Acquire A Property

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  • I found an ideal property [$200k] to buy for myself which my realtor friend/neighbor will be listing shortly. It has recently gone through GA probate because their parents didn’t have a will. The seller’s, 6 children, are anxious to sell it. I have two $600,000+ properties for sale of which I can easily have the funds from either one to do the deal.

    Any ideas on how to tie up the property or negotiate a deal with them until I sell my property. I don’t think they will go for owner finance but I can try. Any ideas?

    Thank you!

    Jim, I’m assuming that when you wrote “buy for myself” you mean that you hope to live there. If you have other intentions like using it as a rental, that’s a different issue.

    I’m also assuming (since you didn’t mention any serious fix-up issues) that the property is in reasonably liveable condition. Given those assumptions, here goes:

    The fastest way to nail down that property is to secure an option to purchase (with an upfront payment to legally secure that option per your state’s laws), contingent on the sale of either for-sale property you mentioned. To sweeten that offer, combine it with your offer to move in and pay market rent ASAP. That would solve the vacant house security issue that the heirs must be concerned about. It would also help convince the heirs of your serious intention. The amount of rent isn’t a biggie here, but it simply greases the skids to get the process moving in a way pleasing to the heirs. Finally, this plan completely eliminates the need for that “friendly” neighbor / realtor to list the property and extract his/her 6% commission. So speed is of the essence here, as is convincing the heirs they don’t need to formally list that property — given your plan.

    You might also ask if the heirs prefer an all-cash buyout, or perhaps for tax and long term income reasons, might prefer being paid over time, or possibly some preferring cash and others preferring the over-time payout. Some might even prefer a combination of some cash up front plus the rest over time. Such preferences might easily depend on the heirs varying ages, their individual tax and income circumstances, their medical conditions, etc, etc. Being able to customize your offer to meet their individual preferences is probably a significant advantage over the one-size-fits-all funding from any institutional lender — that a realtor listing process might invoke.

    Precaution: there are a few states that have adopted some nasty restrictions on leases in combination with an option to purchase. You’ll probably want to run this question by your real estate attorney, along with help on structuring your option and leasing offer. I realize there is a lot of how-to information about this here on CFD, but you’re in a race to secure a deal with those heirs before they stupidly list that house with the realtor and mess up your plans. You don’t have time to DIY this, so that’s why I’m thinking you need a lightning quick conversation with your preferred local real estate attorney.

    If anyone else here spots a gap in my thinking, or has additional insights on your proposed deal, they are certainly welcome to contribute to this conversation.

    Best wishes,



    Jim, here’s a couple of additions.

    One, the legal term for whatever payment made to a potential seller to make an option enforceable under state law (whether in cash or services or some combination of both) is called the option “consideration.” There is usually some minimum amount required by the state — which varies state by state. It might be $10; it might be $100, etc. But beyond the state’s minimum, whatever amount you can negotiate with the potential seller may be significantly more, so that seller is convinced you’re serious and motivated to follow through — and plus whatever it takes so the seller is willing to sign that option agreement.

    Two, having multiple heirs (or multiple owners for other reasons) can often be a mess to work with. Assuming they’ve not taken ownership inside an LLC or a land trust (so you only have to work with one representative of either structure), you have to get all of the owners to agree on decisions. Sometimes that’s easy, but sometimes it’s somewhere between difficult and impossible. The result is that investors typically downgrade such a property’s value by anywhere from 10% to 20% … depending, because of the extra work and extra uncertainty in dealing with all the fractionalized ownership interests.

    Some examples of such messes might include dealing with six different short term landlords, getting all of their approvals on the option plus leasing agreement, and possibly having to negotiate six different payment contracts (whether in all cash, or some combination of upfront cash plus payments over time — that could potentially be different, depending on each heir’s demands).

    I’m sitting on one extreme example where we’ve been unable to sell a pasture property for some 40 years because my late uncle back about 1960 unwisely included his new wife on the property’s title. When he died, because she was already on title, she was denied the step-up basis on that property to avoid paying capital gains tax. The result is that all these years since, she has been unwilling to agree to a sale of property that only yields about 1%/year on the property value (so we could replace it with property earning something competitive in today’s outrageously inflationary market). All it takes is one heir to monkey wrench a deal where there are multiple fractionalized interests.

    Here’s wishing you the best possible outcomes,


    Thank you, Dee, for your detailed answer. Yes, I’m planning on living there with my mom, who has Alzheimer’s.  A year ago, I was looking for a larger property to start an assisted living facility [called Personal Care Homes in GA].  I now prefer starting an inexpensive [non-profit] adult daycare to give a break to full-time caregivers like myself. My mother and I would live there as I facilitate the ongoing workings of the daycare.

    The subject property needs a new roof, flooring, paint, etc. but is in livable condition. I love the option idea contingent on the sale of either one of my properties.  I’m listening to Jack’s option series trying to get my head around it.  

