Homebuyers – How to Avoid Negotiating Drawback Contracts & Costly Mistakes

As a Realtor who has been doing business for several years in the San Diego Real Estate Market, I am extremely aware of some of the shrewd and experienced segments of the Market, who have learned the art of negotiating with the commercial and residential property owners who would eventually use my services. It appears that there are several segments of the market that are less experienced in the majority of these types of transactions, including appraisal, tenant representation, remodel, and several others. These types of transactions do not commonly involve the type and price of homes that I am commonly known for. These transactions are typical costs and time-consuming to both the Homebuyer and the Lender. Lenders have the ability in many cases to ” flair” these types of deals and increase the percentage of money which they lend on the property.

Home Buyers and home sellers are often uneducated as to the common practice of negotiating backup contracts. These agreements might include extra closing costs or even contingencies such as west coast and/or due diligence time extensions, or other “let’s play it by the book” type agreements. Never, never forget that your typical backup agreement is almost always negotiable. The nature and strength of the Seller’s negotiable contract options are often not as strong as the typical negotiable contracts by the Buyer. However, by using the Viallyity of Lease/Purchase options, plus other questionable agreements certain contracts may be written in which the Buyer does not feel much as an offended party.

Here are some off-the-wall examples of contracts that are very negotiable outside of certain situations. Also, keep in mind that certain brokers have alternate negotiable contracts to counter the Buyer contract. These contracts contain ” health multitask” terms.

  1. Private Covenants – The Landlord may set up certain times when they lease property to you which do not fully adhere to the Lease/Purchase agreement. Oftentimes, they will include a clause which states that this is considered “private knowledge”, meaning that no force other than negotiation and maybe threats of the lawsuit may be used on either party of the Lender (Landlord) or the Buyer (Buyer). This effectively gives the Landlord wide discretionary power to either convince the Lender to escape the contract entirely or to insert some hidden term which may possibly allow for loopholes or escape clause Lender may insert against the Buyer. It is important for both parties to make clear to the other party what the exact terms of these private Covenants are.
  2. NO OWNERSHIP!! – The Buyer may specify in the agreement that they will not attempt to purchase the property if they have less than twenty percent of the to be transferred for a purchase price. By adding in the “20% Financing Option” the Buyer perhaps can own the property without being able to qualify for the mortgage, since the loan amount desired by the Lender covers principal, interest, and closing costs.
  3. FINDING A LOAN OPTION – Oftentimes, the Lender may offer to finance multiple properties purchased on the same loan. A Buyer can purchase one property under the terms of the Lease/Purchase agreement and then flip it to another buyer, with the ability to negotiate mortgage financing. These additional properties purchased with one mortgage can be used as “Cash Escrows” by the parties, for instance, in a Real Estate Investment Trusts (REIT)
  4. VACANCIES – At the contract signing and termination of the transaction, it is often the case that the previous Landlord/Buyer (Lessor) may have kept this vacant property. The Lender is allowed to Stimulate the rental payments by restoring the Provescence. This is handled in a separate, contractual agreement. Once the lease/purchase agreement is executed, the Lender is frequently able to convert this vacant property to fixture/equity via a separate loan. The deed to the returned property is delivered to the new Purchaser (Lessee) on October 15 of the same year ( Alternatives to Lender Foreclosure) and the original Lender is excused from all further obligations regarding the property.