Pasture Purchase Part II ?

[Stocker Steve]

The owner of our leased place has not been willing to put money into it for many years and now decided to sell. He did not know what he wanted and he was not willing to pay a realtor - - so we paid for an appraisal, and paid for a purchase agreement, and then offered 100% of appraised value. He said he wanted more ... and we said to transfer the grazing lease to the next owner.

Now he has come back proposing a contract for deed. I think he realized that paying 5% to the realtor out of what a leased property will bring may not be a great idea.

To clean this place up we need to burn a couple building and redo all the corrals. To make this place cash flow we will need to lime and seed and fence and buy more stockers... What are the downsides of doing this on a contract for deed property?

 

[dun]

As long as you keep paying on time I don;t see a real downside. If you default then you lose everything.

 

[agmantoo]

Here are guidelines of what is entailed here in NC. In my own experiences with a contract for deed I had rather be the seller than the buyer. I never have the warm feeling with me as the buyer due to complications that may arise. The absolutely only way I would do this as the buyer would be through an attorney.

NC provisions

These are just some of the important provisions included in this North Carolina Contract for Deed:

* Parties: Identifies the Seller and Buyer involved in the transaction;
* Price and Payment: Sets forth the price for the property and when and how payments are to be made;
* Security: Explains that the Contract stands as security for the performance and payments by Buyer.
* AS-IS condition of Property: Buyer will accept the property AS-IS;
* Deed and Evidence of Title: Promise that seller will deliver a general warranty deed after buyer fulfills his or her obligations
* Title: Assurance that title will be free and clear of all encumbrances
* Taxes and Assessments: States that Buyer will pay all taxes and assessments ;
* Risk of Loss and Insurance: Assigns the risk of loss by negligence, fire or other casualty.
* Eminent Domain: Explains rights and obligations in the event the property is taken by eminent domain;
* Prepayment: Explains what happens if the Buyer prepays
* Possession of Property: Buyer shall have possession of the property as long as all contract terms are complied with ;
* Default by Seller of Buyer: Consequences of default by either the Seller or Buyer
* Maintenance of Property: States that Buyer will maintain property;
* Mortgage by Seller: Explains that Seller may place a mortgage on the property ;
* Conveyance by Seller: Seller may convey his or her interest in the property;
* Joint and Several Liability: If there is more than one Buyer, all will be jointly and severally liable;
* Reinstatement after Acceleration: Buyer may reinstate this Contract in the event of default and acceleration according to law;
* Assignment of Sale by Buyer: States that Buyer will not assign his interest in the property without consent of the seller;
* Disputes: Allows the parties to select how to handle disputes;

Some of the above may not apply to you but here is what I would also want
1. No penalty or time restrictions for prepayment of the purchase price. My intent would be to take ownership ASAP
2. The seller would be selling the property with all the improvements as of the date of sale.
3. That you the buyer would have all rights to the property as long as the payments are current
4. The seller is to transfer ALL rights that he holds to the property to you the buyer
5. I would want "time is of the essence" included in the contract. This makes all dates concrete and not just approximate times.
6. If there is timber on the land I would want clarification as to whom is the owner of the trees on the date the contract is implemented. Remember if there is timber to get an appraisal as to the value at the date of contract. This is good basis info for taxes at time of future sale
7. Is the seller current with the back property taxes?
8. Are the property lines obvious and the number of acres verified?
9. What if any liens are against the property /owner?

 

[Stocker Steve]

I am trying to understand the + and - of it. Liens and prepayment are things I need to think about. I take better care of the place than the owner does so I do not see much risk for him.
Contract for Deed was more common here back in the day before there was a lot of outside money in play, and I know some folks were able to pay off an established profitable farm in a couple years. Not too likely at today' prices so I would still end up with a mortgage. Part of the issue is the seller does not want to pay any closing costs.
He parks most of his money in bonds so there could be an attractive interest rate here for both of us... Trying to stay positive but it has been a real rol a coaster.

 

[plumber_greg]

Steve, I couldn't count the number of properties I have worked on that the seller did a contract for deed. I would do improvements for the buyer, the payments couldn't be made, and the seller got it back. Sometimes I did this type of things on a property mutpible times. IMO if you can afford the property,make it cashflow, and make it all work, you can find a lending instution that will work with you. Get the deed when you buy it, if you lose it, then too bad, at least it's yours. gs

 

[Stocker Steve]

Steve, I couldn't count the number of properties I have worked on that the seller did a contract for deed. I would do improvements for the buyer, the payments couldn't be made, and the seller got it back. Sometimes I did this type of things on a property mutpible times. IMO if you can afford the property,make it cashflow, and make it all work, you can find a lending instution that will work with you. Get the deed when you buy it, if you lose it, then too bad, at least it's yours. gs

So the seller was finding multiple buyers who could not cash flow at that price?

 

[Douglas]

Not sure i understand what you are saying. Is this seller financing? Where he holds a deed of trust until all payments are complete? Usually this is done to spread out the seller tax liability over several years because it was purchase years ago and inflation has resulted in phantom profits. Just an installment sale. If you borrow from the bank they will could foreclose and get the improvements as well. I don't see what the differnce is in paying the seller vs. the bank.

 

[plumber_greg]

Yes, Steve, has happened more than you think. Usually young people with no idea of financing, cashflow etc. One particular 160 was sold to a man that had a pretty good job, just not too smart. He let the seller not only hold the deed, but take a mortage on all machinery and livestock. This guy cleaned boxcars out, brought the stuff home and fed it to hogs. We put in I forget how many waterers, elec, he put up a modular home. Lots of improvements, lasted about 3 years. Seller made out like a bandit, had a sale, sold all his stuff, sold the house, cleaned it off, and resold it within a year. New owner put it in CRP and still has it.
This is what the guy does for a living, forclosing, can't wait for the next one. One time a welfare lady with 4 kids bought a junk house from him, had to get a water heater and wanted to make payments to me. She said, and it still pizzes me off, and I quote,"I do really well, I get 3 checks." gs

 

[Stocker Steve]

Took the plunge and signed the paper work today on another 240. Paid for a few things twice since I over improved the place, but got below market financing. Now need more cattle...

 

[ANAZAZI]

Congrats!