Investors on Terms: Definition

This entry is part 3 of 3 in the series Investors on Terms

PROXIMA INVESTORS are Investors on Terms!

Mansions in Sterling, Massachusetts. Right on golf courses, satisfying saltwater pools, luxurious wine cellars, comfortably large saunas, professionally equipped exercise rooms, multiple car garages, pristine level grounds, numerous and ubiquitous fireplaces, huge rooms and spaces, areas for all needs and purposes

Our primary objective in the course of our real estate investing business is to leverage deal terms to achieve a solution for Sellers, Buyers and all parties involved in our deals, getting them DONE!

Meaning of Investors on Terms

There doesn’t appear to be ANY official definition of Investors on Terms or Deals on Terms (which are made by Investors on Terms) in general or in detail, nor are they specifically mentioned in public documents or recognized by public authorities or entities, as Purchase & Sales and Rental transactions are (“Subject To” deals are marginally acknowledged). The only deals that the general public may be aware of and can be included in Deals on Terms made by Investors on Terms, are Owner Financing and Rent to Own deals. However, these alone do not explain the concept that characterizes Investors on Terms.

Description as “Investors on Terms”

Hadley, MA: Home for sale on terms, lease-option or seller finance
Hadley, MA: Single Family Home for Sale on Lease-Option

Investors on Terms” is a popular way of describing a certain type of real estate investors, albeit it’s mostly used in the industry and almost lingo of the defined community of professionals, investors and operators active in real estate. It’s a very broad and diverse category which includes many different investors with different, often unique, business models, practices, standards and so on.

Individual real estate investors

Sterling, MA: Home for sale on terms in lease-purchase, owner finance, or straight conventional sale
Sterling, MA: Single Family Home for Lease-Option

Each and every investor may attach a slightly different meaning to “Investors on Terms“. When dealing with investors, the claim should be taken with a grain of salt and the investors’ model examined to determine the exact type of approach to real estate investment.

Unlike other professionals, investors operate more on a smaller, individual scale and with different business models.

Proxima Investors

Real Estate is a solid investment with many ways to monetize and always on demand

For us, Proxima Investors, investing on terms means that we partner with sellers and buyers to find an effective solution to the challenges that they otherwise expect to overcome with a regular sale, with representation from an agent or by handling the deal by themselves.

That’s the core meaning of the term for most investors and their goal, no matter how they distinguish themselves from all the others in the details.

Achieving the goals

In Real Estate Buying and Selling is a challenge and it's different for everyone. That's why a customized solution is to be considered.
Every Home Seller and Buyer has a different situation and challenge; we address it with a custom deal that provides the best solution

Deals on Terms represent an alternative to the mainstream method of buying and selling, especially when they allow to achieve and often overachieve the goals set by sellers and buyers.

In these deals, we don’t focus on the property and its price and/or market value as the only or primary deal point. When we look at a deal, the property is important, but we also dive deep into the whole situation; we dissect all the possible aspects and details of the situation. We look at the big picture and include the sellers or buyers, their personalities and their needs, desires and expectations. We can overdeliver in satisfying the priorities as they are set and expressed by sellers and buyers, if we can leverage effectively all the items of the deal. We create, design and provide a custom agreement which addresses and resolves all the issues of our partners specifically.

In these deals, we don’t focus on the property and its price and/or market value as the only or primary deal point. When we look at a deal, the property is important, but we also dive deep into the whole situation; we dissect all the possible aspects and details of the situation. We look at the big picture and include the sellers or buyers, their personalities and their needs, desires and expectations. We can overdeliver in satisfying the priorities as they are set and expressed by sellers and buyers, if we can leverage effectively all the items of the deal. We create, design and provide a custom agreement which addresses and resolves all the issues of our partners specifically.

Goals and Tools

An “Investor on Terms” looks at the goals of sellers and buyers, proceeds to find the most effective method of achieving such goals by using all the tools that the law, federal, state and local, allow and support in real estate.’

“Investors on Terms” DEFINED:

DEFINITION: In residential Real Estate, “INVESTORS ON TERMS” study and analyze the homeowners’ goals situation, looking deep into the details of the property, and/or of buyers’. Then, they design a deal that leverages as much and as many deal points as possible to achieve the ultimate goal of the sellers and/or buyers.
REMEMBER investors on Terms do business by making Deals on Terms, but each investor has a different interpretation and implementation, style and approach, so no 2 deals are all different!

Conclusion

Hand people are paying the dollar with other hand holds the keys.
Many Buyers are caught out in these days of challenging lending conditions, making Deals on Terms an appealing alternative to get on the property ladder.

That’s the essential traits of “Investors on Terms” and most certainly of Proxima Investors.

Thanks to the tools that the law makes available today, we have much greater flexibility than other professionals in real estate; we can find solutions that work for all parties when a satisfactory solution wasn’t available by mainstream methods.

