Should I allow buyers to amend name to foreign LLP? WIIFM?!
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Greg ScottPro Member
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votesIf you are OK with losing the sale, then sure, you have some negotiation power.
I'm not sure I would ask for more on the price, as that would increase the likelihood they would walk away. I might ask for higher earnest money and make it non-refundable. If they are serious about buying, that is something they would readily agree to. If they walk away from that, it is an indication they weren't serious anyway and you can all move on quickly.
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- 4yGreg ScottPro MemberRental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
If you are OK with losing the sale, then sure, you have some negotiation power.
I'm not sure I would ask for more on the price, as that would increase the likelihood they would walk away. I might ask for higher earnest money and make it non-refundable. If they are serious about buying, that is something they would readily agree to. If they walk away from that, it is an indication they weren't serious anyway and you can all move on quickly.
Not sure how I could lose the sale, tho....
I've already got a contract with the 2 local guys. There's NOTHING that allows them to cancel the contract, short of foundation, roofing or other "system" problems (HVAC, electrical, plumbing, etc.). But the concrete slab is great, there's a new roof, a new HVAC system, new electrical, newish water heater, & there's nothing wrong with the plumbing. Their contract specifically precludes then from cancelling due to cosmetic issues, which there are many.
So the way I see it.... There's ZERO benefit for me to amend the contract to other buyers. If they want to amend, then there should be something in it for me, no? Wholesalers mean they've likely already found another buyer, the LLP, to pay them $10k to $20k on top of what they originally offered me. Accepting their buyer amendment only makes sense to me if I'm getting something extra, because I'm ALREADY getting the original contract price. No way they're getting out of it. So yeah... No benefit for me to accept buyer reassignment.
What if their funding falls through all of a sudden? What if they decide some things in the inspection aren’t acceptable? Then sale falls through and you get nothing.
Even if it's too late for any possible contingency (although financing is almost always valid.) then you still can't force them to buy. You can try to keep their EMD if you're sure you can find another buyer that will pay the same or more.
Not losing the sale is what's in it for you. On the other hand, why wouldn't you if you think they're going through with the sale? Refuse to e-sign one page to prove you can be a jerk? Maybe they paid some stoopid guru who told them every property had to be in an LLC? Maybe their CPA suggested it? Maybe they're being jerks, maybe they're new
Personally I'd go with Scott's answer. Make the EMD non-refundable and if it's less than $5k make it $5k or more. Otherwise you might just find yourself fighting to get the emd and starting over.
Why do you care who’s name is on the contract. You’ll either get the agreed upon price or you’re starting over looking for a new buyer. Maybe getting less maybe just paying extra holding costs.
Quote from @Bill B.:
What if their funding falls through all of a sudden? What if they decide some things in the inspection aren’t acceptable? Then sale falls through and you get nothing.
Even if it's too late for any possible contingency (although financing is almost always valid.) then you still can't force them to buy. You can try to keep their EMD if you're sure you can find another buyer that will pay the same or more.
Not losing the sale is what's in it for you. On the other hand, why wouldn't you if you think they're going through with the sale? Refuse to e-sign one page to prove you can be a jerk? Maybe they paid some stoopid guru who told them every property had to be in an LLC? Maybe their CPA suggested it? Maybe they're being jerks, maybe they're new
Personally I'd go with Scott's answer. Make the EMD non-refundable and if it's less than $5k make it $5k or more. Otherwise you might just find yourself fighting to get the emd and starting over.
Why do you care who’s name is on the contract. You’ll either get the agreed upon price or you’re starting over looking for a new buyer. Maybe getting less maybe just paying extra holding costs.
So... The contract is cash only. Financing is NOT an available contingency. If they don't have the funds, then they HAVE to reassign the property WITH my consent. Period. If that's the case, they're personally on the hook and would be more than willing to fork over an extra couple $2,000 easily... *especially* considering they already have a buyer. I mean, they're golden. Why *w
ouldn't* they pay an extra $2,000???The deal is... I was selling to two local guys. Whether or not just one of them wanted to use it personally, both of them use it personally, or they wanted to use it for the great cash flowing rental property that it is... that was up to them. But I sold it to THEM with the stipulation that it was non-assignable without my consent. Had I known from the get-go that they wanted to wholesale the property, I wouldn't have cut them as good a deal. The company they want to add as buyer does *not* exist in Mississippi and appears to be a Minnesota LLP.
The way I see it, we can just roll with the contract as is.... with them personally liable for contract performance. Or they can pay something extra to avoid trouble on their end. They've obviously got a buyer, and the wholesaling Rule of Thumb is $8,000 *minimum* profit before putting an offer on a property. So $2,000 to avoid extra closing costs, realtor fees, save time, etc. seems like a fair deal to me. I had zero intention of selling to some out of state shell company acquiring and holding tons of properties across the country. At minimum, I believe this message should serve these guys a lesson.
