the building on it.


I know you want to get rid of the property, but it sounds like you could only do so now at a loss and/or by holding the pastor to something he can't afford.  Holding on to the land for a few more years is the price of putting your money into land rather than VTAX, and doing a deal with the pastor is the price of being a decent human being.

BTDretire

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Re: In a bind on a property
« Reply #7 on: May 09, 2019, 09:00:22 AM »
The check for this months payment was just delivered.
The contact expired last month, I sent a new contract, but
I didn't sign it. He may have signed it but didn't send me a copy.
The payment was for the monthly amount in the expired contract.
 My attorney is out of town until next week.
 Last talk purchaser didn't want to sign a new contract.
Arrgh!
« Last Edit: May 09, 2019, 10:09:17 AM by BTDretire »

SwordGuy

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Re: In a bind on a property
« Reply #8 on: May 09, 2019, 11:50:06 AM »
Let me get this straight.

You SOLD the property to someone.

Now you are trying to rent the property YOU DO NOT OWN to someone.  (The same someone who bought it.)

Did I get that right?

I don't think you have a legal right to rent him the property because you don't own that property.

You can buy it back from him for $1 and then rent it to him. 
You can foreclose on it and then rent to him.
You can renegotiate on the sales contract to redo the payment terms and he continues to own it.
But I don't think you can rent it to him while he owns it.

Car Jack

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Re: In a bind on a property
« Reply #9 on: May 09, 2019, 12:30:41 PM »
What does the sales agreement say when payments are missed?  Do you need to forclose?  If you do, then I guess sell the property and you'd owe him the $30k down payment back?  Or does the contract say otherwise?

I think in general, you should not own this property.

BTDretire

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Re: In a bind on a property
« Reply #10 on: May 09, 2019, 02:00:29 PM »
Let me get this straight.

You SOLD the property to someone.

Now you are trying to rent the property YOU DO NOT OWN to someone.  (The same someone who bought it.)
No, he's just continuing to make payment under the old contract.
Quote
Did I get that right?
no
Quote
I don't think you have a legal right to rent him the property because you don't own that property.

You can buy it back from him for $1 and then rent it to him. 
You can foreclose on it and then rent to him.
Might need to foreclose.
Quote
You can renegotiate on the sales contract to redo the payment terms and he continues to own it.

But, he won't sign a new contract that is at the same price, because the property lost value. As my attorney
put it that loss of value is on him, he would not have come running to you to give you money if the property value had went up.
Quote
But I don't think you can rent it to him while he owns it.

BTDretire

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Re: In a bind on a property
« Reply #11 on: May 09, 2019, 02:02:02 PM »
What does the sales agreement say when payments are missed?  Do you need to foreclose?  If you do, then I guess sell the property and you'd owe him the $30k down payment back?  Or does the contract say otherwise?

I think in general, you should not own this property.
I wouldn't expect I would owe him $30k back, he broke the contract.

SwordGuy

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Re: In a bind on a property
« Reply #12 on: May 09, 2019, 09:18:15 PM »
Let me get this straight.

You SOLD the property to someone.

Now you are trying to rent the property YOU DO NOT OWN to someone.  (The same someone who bought it.)
No, he's just continuing to make payment under the old contract.
Quote
Did I get that right?
no
Quote
I don't think you have a legal right to rent him the property because you don't own that property.

You can buy it back from him for $1 and then rent it to him. 
You can foreclose on it and then rent to him.
Might need to foreclose.
Quote
You can renegotiate on the sales contract to redo the payment terms and he continues to own it.

But, he won't sign a new contract that is at the same price, because the property lost value. As my attorney
put it that loss of value is on him, he would not have come running to you to give you money if the property value had went up.
Quote
But I don't think you can rent it to him while he owns it.


Huh???   How can you foreclose on him if he didn't buy it from you?

BTDretire

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Re: In a bind on a property
« Reply #13 on: May 10, 2019, 02:52:37 PM »

Huh???   How can you foreclose on him if he didn't buy it from you?

