I purchased two rental properties from a 74 year-old seller by assuming his existing bank financing. The title is still in his name for both properties; I am simply paying the bank on his behalf. My contract with the seller gives me up to five years to pay off the existing bank loans. Once I pay off the bank loans, I own the properties.
Given the seller's age, do I need any additional protection, such as a survivorship deed, that will ensure that the contracts remain in force even if he passes away prior to me paying off the bank loans?
Any suggestions for how I can protect myself?
Hi @Rob Young , my husband and I are in a similar situation with a 78 year old seller, however, he owns the property free and clear. I was wondering what the outcome was for your situation? Thanks!
@Ashleigh Rosinbaum , I had mixed results. I ended up assigning the contracts on the houses, which gave me a decent assignment fee. After six months, the assignee called me, said he was moving out of town for work, and didn't want to be an investor any more. He gave the properties back to me without asking for his assignment fee back. So that was good.
The downside was that he had put a terrible tenant in one of the houses. I think the tenant was dealing drugs. He eventually just left the house after skipping out on rent. When I got back into the house I found out that he trashed it to the point where I had to rehab the entire house.
I held on to both the houses and rented them, but recently decided to sell all my SFRs so I can focus on apartment complexes. When I sold them, the title company didn't think that my original contract with the seller was adequate so we had to create a new contract. Fortunately the seller and I had a good relationship, so he was willing to do this.
There were several lessons in this experience. 1) If you assign a contract, vet the person you're assigning your contract to so you know that he knows what he's doing. If I had vetted the assignee, I would have saved myself a lot of trouble. I never imagined that I would have to take the houses over again or spend money to make extensive repairs. 2) Have an attorney create or at least review your contracts. I was fortunate that the seller was willing to let me revise our original contract. If he had not, then I may not have been able to sell the houses. 3) Always keep good relationships with all the people involved in this type of transaction. You never know when you will need their help.
In your situation, I would definitely make the investment to have an attorney draw up the contract. Good luck.
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