My $16K house has hit a snag.

Sellers have about $9K in liens against it from court judgments years ago (some as old as 2004!). The sister / co-owner who lives out of state is the one managing the sale and appears to be the responsible one of the group. The other 5 family members currently living in this 2-bed gemstone were supposed to to move out and go live in a trailer/cabin in the country. $16K less closing fees, less prorated taxes, less realtor fees, less $9K in liens doesn't give them enough to purchase said trailer/cabin.

Realtor says Seller didn't know about all the liens. Yadda, yadda, probably true but you're supposed to check on these things when you are offering to sell MLS and warranty the title from defect.

Last week I recommended negotiating with collectors. These debts are OLD. Could probably be settled for 20-30 cents on the dollar. Realtor agrees a good solution and they're "working on it."

Yesterday I get an email from Realtor saying they really want to break the contract and back out of the deal and are "consulting their attorney." What their attorney will find is a provision in this standard Board of Realtors contract that says they will be responsible for a 10% of purchase price liquidated damages fee. I don't know if they'll try to fight it but the contract language is pretty clear. We the Buyers aren't the ones at fault here.

If they'd get off their butts and negotiate I think they could settle all the debts for $3K or less cash on the barrel. Their alternative is renege on the deal and owe me $1600. I'd LIKE to own this property. For the price, it is a good deal! My guess is they want to try selling it for a better price to cover the spread of what they loose with me. They'd still be smart to try negotiating down those liens, but whatever....

Dang...always wanted a house with laminate floor face nailed to the walls! ;-)

I'm thinking it would be best to take my 10% fee, let it go, and find me another cash cow. This one is a good one, but there are others.

I would've made that same $1600 net profit in the first 4 months alone. But unless I'm missing something taking the buyout seems like the best solution for now.

Sid, if you're under contract, force the sale. You can do that here under most circumstances.

Their inability to not buy their cabin, however unfortunate, is not your issue.

If the debts are old, they may have expired.

You can always buy it in place since your planning to hold and let the liens fall off in time.

NE would forcing the sale simply mean that the accounting at closing would have $9k goto paying the liens?

David. that depends. If the liens MUST be paid at closing, then YES. The current owners would be $9,000 lighter in the pocketbook. If that's the owners issue, then I would absolutely push the sale forward even if it cost me some extra $ hiring the right lawyer to get them to do it. (Provided the deal was worth it)

If the liens don't have to be paid at closing and stay with the priory, Sid could take them and tell the lienholders that he will give the $0.10 on the dollar in trade for a release and if they don't take that, he can let the lienholder know that he plans on keeping the property for 30 years and they can stay where they are.

Sid, go to the courthouse today and check on these liens. My guess is that they got a better offer.

NE, you make a good point. Looks like liens in MO "fall off" after 10 years. However, I don't know if there has to be court action to remove them forever or ???. It's not ever been clear to me exactly how that happens. Unfortunately, only about $1500 of the liens are old. The other $7500 came along in 2014/2015...for--guess what?--"Breach of Contract."

Does your contract say subject to a clear title? If so, make it happen, if not you might be better off taking the money.

Update: Seller is now trying to claim our contract is invalid because she (power of attorney) was signing for her mom (co-owner with son who ran up the bulk of the liens), but she says she never recorded the power of attorney. RSMO (i.e. our law) says real estate deals must have a recorded POA.

So Seller is A) lying and had a recorded POA B) lying and has no POA whatsoever or C) is telling the truth and never recorded the POA, which means she fraudulently tried to sell us something she had no right to sell.

No...we aren't renting to the current residents. Right now they are a giant pile of family drama and are not paying any rent to the sister / POA. No interested in having any dealing with them other than purchasing the house or getting bought out.

Sid of MO, Consider getting the best real estate attorney in your area and having him or her send a letter to the POA, Realtor and anyone else on the paperwork. This may move them to closing with you. Also in the contract it states that the property is to be clear and they as the seller signed the contract. I don't care whose liens they are the person that owned the house signed the lien paperwork as well.

NE, so you still think they got a better offer? Maybe...maybe... It would be interesting to try, although then I'd have to "rig" some other situations and that could be complicated and I don't want any shenanigans to make me look like I'm trying to undermine the deal. Just doesn't sit right for some reason. They're playing games: I'm going to play this straight. FIRM, but straight.

Tom, your advice is spot on. I use the largest, most successful law firm in SW Missouri. They've handled all our real estate legal affairs for 12 years and have been in business over 30 years. They are the legal equivalents of pit bulls once we turn them loose.

I've relayed an ultimatum to the Seller via the Realtor: we regard this as either trying to back out of a contract or fraud, so either close this deal or buy us out. I closed with, "There is no acceptable scenario that goes, 'Oops, we Sellers didn't do our due our homework so we get to walk away for free.'"

