BiggerPockets

I am in the process of selling an REO. My attorney says that NO disclosure is needed for the seller because this is not a short sale. It is none of the banks business what I intend to do with the property once it is sold.

However, I DO have to give a disclosure to the end buyer to let them know that this is a double closing. How is that clause written? I want to include this in my P&S agreement, but I don't want the wording to scare off my buyer. They are going to be buying with cash. I have been told by a title company that the disclosure is done through the HUD-1 settlement sheet however, I have also been told by my attorney that I also need to include such in the contract. I don't want to pay the fee in addition to the closing costs to my attorney if i can find a disclosure/clause on my own that fits just fine.

Does anyone know where I might find this clause? :idea:

Angela,

The Title Company may not have understood your question.
If I interpret your post correctly, it seems to me you are referring to a situation where there are truly 2 closings.
That means 2 separate HUD statements; so there would be no "disclosure" as such on either HUD statement.

If my memory serves me well each State has its own rules on whether you should disclose to the end buyer that you are contracting to sell a property that you do not own, but have under contract to purchase.
So your Attorney could very well be right; just check with another Attorney to make sure on that.
Now I do not have a simple clause that covers such a disclosure.
What I do have on file is an Addendum to the Sales Contract with your end buyer.
I've never had to use it in years past, and in re-reading it just now, it still scares the hell out of me.
But if you need a copy, just PM me your email and I'll email you a copy.

Is your Closing Attorney requiring you to come up with the Funds for the first closing?
Or has he requested a POF letter from you?
If not, he seems like the perfect guy for your business; cherish him.

Always remember though that if your end buyer does not close for whatever reason, you now own the property and have to come up with funds to pay the seller.
But I'm sure you know that and covered yourself adequately for that contingency.

Don't forget to post how it all turned out.
Happy hunting! :cool:

Angela-

IMO, you are going to want to disclose this with your end buyer. When they perform a title search and see you are not on title, then they'll wonder what is going and may back out of the deal. You and the end buyer need to work together to make sure everything goes smoothly. Most of them understand and are okay with it.

Have your end buyer deposit 25% of the purchase price in non-refundable escrow 2 business days before the closing.
Make a deal with your HML to be on standby in case the second closing does not take place.

The "pain" of the 25% loss is a virtual guarantee that he will close as planned.

Thank you both.

Scott, I will fully disclose all that is required by the title company and closing attorney. Also, that clause that you suggested "Buyer acknowledges that the Seller is not in physical possession of the Property. In this regard, the sale to be made by this Sales Contract is without recourse to the Seller, and, as between the Seller and the Buyer the sale of the Property is "As-Is, Where Is."..is that a good enough disclosure to the buyer that I am performing a double close?

Louis, I think I'm going to have to make the buyer put up some kind of earnest money to give him reason not to back out. Thanks again.

Scott -
Can't you share it with everyone so we can all see it? Posting it here for all to see would be a great idea, no?

This is the set of disclosures which I use when I have an agreement with end-buyer to purchase. I use this in tandem with a Sales or Assignment Contract when I am flipping a short sale or an REO. This is a simple form which should be used, not only for your protection, but also as a script for you to disclose the facts including the interdependency of the pending transaction and the importance of the buyer performing.

Notes: 1. I also inform the end-buyer that I intend to hold title for a very short time and for that I am discounting the price to reflect the carrying costs I would normally have to incur. 2. I also require the buyer deposit earnest monies equal to six months of carrying costs in case he or she backs out.

This form is not meant to be an agreement, but should instead be used as an adjunct to the Sales Contract. This also can be incorporated into a sales contract, but I prefer to use it as an addendum.

BUYER ACKNOWLEDGMENT, DISCLOSURE AND ADDENDUM TO SALES CONTRACT

I, ____________________ ("Seller"), this _____ day of ____________________, _____, have agreed in writing to sell the property located at ____________________ ("Real Property") to ____________________ ("Buyer") and/or its assigns, according to the terms and conditions contained and described in the Sale Agreement ("Agreement") of same date, a copy of which is attached.

Buyer acknowledges, warrants and, represents as follows:

(initial below)

________ 1. OWNERSHIP OF THE PROPERTY: The Seller may or may not be the owner of the Real Property upon the execution of the Agreement, but, in order to effect this sale, ownership will have been recorded prior to the scheduled close of escrow.

________ 2. I ABSOLUTELY AGREE THAT THE BUYER IS ENTITLED TO PROFIT FROM THIS TRANSACTION: I understand Seller may be reselling their rights to the Real Property and may realize a substantial profit in doing so. I agree Buyer is entitled to any profit, in any amount that may ultimately result from the subsequent resale of the Real Property.

________ 4. I AM SATISFIED WITH THE SALES PRICE: I have been given an opportunity to perform my own due diligence with respect to the condition of the property and am also aware the Property is being sold As-Is, Where As. Despite the fact the seller will not warranty the property, I have concluded the price is fair and it is in my best interest to purchase the Property.

________ 5. TIME IS OF THE ESSENCE: I understand that I am required to timely submit all documents, monies, and information necessary to effect this sale including attend the closing.

________ 6. THIS SALE IS ABSOLUTELY FINAL: I understand by signing the Agreement, I have agreed to buy the Real Property and am now legally bound by the terms and conditions described in the Agreement. I further understand that I cannot "change my mind" and try to cancel the contract at some later date. If I fail to perform and cannot effect this transaction, I understand that I will lose my Earnest Money (Deposit).

________ 7. I UNDERSTAND THAT CONTINGENCIES MAY EXIST: I understand the sale may be contingent upon Seller and other third parties performing and effecting the sale. I further understand that if the Seller is unable to secure the sale of this Property, that I am entitled to receive my 100% of my Deposit as presented in the Agreement.

________ 14. LEGAL COUNSEL HAS BEEN ADVISED: I agree and acknowledge Buyer has advised me to seek independent legal counsel to review the Agreement. If I chose not to seek council, it was a decision I made of my own accord.

________ 21. I AM FULLY SATISFIED WITH AGREEMENT: I am fully satisfied with all terms and conditions contained in the Agreement and have been given every opportunity to negotiate the terms that I want.

Dated this _____ day of ___________________, 20____.

Signatures Here:

This form is provided for informational purposes only and as a courtesy to members of this site . Please consult with an attorney prior to using this information.

Thank you Scott!!! This one is better than the one I had!!!!