S.E.C. Real Estate Observer

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Editor’s Note: This article first appeared in the April 1973 issue of the Real Estate News Observer.

In the Beginning

Mr. and Mrs. Seller had purchased an industrial parcel of land some five years ago for $200,000. They purchased the property for 25 percent down and agreed to pay the balance over five years.
They put down $50,000 and paid the $150,000 balance in equal annual payments. The payments took a healthy bite from the resources of their annual income. Mrs. Seller really raised “heck” with Mr. Seller when the annual payment was due.

However, Mr. Seller always managed to save the day and pacify Mrs. Seller with, “If the property is worth a cent, it’s worth $250,000.” This went on year after year, until the loan was retired. Finally, the Sellers decided to list the property with Robbie Realtor, a creative and innovative professional.

In High School, it Was Called Homework

Robbie knew that he had to secure data before presenting the property in the marketplace. He secured the following for his file and future reference:

A current preliminary title report called for by his listing agreement, and had the title company bill the Sellers for the preliminary title report.

An area map, plat, and topographical map.

A feasibility study also specified in his listing agreement.

Photos of the property.

Listing of all utilities to the property, complete with names and addresses of the respective utility company’s supervisors.

Robbie also went to other realtors who specialized in industrial property and secured their ideas on the property. In subsequent counseling sessions with the Sellers, Robbie found that they would sell the property on the same terms as they had purchased it: by installment payments.

Ready, Willing, and Able to Not Pay the Price

Mr. and Mrs. Buyer inspected the property, wanting to construct a building on it for their business. They liked the property and initiated an offer for $240,000 with $60,000 – 25 percent – down, and the balance payable over seven years, including seven percent interest.

Presenting the Unsatisfactory Offer

Robbie presented the offer, and Mr. Seller jumped at it. However, Mrs. Seller remembered Mr. Seller’s yearly proclamation: “If it’s worth a cent, it’s worth $250,000.” Robbie suddenly realized his transaction was headed for the rocks, due to a slight discord between Mr. and Mrs. Seller. Sound familiar?

Super Idea Saves the Day

Robbie secured a counter-offer from the Sellers for $250,000 with the same $60,000 down payment, all the time knowing Mr. and Mrs. Buyer wouldn’t go another nickel. However, the Sellers added the following clause:

Buyer can retire the loan carried back to the seller at 95 percent of the unpaid balance within the first three years of this contract. Thus, the Buyers could, at their option, receive a $9,500 discount if they retired the loan at the close of escrow by taking advantage of the automatic discount provision.

In the End

Mr. and Mrs. Seller received full price, and Mrs. Seller was happy because, “If it’s worth a cent, it’s worth $250,000.”

Mr. and Mrs. Buyer were happy. They had completed purchase of the land they wanted and knew the automatic discount was available for three years.

Robbie Realtor was happy, as he had created a transaction beneficial to both seller and buyer.

Epilogue (to a good business transaction)

Robbie had called upon his own attorney to draft the automatic discount clause (consult your own legal advisor, as Robbie did). He had his attorney meet with the Sellers’ and Buyers’ attorneys to insure a fair and equitable transaction.

Robbie knew that when anything “unusual” is offered into a transaction, like an automatic discount clause, it is time to bring in an expert to protect the parties involved…including the broker!