The EMD is a non-issue as far as I'm concerned, because they're going to pay one way or another. That's the contract they offered. Cash. No financing contingency. Only functional inspection contingencies, which there are no functional issues. And a termite inspection contingency, which that report also has a clean bill of health, as well. Those are the only two contingencies, with no right to assign without my consent. If they want to assign now, they should pay. Period. If they don't have the cash, which could be very likely, then they would benefit from paying more $$. Even if they do have the cash, they would benefit from paying more $$. In all honesty, this seems like a VERY cheap lesson for BOTH of us to learn. I didn't expect a wholesaler to try assigning a property with such a cash only offer, minimal contingencies, & no right to assign.... But then again, I didn't ask for proof of funds. Hmmm....
But you have no prof they are wholesalers. Again, they could be doing it for liability or asset protection or to better share the property, or because some guru told them they needed an llc. If they are wholesalers you must have left a lot of meat on the bone in this market. They usually don’t do inspections and in a falling market time is money.
Again, as long as you’re happy just getting the emd and looking for a new buyer if they back out. Then there’s almost no cost to you being a jerk over clicking a mouse once. You aren’t going to be able to force them to buy it. You were given great advice by Scott and you decided to ignore it completely. I think you were given good advice by me and you don’t like it. What was the point of the post if not to get advice? We don’t have any skin in the game. Good luck. Did you prepare your realtor for the fact they might not be getting paid and will have to start over? Maybe you should change the mls listing to accepting backup offers before the value drops more.
- Investor · Jackson, MS · Member since 2014 · 1k+ posts · 769 votes4y
Quote from @Jason V.:
Not sure how I could lose the sale, tho....
I've already got a contract with the 2 local guys. There's NOTHING that allows them to cancel the contract, short of foundation, roofing or other "system" problems (HVAC, electrical, plumbing, etc.). But the concrete slab is great, there's a new roof, a new HVAC system, new electrical, newish water heater, & there's nothing wrong with the plumbing. Their contract specifically precludes then from cancelling due to cosmetic issues, which there are many.
So the way I see it.... There's ZERO benefit for me to amend the contract to other buyers. If they want to amend, then there should be something in it for me, no? Wholesalers mean they've likely already found another buyer, the LLP, to pay them $10k to $20k on top of what they originally offered me. Accepting their buyer amendment only makes sense to me if I'm getting something extra, because I'm ALREADY getting the original contract price. No way they're getting out of it. So yeah... No benefit for me to accept buyer reassignment.
I would not assume they are getting as much profit as you imagine out of that deal. Wholesalers operate on a pretty low profit margin. In any case, if they walk away I'll you'll get is their earnest money, and usually wholesalers get away with very low ones. - Investor · Jackson, MS · Member since 2014 · 1k+ posts · 769 votes4y
Did your contract specifically say it was non-assignable?
Quote from @Susan Maneck:
Did your contract specifically say it was non-assignable?
Yes. Not without my consent, at least.
- Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes4y
Quote from @Jason V.:
Buyer (2 local individuals) & I have a purchase agreement. Home inspection finished last week, presumably looking acceptable to buyer(s). Termite inspection passed.
BUT... the buyer's agent has now sent an amendment to the contract. The ONLY change is the buyer's name will no longer be the two local individuals, but a foreign company from another state, "Something Properties LLP".
The original contract didn't mention reassigning the contract to another buyer's name, so I didn't think I was dealing with wholesalers, just a couple of guys that wanted to purchase some good cash flowing rental property. But now I'm thinking they *are* wholesalers.
My ultimate question is... WIIFM?! Or, "What's in it for me?!"
I am under no obligation to allow such a contract amendment. So perhaps I could use it as leverage?? I'll only sign it for an additional $3,000 purchase price, for example?? Makes sense to me, no?
Just ask who owns the LLP and why they are involved. Your wholesalers might be able to double close but you will save them the time and money if you assign. I don't have a pony in this race so:
If you want to charge $3,000 for a new amendment you wil probably get it. They will simply raise the price to the LLP. That's called capitalism. Fair enough.
However, if the market is moving well in your area, you now know your property is worth maybe $10,000 more than you thought. That's capitalism.
Then it's a question of time and convenience.
As a thinker, you are entitled to get more for your product. That's what capitalists do. They think and then they act. Sometimes, it backfires but often it works out just fine. If you take the imagined $10,000 extra in value and divide it by time\value of the carrying costs, you can see where your break even point is. If it costs you $1,000 a month to hold you can wait a few months and be ahead of the game.