Nicole, I've never has to record one and have used them numerous times for buying/selling. Maybe other stuff, not sure.

I'd bluster a bit but walk away if push came to shove. Not worth the $5k-$10k to take to court to force the sale, and the year to do it.

Also in CT at least you can force a sale, the liens are the sellers problem. What happens is your attorney contacts their attorney and basically sets up a closing date. If the seller than says nah not happening you sue them for performance of contract.

The trick is will it stand up in court or not? Who knows, it might or if their attorney is good it might get thrown out on a technicality. Or maybe you guys settle on some sort of damages, ie money you spent on the parcel prior to close with some time damages, etc.

So, you will hire an attorney who will charge up a pile, then get you a judgement which will get piled onto the other judgements.

Will the fees to you exceed the $1,600 way down the road?

The other $7500 came along in 2014/2015...for--guess what?--"Breach of Contract."

I am so incredibly sorry to hear that you had to go through such sudden drama for a transaction that was supposed to be said and done. It doesn't seem right as you don't usually seem to knowingly go into a situation so muddled that you have to arm yourself to the teeth with plans, backup ones, and yet other ones just in case? The sellers are odd and not forthright.

Anyway, best of luck no matter what happens and please keep us posted if you can.

Sid,

Learned this at a seminar and did it...

Contact the lienholders and buy the liens for pennies. Now YOU control the sale.

The house is only worth what they can get. It's their problem it won't be profitable after closing.

Some houses are worth zero due to repairs.

And don't be afraid to walk away. Plenty of other deals out there. Your time is valuable.

Thanks to everyone for the comments.

I've sent my attorney a note asking if we have a legal contract. That's the first thing I need to know. If yes, I'll ask for the buyout fee (10%) that is written into the contract. If they don't want to pay, then I'll decide what to do. I may pursue the lien buyout strategy that Brad mentions. If we don't have a legal contract, then I'll heed his advice on how to proceed.

Right now I have a note to the Seller's agent saying if they want out of this deal, I need something other than "Oops, we messed up." They're supposed to send me a number.

If we do have a contract, I doubt I will force the sale due to the contentious nature of the deal.

Once upon a time, my MIL decided to move 900 miles to be near her grandbabies. She looked at the houses in a half-hour radius, and finally picked a 2/2 for sale for about $20k. It was in need of massive amounts of work. The owner had remarried and was looking to get rid of it. My MIL decided she wanted to tackle the renovation, and they had a contract and everything. Then the seller's adult children started getting on her... "You could have sold it for more...!" and the seller tried to back out. But there was that darn signed contract in the way. The seller was very angry that her agent wouldn't let her back out, and even threatened to report her to whatever board oversees real estate professionals' licenses. We weren't sure if she was going to show up to closing... but she fortunately did. But I remember we had to deal with that question of walking away and finding something else, or insisting. But there's a certain amount of satisfaction in forcing people who deal in bad faith to honor their agreement... :)

There's a guy in our area who owns a car wash. He's sold it, owner-financed, probably four or five or six times. Every time his purchasers were just the teeniest bit overdue in sending in a payment, he'd immediately foreclose on it. And then he'd rinse and repeat. Over and over and over again. Finally, the next guy in line tried to buy it from him. He paid a couple of months like normal... and then suddenly paid the whole thing off in a lump sum. The guy was sooooo mad. He was asking his attorney if he had to accept a lump payment like that-- because he didn't really want to sell it; he wanted to sell it over and over and over. :) I suspect the guy who finally got the best of him felt a certain amount of satisfaction in getting a guy who was dealing in bad faith to honor his agreement, too. :)

Deanna, good stories! I strongly oppose MOST Owner Finance deals for the very reason you cited. The folks who use it often abuse it. However, that said...an agreement is an agreement. The owner had the right to foreclose...just like the buyer had the obligation to pay on time and keep his interest in the property intact. To me, though, it rubs raw against the spirit of the law which is to ensure transactions ensure fairness to all parties involved. "Sophisticated" sellers like the one you describe who run a "rinse and repeat" sale operation and have no real intention of selling. They look for people who are likely to fail, take a bunch of money up front, then pounce when the inevitable happens.

At some point, deals like this cross the borderline of parties on generally equal terms having a meeting of the minds when one goes in desiring nothing but failure on the part of the other. I think that point is different for each person, but when the Seller gets spitting mad that the Buyer actually got the property, I think it is safe to say the line was crossed. Dunno. Guess we could argue the same about people who short the stock market.

Side,

I bought a seller's $40,000 second mortgage for $4000 with about 3 phone calls. Probably could have gone lower but I was anxious. Now the home was affordable and they owed ME $40,000 if they did not sell to me.

Shazam! I knew that second position loans were often tossed to the side thereby making them harder to get initially.