The downside is that these deals can be intricate and complex. They can prove to be a challenge too hard to face for many who are better off with a simpler, yet risky and/or expensive mainstream alternative.

For all the rest, these deals are not always simple, but indeed always WORTHWHILE!

For this reason, by far most of our deals, are on terms. Therefore, Proxima Investors are “Investors on Terms” indeed!

NEXT: Examples of Investors on Terms

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Investors on terms
Proxima Investors Buy and Sell Homes on Terms throughout New England and Beyond
Creative deals that effectively address challenges that make the sale of a home difficult or the process purchasing a home longer than the market changes and never happens…

Pocket listings and new rules for Realtors!

Realtors have to list a property on the MLS within 24h of any marketing effort!

Pocket listings limit the marketability of a property and may fetch the seller a lower price. Sellers should think twice about allowing the practice and do due diligence to find out if that’s in the cards for their listing. Alternatively, look elsewhere to sell!

 

The National Association of Realtors’ new rules about private listings

 

Mandatory listing on MLS

Homes are not always listed on the open market as often and quickly as they should, especially in a low inventory situations like in these days.

Very interesting news from the NAR (National Association of Realtors). Realtors will no longer be allowed to market a property privately for an extended period of time.
Within just 24h (one business day to be precise) of the start of any marketing efforts, they have to list the properties under contract on the MLS. Flyers, email blasts, phone calls, any online or offline marketing effort triggers the countdown to the requirement to open market the property.

Private listings/Pocket listings

These listings are called private listings (or even exclusive listings) because properties are marketed only to a limited number of buyers, generally controlled by the listing agent. They are also known as “pocket listings” to describe how the listing is hidden from the general public (kept in their pocket), and listed publicly only if no private buyers are found.

Opening up to the market

It’s pretty big news because it aims at opening some properties to a broader pool of buyers (and their agents) much to the benefit of many in the market, professionals and homeowners selling. Private listings have been used and abused by some realtors, despite having committed to the NAR code of ethics.

Why do pocket listings

There are multiple reasons for this practice; the one that stands out is the attempt of listing agents at collecting a full commission, instead of having to split with another agent representing a buyer who found the listing on the MLS. Thanks to buyers’ lists that agents build in many ways, including by setting up open houses for that primary purpose, listing agents can find a buyer quickly, which is sometimes one of the sellers’ goals.

Listing agents are incentivized to these practices by handsome and easy monetary rewards.

More importantly, if they have the listing (representing the seller) AND find the buyer, they net the whole commission. The downside for agents is minimal, as the full commission easily exceeds the loss due to a likely lower price. However, that violates the fiduciary relationship between agent and their seller. It’s a poorly kept secret in the industry, but most sellers are completely unaware. It’s sellers who lose the most as for every dollar they lose in the sale due to the restricted number of buyers competing for the purchase of the property, the loss is split in 94% for the seller and only 6% for the agent, but there is no commission split with a buyers’ agent.

Example: Agents rather sell a property for $90 and get 6% by selling it to a buyer from their private list only and pocket $5.40 (6% of $90), than market on the MLS for $100 and sell to a buyer who is represented  and is owed half the commission, therefore pocketing only $3 (6%/2=3% of $100). If the price is $900,000/$1,000,000 which is not that uncommon in states like Massachusetts.

We will have to wait and see if and how this is enforced because it breaks a fairly common practice.
It would also affect some showings that genuinely require private marketing, as in the case of celebrities.
For those realtors who complain by saying that it’s their clients who require such type of listing, they should be reminded that they advise their clients and if they informed them that they could be underselling the

Sellers need to be made aware of all the best options available in a professional and ethical way and timing.

property, many would probably prefer an open listing.
Sellers now have more and better opportunities to sell faster and for more.
Buyers have more listings to choose from, especially if they have a buyers’ agent representing them.
Listing Agents miss out on the opportunity to get paid the whole commission without having to split.
Buyers’ agents have more opportunities for their clients.
So to summarize, this is bad news for listing agents, who emerge as the losers, but only those who regularly used this technique. Everyone else wins, but only if the rule is effectively enforced.

This sounds like one of many attempts at disciplining industry practices like others in the past, often largely ineffective as workarounds are always found when the monetary incentive is often so high in real estate.

Winners and Losers:

Listing agents LOSE, because they lose control over the marketing for that listing and potentially the full commission.

Buyers agents WIN because they have more opportunities on the market to find their clients a home to purchase and therefore to earn a share of the commission.

Listing sellers WIN because their property opens up to a much larger pool of potentially bidding buyers.

Other sellers LOSE because more properties are released on the open market to compete with theirs.

Buyers WIN with more homes available to choose from and possibly lower prices thanks to the more competitive environment.

Buyers on listing agents lists LOSE because they may have to compete with more buyers.

For more and a point of view more focused on Sellers, read here!