    I found out last night from one of the five siblings that my “friendly” neighbor/realtor named Billy failed to mention that his wife is their cousin. Billy is most likely not willing to give up the sale since he is just starting in his realtor career.  The sibling’s wife sounds like they want too much for the property now, which is already proving your point of future complications.  This brings me to my next deal.  

    A year ago, I found a gorgeous 10,000 sf luxury log cabin in North Georgia mountains which was being sold by the REO department at a local bank which held the original loan.  After months of research to convert it to a 20-30 bed assisted living facility, I could not find a bank to fund a downpayment for the $800,000 project. The REO bank gave me two old appraisals [$1,000,000 & $2,000,000] for this log cabin, but no one would loan me the money.  I gave up on it, but now I believe this property would be a good fit [perfect zoning, near two large senior adult communities] for my adult Day Care idea with very little money needed to modify it.  They were listing it for $850,000, and I had it under contract for $500,000 which they were losing a lot of money.  The problem with the property is that the property location is too remote for a business and it would cost $100-200,000 for septic and water for an assisted living facility and the floor plan is set up for displaying furniture [it’s former use] which is not conducive for a home.  

    So my new questions are:

    1] Since I know the banker, can I do an option with him and bypass the agent? If not, can I still do an option with the agent? Or do a contingency contract?

    2] Since the bank has been sitting on this property for over three years now, I’m wondering if I should offer $350,000 now although I don’t want to insult them? I will have around $450,000 total from the sale of both properties, but I could get the total amount from just one if my sister, co-owner, will agree to it.

    3] I’m listing one property myself by force [I’m a realtor for personal and family only! I dislike realtors and my sister, co-owner of both properties, dislikes RE investors and Realtors] and my sister is listing the other property with Billy.  Both properties have a smaller buyer’s pool since they are $600,000+, which may take some time to move. Given this, do you have recommendations to move these properties quickly? Any particular teaching on this site you recommend?  

    4] I’m considering using my family non-profit to purchase the property to eliminate property taxes but still need to access my exit strategy if I sell the property for a profit in the future. Any ideas on this?

    Thanks again.

    Jim, before I get to your questions, less than two weeks ago a dear first cousin of mine went into hospice with Alzheimer’s, so I have some understanding of your situation.

    Regarding that 10,000SF property that you ultimately bypassed, banks are not the only game in town for funding. One of the largest networks of private money lenders in the country is headed by Cogo Capital in Idaho. Their website is — in case that may be of future use to you.

    You asked:
    1] Since I know the banker, can I do an option with him and bypass the agent? If not, can I still do an option with the agent? Or do a contingency contract?

    My thought is that an option arrangement such as I discussed would probably only be possible if the agent has not yet listed that property. And then, whether the bank would agree to it is highly iffy. You can always ask, but don’t bet the farm on the outcome.

    You asked:
    2] Since the bank has been sitting on this property for over three years now, I’m wondering if I should offer $350,000 now although I don’t want to insult them?

    In my opinion, the only thing that matters is what amounts of cold hard cash make any sense for a deal for you. There are no units of measurement in assessing any degree of insult regarding a bank. They are constantly comparing you with all other customers they have, or ever will have — just as you have to be aware of competing institutions, including private money funders. Publicly regulated banks will turn against commercial borrowers in a heartbeat when the economy goes into a severe downturn, just as they did back in the 2008+ era.

    You asked:
    “…Both properties have a smaller buyer’s pool since they are $600,000+, which may take some time to move. Given this, do you have recommendations to move these properties quickly?…”

    The classic realtor’s listing model is a reverse Dutch auction. It begins by posting a too-high price, then promoting (which takes some time), and then dropping the price as little as possible and then repeating that same game, again and again — until or if there’s an intersection between price and buyer interest and capability. A Dutch flower auction can accomplish that same process in a minute or two with an electronic clock on the wall that runs backwards until the first buyer presses a button to stop the clock and lock in the declining price of that second for anything from a pallet load to a ship load of flowers. Contrast that with realtors dragging that exact process out for many months, or even years…

    That’s why CFD has some excellent material on the HBS process (Highest Bidder Sale) that can be accomplished in just a couple of weeks or so, which finishes up after considerable publicity, with a 2-day open house of limited hours each day, and a round robin phone call on Sunday evening to see who the highest bidder will be. The winner generally meets at the title company the next day, etc. But if you’ve never done one before, you may not want to spend the learning time first. You may want to enlist some experienced help for your first such deal — which is easy to find here on CFD. If you have some time, look for superb learning opportunities to volunteer as a helper with other CFD member HBS sales.

    I do think there is much merit in refurbing properties to convert into assisted living or nursing homes. I have friends in such facilities and have heard most of the horror stories, including the results of understaffing, theft of resident possessions and clothes, badly chosen diet foods that conflict with strict medical directions, failure to respond to help button requests for many hours, etc, etc. I know there are federally mandated agencies in every state and US territory to be on the watch for elder abuse. How effective they are is open to question. The point is that market is being badly served by a lot of such facilities, so there has to be lots of opportunity to outcompete them.



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