contract terminology

through the advice of a realitor we sold our home in indiana on a contract sale. at the time she said they had a lendor who was working with them but they had one credit problem to iron out. we agreed to a six month contract to allow them time to refinance. the contract that we signed says that they have six months but they can have six months more if they can prove to the sellers satisfaction undue hardship. the realitor says that this means they have to prove turn downs by three other lendors. is this true or what does undue hardship mean. i'm not sure if these people can ever get financing and in the mean time they are living in my house. she also says that after one year if they don't get financing that i will have to go to court to get them evicted.

[HomeGuru]

That was a really dumb way the contract was written. It offers you as the Sellers basically no protection. Hardship could also mean if the Buyer lost employment, was hospitalized etc.
You should have had an attorney review the contract since your Realtoris not an attorney and did not take your best interests as top priority.

Consider this, you have a buyer so weak that a mortgage lender who deals in this stuff all the time will not make them a loan.
Now a Realtor comes along and hopes to throw a weak deal on the wall and hopes it'll stick and a commission will be produced. If the deal falls apart, the Realtor is out only a commission. You have a nonqualified buyer in his house, who did not give a damage deposit.
Don't sell on a contract, unless you have a very large down payment. I bet the buyer is bringing in just enough down to close the deal and pay the closing costs and Realtor commission. You walk away with about zip in hand -- with a smile and a hope to later close.

Here's what I'd do: I'd tell the Realtor to write up the same offer the bank will be financing -- not a real estate contract. After all the terms and conditions are shown. I'd include an addendum that says the buyer has 10 days to preform and approve any any and all inspections or anything the bank may want. Otherwise, 6 months later the buyer can use the excuse that the banks wants a new roof in order to close. About the only thing you may not get early is the appraisal. But if it doesn't appraise, then noone will buy it. Anyway will all this out of the way the contract is pretty much locked up pending financing by the buyer.
Make the closing date some time in the future -- say 1 year, to give him all the time he needs.

Next whip out a rental agreement for that ame time period. Make the buyer put down a damage/security deposit and some option money, plus a months rent prior to move it. Write on the rental agreement that the buyer has the option to buy the home as long as they close prior to the closing date shown on the purchase & sales agreement. Write it on the lease, or somewhere, that buyer at closing gets back all deposits and option money. If he does not close the option money is forfeited, but the damage deposit is refundable less any damages.

Tell the buyer you'll give him $ 200.00 credit back for each month he resides in the property prior to closing. Then increase the rent by that amount. Important to write somewhere that all rent money paid shall be considered fair market rent. Otherwise, he'll think the $200 per month was his saving account.

Chances are, he'll not qualify, and you'll have $200.00 more money in your hand for each month plus $ option money.

Now if the buyer has as good a chance to qualify as he and the agent say, they should be happy. You are somewhat protected because you can evict a tenant when his lease expires, and you have a deposit. Problem is -- if he learns early thet he won't qualify, you got a tenanmt for a year.
But, that ok -- you got $1000 option money and $200 in rent

Follow all the check in & check out requiremet just as you are required to do when you have a tenants deposit. Take pictures of the property in the move in condition. You may later need these when the tenant says -- no, my dog did not eat up that carpet -- it was like that.

Good luck!


[Edited by archarrell on 02-11-2001 at 01:53 AM]