Not a frequent question, but a baffling one that we occasionally receive, despite our decade of experience in real estate as Proxima Investors and our esteemed A+ rating with the Better Business Bureau, concerns the legality of our deals on terms.

In general, deals on terms are entirely legal across all states, provided they comply with applicable rules and regulations at all levels of government.

However, it is important to note that certain jurisdictions may impose specific requirements that must be met. A prime example is Texas, where unique regulations regarding lease-options have been established in response to abuses by unscrupulous real estate investors and professionals. These regulations aim to enhance transparency and protect buyers from exploitation, including mandates for disclosing any underlying debt.

Aside from these specific instances, arrangements such as lease-options, seller financing, and other deals on terms remain legal unless explicitly prohibited, just like any other conventional transaction. In our view, such prohibitions are unlikely to emerge in the near future.

It is essential to understand that despite the varied terminology used for marketing purposes, these deals typically fall within well-defined categories recognized and regulated by law—such as rentals, sales, and options—rendering them completely legal transactions.

The financing aspect present in certain deals on terms, such as seller financing, may be subject to specific regulations similar to those governing institutional lenders. The rules applicable to small lenders and home sellers who finance a purchase in a one-time transaction or for a limited number of properties are quite limited. These regulations are primarily designed to protect end buyers from unscrupulous practices while ensuring that the implementation of such financing methods is not unduly restricted. This approach supports and facilitates homeownership, which is a fundamental component of the American Dream and a significant objective for many individuals across the nation.

In our real estate deals you can often come across one or more :

• A Down Payment is typically Paid Upfront, Non-Refundable and is Credited towards the Purchase Price.
• A Deposit is Paid Upfront, Refundable and credited towards the Purchase Price.
• A Fee (usually an Option Fee) is Paid Upfront, Non-refundable and is not Credited towards the Purchase Price.
• A Commission (usually an Agent’s compensation) is Paid at Closing and Out of the Sale’s Proceeds of which it’s typically a percentage; since August 17, 2024, Sellers and Buyers pay for each other’s representation, while Dual-agency (Agent working for both parties) is illegal in many states.

Our deals are always tailored to the sellers’ and buyers’ needs, goals, and expectations, so these are not rules, but rather guidelines that must be verified and confirmed before being relied upon.

In some deals, or in some stages of them, it’s better to include a down payment, in others a deposit or a fee. A commission is likely present if an agent or broker is involved.

Make sure you know the specific use of any term and in particular of the ones above to avoid misunderstandings and disappointment, as we want every aspect of our deal to be clear before money exchanges hands.

Clarity makes good deals, and good deals are made in clarity.

Our approach to contract drafting is tailored specifically to each unique transaction, reflecting the terms agreed upon by all parties involved. As principals in these deals, we have the technical capability and legal authority to craft our own contracts, rather than relying on generic, off-the-shelf documents as other real estate professionals can only use.

The process begins with a detailed discussion and agreement on all terms. then, we draft the contract, which is then reviewed by all parties for approval. This stage allows for corrections, additions, and modifications to ensure that the deal is perfectly understood and mutually agreeable. Only when all parties are satisfied do we proceed to contract signing and implementation.

This meticulous approach enables us to accurately address the needs, achieve the goals, and meet the expectations of both sellers and buyers. By designing custom deals, we can extract significantly more value for all parties involved, often bypassing traditional intermediaries such as banks, lenders, some real estate professionals, and landlords.

Our expertise in “Deals On Terms” allows us to offer a more nuanced and flexible approach, akin to a painter with a full palette of colors compared to one limited to black and white. While not every situation or property can benefit from this approach, the majority can. Our role is to explain and facilitate these transactions, as many individuals and even real estate professionals may lack familiarity with these innovative strategies. Let me point out that most of these methods have been around for a long time, some you could say “forever”; it’s their specific design and implementation that can be new to many, but not for the most sophisticated real estate experts.

Having specialized in deals on terms since 2015, we bring extensive experience and continuous, intensive training to the table. This allows us to adapt to the ever-changing real estate market and find optimal solutions, rather than being constrained by conventional selling or renting options.

The result is a win-win-win situation that benefits sellers, buyers, and us as facilitating investors. By structuring deals that circumvent traditional financial intermediaries, we can create truly advantageous arrangements for all direct participants.

Our commitment to this approach, combined with our expertise and adaptability, enables us to offer unique and valuable solutions in the real estate market, resulting in remarkably beneficial outcomes for all parties directly involved.