A property is worth what a capable buyer is willing to pay for it when it crosses the price expectation of a willing selling. That's capitalism.
Quote from @Susan Maneck:
I would not assume they are getting as much profit as you imagine out of that deal. Wholesalers operate on a pretty low profit margin. In any case, if they walk away I'll you'll get is their earnest money, and usually wholesalers get away with very low ones.
I would assume they're getting SOMETHING, because I can assure you that these 2 guys don't have a Minnesota-based LLP. No chance.
They have no right to walk away from a contract. Just as a buyer can file a lis pendens for a seller who fails to meet his end of the contract... surely there is a similar action for a seller to get the money that the buyers contractually obliged to pay for the property.
If they wanted to assign the home to another buyer, they should've been upfront about it.... not bring in some other buyer at the last second
- Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes4y
Quote from @Jason V.:
Quote from @Susan Maneck:
I would not assume they are getting as much profit as you imagine out of that deal. Wholesalers operate on a pretty low profit margin. In any case, if they walk away I'll you'll get is their earnest money, and usually wholesalers get away with very low ones.
I would assume they're getting SOMETHING, because I can assure you that these 2 guys don't have a Minnesota-based LLP. No chance.
They have no right to walk away from a contract. Just as a buyer can file a lis pendens for a seller who fails to meet his end of the contract... surely there is a similar action for a seller to get the money that the buyers contractually obliged to pay for the property.
If they wanted to assign the home to another buyer, they should've been upfront about it.... not bring in some other buyer at the last second
The most they lose is any earnest money they put into the deal. Well, unless your local attorney general is very bored or if they sold it as a property and not a contact they are selling then the local real estate board might be interested.
Quote from @Account Closed:
Just ask who owns the LLP and why they are involved. Your wholesalers might be able to double close but you will save them the time and money if you assign. I don't have a pony in this race so:
If you want to charge $3,000 for a new amendment you wil probably get it. They will simply raise the price to the LLP. That's called capitalism. Fair enough.
However, if the market is moving well in your area, you now know your property is worth maybe $10,000 more than you thought. That's capitalism.
Then it's a question of time and convenience.
As a thinker, you are entitled to get more for your product. That's what capitalists do. They think and then they act. Sometimes, it backfires but often it works out just fine. If you take the imagined $10,000 extra in value and divide it by time\value of the carrying costs, you can see where your break even point is. If it costs you $1,000 a month to hold you can wait a few months and be ahead of the game.
A property is worth what a capable buyer is willing to pay for it when it crosses the price expectation of a willing selling. That's capitalism.
I believe this is 110% the correct answer.
Upon looking at the last names of the buyers, it appears that if you put those names together, it might actually form the same name as this foreign LLP, which I don't believe is related to these buyers. All I know is this LLP doesn't exist in Mississippi as of today. Could they create it as soon as I permit the buyer change?? Sure!
Guess I should just start with the advice in your first sentence for now and go from there. If it turns out to truly be their own company, I'll let them slide for just $500 extra purchase price. :-D
- Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes4y
@Jason V.
Jason, sword or shield man. Are you trying to protect yourself and your original objectives or trying to make more money? Not the same goals.
My partner and I are not wholesalers, but use our LLC all the time. It's "foreign" in the sense it's based in MA and we often buy in NH. Yes we usually put "or assigned" in the offer but if we didn't and the seller tried to—ahem—"negotiate" more money my response would not be polite. My asset protection and business practices are none of their business.
- Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes4y
Oh and it's fairly common to create the LLC after the fact, ie when getting the loan. They aren't magic and it doesn't take that long.
A two partner LLC at 50/50 is a very good idea as you can create an operating agreement and be flexible around how you handle things internally.
Not everyone is out to get you, is the opposite true?
- Investor · Jackson, MS · Member since 2014 · 1k+ posts · 769 votes4yThat's my understanding as well. You only get to keep the earnest money. That's what it is for. In Mississippi earnest money tends to be pretty low and most wholesalers will try to get around paying any earnest money if they can. There are ways to get wholesalers in a lot of trouble in Mississippi because they are selling real estate without a license. The real question is, does Jason want to sell this property to them or not? If he is just trying to squeeze extra money out of them, then good luck!
The most they lose is any earnest money they put into the deal. Well, unless your local attorney general is very bored or if they sold it as a property and not a contact they are selling then the local real estate board might be interested.
Well.... Buyers agent claims the purchase is still for same buyers just wanting liability. So it *appears* they haven't created the LLP yet. I went ahead and signed without bothering to ask, "What's in it for me?".
As I said, either way, there's a lesson for them and their agent to learn. Had they just added "or assigns" to the buyer, then I wouldn't have even started the thread. Guess that's a lesson for them to learn another day....
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