Proxima Investors are not Realtors nor Real Estate Agents and do not charge listing fees to their Sellers providing the best return for their important asset, their home.

Selling haunted homes in Massachusetts

Disclose or not disclose?

Since it’s Halloween, let’s see what the law says about haunted homes, murder, suicide, paranormal activity, which happened or, allegedly, are happening in the building in Massachusetts.

Stigmatized properties for sale in Massachusetts and Sellers’ disclosures

When Selling a home, a Seller has to abide by many rules and guidelines. Some of these are pertinent to facts that may affect the building, and in turn the transaction, and that the law may or may not require a seller to disclose.

A stigmatized property is a property in which paranormal activity is reported or suspected, or where heinous events have occurred, such as murder, suicide or both. The law also considers an association of the property a certain illness, but that has lost much of its impact nowadays, so it’s more about the former occurrences.

Each individual, seller or buyer, has a different sensitivity to the issue of stigmatized homes and for many it’s not an issue at all. The issue of disclosure of these events and situations could add uncertainty in a transaction if not clear.

Scary ghostly figures in haunted building..

There are already so many hurdles, like inspections, appraisals, concessions, fees, assists, waivers, endless negotiations and other disclosures that having to reveal a “paranormal presence” in a house could jeopardize a done deal by spooking even very motivated buyers.

The creaky floors could be something easy to fix and not likely to hold up a Purchase & Sale, but should they be thought to be due to paranormal activity and not having been disclosed by the seller, it could create an insurmountable issue. If it emerges after signatures have been exchanged it could provide a solid reason for legal claims based on lack of disclosure.

MASSACHUSETTS LAW

Unlike California, where you can go back 3 years and more for psychologically impacting events on the property, it’s not the case in Massachusetts! The law clearly states that, as it doesn’t fall in the category of material facts which have to be disclosed, it’s unnecessary “to disclose the fact that the property was the site of “…felony, suicide or homicide” or “…that the real property has been the site of an alleged parapsychological or supernatural phenomenon.”

HOME SELLERS AND LANDLORDS

No disclosure of any stigma on a property for sale is legally necessary in Massachusetts for a Seller, but for a Landlord or Lessor also.

Buyer Beware and due diligence

HOME BUYERS AND INVESTORS

The general “Caveat Emptor” (Buyer beware) rule applies here for home buyers and buying investors, who are expected to perform their due diligence in general, but especially with regards to this specific issue if they’re sensitive to such a property. If you’re a buyer, it would be advisable to talk to neighbors, research public records, and just ask clear and direct questions, especially if there’s a doubt, maybe rumors, maybe a feeling.

If home buyers ask clear questions about any stigma on the property, the seller cannot misrepresent or make false statement without giving cause of action, with half-truths also providing an opportunity for a successful lawsuit.

CHOICE TO DISCLOSE

What sellers can do, is to provide information voluntarily. If they so choose, it’s their prerogative, but NOT obligation and buyers can’t claim it as a right to have that information disclosed.

REAL ESTATE AGENTS

If the seller is represented by an agent, in the same way no disclosure is necessary. Due to the fiduciary nature of the relationship between agent and seller, the agent cannot provide the information voluntarily, unlike the sellers, and unless the sellers themselves authorize or instruct the agent to do so. The agent can always decline to represent the seller or terminate an agreement already in place if the information emerges after establishing the contractual relationship.

REAL ESTATE INVESTORS

If an investor, like us at Proxima Investors, is involved in the sale, depending on the type of underlying deal, the investor is subject to the same disclosure rules as the seller, holding equitable interest in the property.

PROXIMA INVESTORS

At Proxima Investors we have not come across a situation of stigmatized properties where it was a concern. However, since Massachusetts and New England in general, are old states with many antique and beautiful homes which have witnessed a lot. Homes can have a long and known history and the creaks and noises of old homes can be unsettling and inspire stories passed down over centuries, and sometimes made more “interesting”. Think about Salem in the 1600s when Massachusetts was a very populous state with lots going on. It’s only a matter of time that we will run into this issue. We already have invested in old and antique homes, which can be difficult to sell in this market, and we love them. Should the issue at some point arise, we believe that it should be dealt with on a case-by-case basis, as property stigmatizing events and situations have a different psychological impact depending on their uniqueness and the specific circumstances.

The bottomline for us is that we don’t have to disclose, but if there’s a particularly unsettling story linked to the house, we would probably not invest in it anyway…

Proxima Investors of Massachusetts are not attorneys and we do not provide legal advice and only state our opinions. Check with your attorney of choice before making any decision based on the content of this article. A useful resource can be found by clicking the link below to the relevant section of the state law: Real estate transactions; disclosure; psychologically impacted property.

Massachusetts Law Reference: https://malegislature.gov/Laws/GeneralLaws/PartI/TitleXV/Chapter93/Section114

Home exterior, front yard with spookie Halloween decorations in the front yard