 Let me try again. It is convoluted, but I'll bypass most of that.
 We sold the property to Jay in 2011 on a land contract with 5 year payoff, (balloon)
in 2016, we signed a new land contract with a 3 year payoff. (balloon)
 In 2019, Jay was supposed to get a mortgage but can't get it for the contract amount.
 Now, Jay does not want to sign a new contract because the price is higher
than the value of the property. But he has already agreed to the price in the 2016 contract,
just because the value went down he thinks I should discount* the price.
 Jay made the last monthly payment under the old contract and now this month has paid
an additional monthly payment.
 I don't know where that payment leaves me. Although it is a slight comfort that
he wants to retain use of the property.
 Does that help?

Additional problem,
Jay has not provided me with a liability policy, even though I have ask
at least 6 times. My agent won't let me buy an umbrella policy without his underlying policy.
Or even just a regular policy.
 I did get named on his policy the first few years. (co-insured)

*I explained to him if the value went up, he would not have run to me with money
to give me.
« Last Edit: May 10, 2019, 03:13:00 PM by BTDretire »

Villanelle

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Re: In a bind on a property
« Reply #14 on: May 12, 2019, 07:12:27 PM »
So he reached the point of the 3 year balloon payment.  He intended to get a new loan before that, but couldn't (or didn't).  It seems to me he then owes you the balloon payment, per your contact.  (Did your contact say that at the end of 36 months the loan was due in full?)  He did not do that, which means he is in breach of the contract.  So you need to foreclose, and I wouldn't deposit that last check (since it was for  a period after your contact ended) without talking to a lawyer. 

All the rest--him wanting a discount, the price going up, etc.--is just noise.  The new value is $150k (just to have a number).  If he wants you to create a new contact, you can charge him that, or whatever you want.  If he doesn't like the terms, he is free to walk away.  But since he owes you the balloon payment and hasn't made it, he is not current on the property and thus it seems to me you need to foreclose. 

Enigma

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Re: In a bind on a property
« Reply #15 on: May 15, 2019, 08:47:31 AM »
Seems like too much sentimental value in the situation.  By the pastor and by you.

First the property is now underwater with the terms.  The pastor is better off walking away with the $80k loss and looking elsewhere.  Better off declaring bankruptcy citing the deal is underwater.

Second you will have a hard time finding someone to get into a contract above $80k-$100k (low end of 80-120k) since you stated that is all it is worth now.  Who wants a torn up church on a large lot of land?  The property is most valuable to the pastor.

I would turn around and cut my losses.  Being stuck with property could take decades to sell.  Especially in an area hit with a hurricane.  The value of the area could continue to fall drastically each year.  This does nothing more than postpone your retirement.  I would try and help him secure a loan with the bank to take the property completely off your hands so you could move on.  That might mean selling the property for $80k or whatever the value of the bank thinks it is worth.

Villanelle

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Re: In a bind on a property
« Reply #16 on: May 15, 2019, 09:30:59 AM »
What about a rent-to-own situation?  If he can't get a loan, that may be the only option.  And it means that if he misses payment or can't eventually buy the property, you walk away with all the rent collected.  (Obviously you need to explore the legalities of RTO and make sure you follow them and they work for you.)

BTDretire

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Re: In a bind on a property
« Reply #17 on: May 16, 2019, 05:39:18 PM »
So he reached the point of the 3 year balloon payment.  He intended to get a new loan before that, but couldn't (or didn't).  It seems to me he then owes you the balloon payment, per your contact.  (Did your contact say that at the end of 36 months the loan was due in full?)
Yes.
Quote
He did not do that, which means he is in breach of the contract.  So you need to foreclose,
Yes.
Quote
and I wouldn't deposit that last check (since it was for  a period after your contact ended) without talking to a lawyer.

Yep, don't deposit check, I talked to the lawyer. Maybe I should send you, the $150 :-)


All the rest--him wanting a discount, the price going up, etc.--is just noise.  The new value is $150k (just to have a number).  If he wants you to create a new contact, you can charge him that, or whatever you want.  If he doesn't like the terms, he is free to walk away.  But since he owes you the balloon payment and hasn't made it, he is not current on the property and thus it seems to me you need to foreclose.
[/quote]
 Yes we are headed to a foreclosure, it's going to be a mess.
Lawyer started clicking away on her computer and found a lot I didn't know about the buyer.
I'll keep a running diary and maybe when things are not so up in the air, I'll tell the story.