There's an old saying that goes, "you win some, you lose some and sometimes it's a draw". This deal fell into the "you lose some" category.
Some deals are just difficult (see Condo From Hell), but they get done. Every once in a rare while, some deals just don't get done. This was one of those.
This started out normally. It was a nice property in a nice area. We had negotiated great terms with the seller. We found a nice tenant/buyer, a couple with a few kids and dogs, who were thrilled with the chance to eventually own their home. The seller was happy we had found someone so quickly to assign our contract to. All seemed fine.
Lesson: When everything seems the smoothest, worry the most.
The seller needed about 30 days to move out, which was perfect as the new tenant/buyers needed about 3 weeks for the rest of their funds to become available.
We had the credit application filled out and picked up a substantial deposit from the tenant/buyer. We sent the assignment form and addendum to the sellers for signature. They signed and returned both. All was ready. We just needed to wait for the tenant/buyers' funds to become available. Now the problems started.
Sometime during the three week wait the seller and tenant/buyer starting talking to each other. They were apparently feeding each others buyer/seller remorse. Having these two parties talking to each other is not always a good idea. Usually nothing bad happens, but in this case it helped blow the deal.
Also during this time, the seller had some family problems, the wife of the tenant/buyer needed surgery, which they knew about before taking the property. Our feeling was that the surgery was more severe than anticipated and that this was a contributing factor.
Another factor, the tenant/buyer arranged and did the final walk through with the homeowner, without calling us. During the walk through he told the homeowner he could sell their property. While this is technically correct, an explanation of how this can be done needs to be made. He just left it at that.
Well, the seller calls us in a panic thinking their house can be sold out from under them. It can't. It took us over an hour to calm her down and explain how this could be done. And even if done, the seller receives all her money, so she had nothing to worry about. However, this presented another problem to overcome. We left it with the seller that we would contact the tenant/buyer to set up a time the following week to pick up the balance of the funds and formally assign over the contract.
We called the tenant/buyer, set the date and time and relayed this information to the seller. Just about done, we thought.
Two days later we got a call from the seller, they're not selling, they changed their minds. We get a call from the tenant/buyer that the seller called him. We are now pulling out our hair.
The seller told us it was a mutual decision, the tenant/buyer said just that the seller wasn't going through with it. For a variety of reasons, we do tend to believe that this was a mutual decision. Remember what we said about the parties speaking to each other? This is why we don't like it.
We immediately offered to show the tenant/buyer another property, but because of the wife's surgery he said it would be better to wait a while. Red flag, he wanted out of the deal also, but didn't want to come out and say it.
We have time and expenses in the deal which we could lose through no fault of ours. Quiz time, what to do?
The seller breached the contract, we could of course sue. The tenant/buyer basically backed out the deal also; so does he deserve his deposit back?
We are firm believers that all things should be negotiated first if possible. We ran through our various options with the seller in a polite, but firm manner. She agreed to compensate us for our time and acknowledged that she was responsible for the return of the tenant/buyers' deposit.
Our worst case scenario in this deal was not getting compensated for our time, knowledge and energy. However, by using good contracts and assignment forms, we protected ourselves. We were able to turn a profit, smaller than originally thought, but a profit none the less.
The moral to this story is that even in the best of businesses a little rain must fall. But if structured correctly, those rain clouds can have a silver lining.
Lease Purchasing, don't you just love this business!
Copyright DeFiore Enterprises 2000
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