Real Estate Investor · West Bloomfield, MI · Member since 2013 · 18 posts · 1 vote
Lets say I have a seller who owns a rented property free and clear but owes 10K in back taxes and wants to walk away with 50K in his pocket. At 60K the numbers work and it is a good deal.
If I have an end buyer lined up at 67K, my question is how would the contracts look if I was going to double close? Do I write my contract with the seller for 50K and put an addendum in it that says all outstanding taxes to be paid by buyer at closing? And with my buyer do I just fill out a standard contract for 67K knowing that 10K of that money will be going to pay off the taxes?
Your contract with the seller can be for 50 and the buyer (you) pay the taxes or it can be $60 and the seller pays. It doesn't matter, the end result is the same.
You contract with you end buyer should be for whatever price you want. The taxes will be paid with the first transaction.
In the past, I've gone so far as to actually state the exact amount of property taxes that will be paid by the buyer, "Buyer will pay outstanding property taxes, not to exceed $____." Sometimes these closings can drag in, while the delinquent taxes keep building up and up.
This kind of clause might give you a little extra predictability in the numbers (anything in excess of said amount would simply be paid from the sellers proceeds).
Food for thought anyway.
I prefer to structure it with the buyer paying. As Seth said the interest can increase during the closing process, and I try not to eat it out of my side.
Thanks for the responses! I like the idea of putting the clause in there Seth, great suggestion. I have a meeting with a seller today in a similar situation so we'll see how it goes.
KISS! Write the contract with clear title, all taxes, liens paid by the seller. The seller knows the taxes are due. Don't complicate it, when it can be simple.
Like @Wayne Brooks said if you write it with clear title provided be seller, then guess who eats the extra interest if they drag their feet...the seller.