A Tale Of Two Land Contracts

Wanted to report on the interesting outcomes of two seller finance deals we did the middle of 2016 where the outcomes could not be further apart.

One was a Non-Performing note in Washington, NC where the owner was deceased, and we had an uncontested foreclosure. The other was a land contract from Saginaw, MI that they evicted the homeowner, and it was vacant.

We picked up the NC note for $8,250.00, and be the time we foreclosed, including all holding costs of note servicing, document storage, lawn mowing, legal, and insurance, we were in it for $15,512.35. After we finished the foreclosure and got inside, we found a leak in the waterline to the fridge had built up a nice mold deposit, a mold bloom is what it was referred to as, and most of the kitchen cabinets had to be replaced. At the time, our JV Partner did not want to spend the additional money to rehab the property, so we were forced to try to sell it on the open market.

After little success, I had the idea to offer it for seller financing to someone who wanted a nice little 2/1 single family home. I found on Craigslist a retired government worker who wanted a nice place near the water for him and his girlfriend. We agreed to a price of $20,000.00 and he would pay $4,000.00 down, and $730.96 a month for 24 months starting in August, 2016.

As of February 1, 2017, he has paid on time with an $800.00 cashiers check every month. Sometimes he pays early, and he should finish up a couple months early at this pace.

We paid $5,500.00 for the Saginaw property, and it also needed rehab, and our investor did not have the funds to cover it, so we tried to sell through our realtor in the area. When we finally found a buyer who would take it, As-Is, we found there were problems with the eviction of the land contract and we had to get permission from the prior homeowners to release their obligation. Ugh!

However, we had not a speck of information as to where they might be or how to reach them. I did ask the seller for any documents they might have that would give us any phone number or address where we could find them.

I was sent their application that had the wife’s fathers name and phone number on it. He told me the husband was in jail, and that they had divorced. I tracked the man down and after talking about paying him $250 to sign the paperwork, he told me he really wanted to move back into the house.

He had a new wife and 2 children and needed a place for them. Since we were not going to sell it for much more than we had into it, I agreed to sell it to him for $13,215.25, with $800.00 down broken into two payments, and $400 a month for 36 months.

He works odd jobs and was not able to come up with the $800.00 due to having lived in a hotel that was costing him $1,300.00 a month. He did start working on the house to make it habitable, fix the roof, and get rid of some mold from the flat roof issues.

He fixed the plumbing that was broken because it froze with water in it after the eviction, and when he went to turn the utilities on, his new wife’s payment history caught up with her. The electric company says the combined amount of past due was $10,000.00 when they combined all the past due and penalties from him, his new wife, and her mother, and they refuse to turn the electricity on. He was able to negotiate it down to $4,000.00, though he still did not have the money, so he switched back and forth from living in his van and living in the hotel.

He tried to hook up a wood burning stove, and a solar panel so he did not need the electric company, though his neighbors turned him into the city for living in the home with no utilities, so they locked him out. I guess they had prior issues from before the eviction.

My heart bled for the guy, he would take one step forward, and get hit with a 2x4 in the mouth knocking him back two steps, and it went on & on. I ended up giving him $250.00 before Christmas to give his kids some gifts, and pay for food.

We have been waiting for his tax return so he can pay the electric company, so he can get the water and power turned on, so he can move in. He has yet to pay anything since August 1, 2016, the exact time of the other deal. He has been accumulating interest on the contract at about $110.00 per month, and I am hoping and praying he can get it together to get this going so he can move in and start paying this off.

I take away from this, that I have read elsewhere is to never, every rent or sell back a property to someone who was evicted from it. We could have easily tried to sell it with owner financing to someone else, and have him paying it off. The cost to change the land contract would have cost several thousand dollars, so we sought different council, and they suggested we send him a Quit Claim Deed that he and his wife can sign, so we can cancel the Land Contract, and sell it to someone else. He is signing it and it will cost us $50 instead of thousands of dollars, and a year of wasted by trying to foreclose on him.

Now we will either rehab or sell to a rehabber. So ends the Tale of Two Land Contracts…

Christopher Winkler
The Note Whisperer
Silverwood Capital
http://SilverwoodLLC.com