I have a buyer that wants to purchase 3 adjacent lots and begin making improvements within 2 weeks on the first lot.
This would be a cash sale, under $10K.
Buyer wants to have a contract on the first lot, pay it off and repeat the process on the second and third lots. They will pay a 10% down payment before signing contracts on each lot.
Within 2 weeks they want to obtain permits for a tiny home foundation, septic system and water tank.
Normally, if this were a finance sale I would want at least 50% down. But since they are going to pay off in 90 days I said the low down payment would be okay.
I told the buyer they will have to provide proof liability insurance coverage ($1M) naming my co. as additional insured.
Has anyone dealt with this type of transaction?
Can you offer any suggestions?
What other pitfalls should I watch out for?
I did email a title agent to ask if they can do âstaged conveyancesâ in a single escrow, but sheâs on vacation (again).
Does this mean the first lot will be completely paid off before youâll sell them the second one? If so, it sounds like youâll be effectively isolating each property as a standalone deal, so they canât default on all 3 of them if they decide to flake.
Is a 10% down payment enough to clean up any messes they make? In the absence of any credit reports or information to see what their payment history is like, youâll be gambling a bit more. Once you see them pay off the first one, then at least youâll have some track record of success, and the 2nd and 3rd deals should be easier to stomach.
Is that for all 3 lots, or just one? Thatâs a pretty low price. Seeing as how they have the funding to build on it immediately, I wonder why they donât just buy the thing outright? A tiny home foundation, septic system and water tank will cost plenty more than $10K.
Under $10k for all lots. But Iâm getting 740% return.
Yea, they want a Master Purchase Agreement covering the details of the âlocked inâ price and terms, and then 3 separate purchase agreements and land contracts (and deeds of course). And the sales of lots 2 and 3 would not take place until lot 1 is paid in full.
I told him the paperwork is a pain due to the terms of consecutive sales, possible late fees or breach terms (even charging doc fees) and Iâd rather run this through a title company. Heâs pushing for land contracts.
I just found multiple notices of forfeiture against this dude. Too risky. I think for him it is âcash or good day sirâ.
Iâm concerned he might be pushing for land contracts because many sellers do not understand the legalities of the enforcement of forfeiture notices. These are AZ lots.
That what I thought too. But I called the county and asked if I sign a permit application before the title is conveyed if the permit transfers to the new owner. I do not want my LLC to be liable for any zoning issues after the title transfer.
They told me that the land owner can sign an authorization form (to be notarized) allowing the buyer to apply for permits. They emailed me the form.