A Real Estate Letter Of Intent (LOI), also known as a Letter Of Interest, is a preliminary document that outlines the basic understanding between two or more parties regarding a potential real estate transaction. It serves as a preliminary agreement before the official, legally binding contract is finalized. Let’s be clear, a LOI is NOT binding, unless it’s clearly indicated and accepted.

Key aspects of a LOI include:

• Function: Expresses seriousness, the interest and general willingness of both parties to engage in real estate business. It outlines the main terms: It summarizes the key points of the potential agreement, such as price, timing, and scope. Facilitates negotiation: It provides a foundation for further discussion and negotiation of the final purchase & sales contract.

• Characteristics: Non-binding; in most cases, a LOI is not legally binding, allowing either party to withdraw from the deal without substantial legal consequences. The deposit, if any, is refundable. However, we may include very specific clauses, a frequent one is a mutual confidentiality clause, and that may reflect a form of commitment. Formal document: Although not a legal contract, it is a formal document written in a business letter format. Varying complexity: Depending on the situation, a LOI can range from a simple one-page document to a more detailed multi-page document, as ours usually are, to provide as much context and explanation as possible.

• Common uses: Business transactions: LOIs are commonly used in mergers and acquisitions, joint ventures, real estate deals, and loan agreements.

Overall, a Letter Of Intent is a useful tool to express initial interest, lay out the groundwork for a deal, and move towards a formal agreement. At Proxima Investors, we use LOIs on both the Home Sellers’ and Home Buyers’ sides, depending on the situation. Our deals typically start with detailed questions about the Home Sellers’ situation, followed by thorough explanations of the exact type of deal that best suits the Sellers. This creates a negotiation that can greatly benefit from an early LOI to design the framework of the deal, demonstrating our seriousness and commitment to a deal within parameters of good faith. The binding contract then follows, creating obligations and responsibilities for both parties involved. Our LOIs change over time as we adjust them to provide the best possible results and may vary based on the specific situation. We may opt not to write one if so the Seller desires or greatly benefits from, especially in the interest of time. In regards to Rent-To-Own deals, we also write an LOI for the Buyer to review before a final contract, ensuring that the deal is understood completely by the Buyers as well.

In conclusion, LOIs are a valuable tool that we use frequently and will continue to use in the foreseeable future. They serve as an advanced version of a real estate offer to purchase, providing a more complete picture of the deal, without the need for formal acceptance or any payment.

They are a great step towards a successful real estate transaction.

It’s a Lease-Option Agreement, typically between the Home Seller and Proxima Investors, who turn around and simultaneously mirror and replicate the deal with a third-party homebuyer. Proxima Investors’ buyer takes possession, but Proxima Investors is responsible towards the Seller until the end of the MLP contract.

It’s Mediated because Proxima Investors are the main tenant-buyers throughout the transaction and deal until the final Purchase & Sale and the party directly responsible towards the Seller.

It’s Lease-Purchase as it works in a similar way to a Lease until the final Purchase, in compliance with the Lease-Purchase agreements that are linked to the same property.

Proxima Investors have direct contractual relationships with the Home Seller and with the Homebuyer separately. There is no direct contractual relationship between the Home Seller and the HomeBuyer. That’s how Proxima Investors are a buffer or a shield for the Sellers; they are the mediating investors and answer to the Home Seller, while the End-Buyer answers to Proxima Investors.

There are typically monthly payments for the Use & Occupancy of the property, a term of expiration of the agreements, rules for the maintenance and upkeep of the property, and a final date for the Purchase & Sale.

In the industry, variations of a Mediated Lease-Purchase can be found to be called Sandwich Lease Options, but at Proxima Investors these deals have a defined framework that doesn’t always perfectly match the type of deals that other real estate professionals and operators may do.

Lease-Options in general are a broad category that includes many variations, and a Mediated Lease-Purchase is just one of them. It may suit some Home Sellers and Buyers, but not others. Statistically speaking, it’s one of our most popular formulas, as it offers many of the pros of lease-options, without the responsibilities and effort. Since these responsibilities are very limited in lease-options compared to other real estate transactions like long term rentals, or labor-intensive transactions like short-term rentals, we are more than happy to stay involved in this type of deal as long as we set them up. We do not take over others’ deals, as we do not have the comfort and reassurance that they were set up properly. Since in a Mediated Lease-Purchase we are responsible towards the Seller, the deal needs to meet our minimum standards of comfort and security.

As real estate investors, when we, Proxima Investors, buy a property “Subject To Existing Financing” (often shortened to Subject To, or Sub To) means that we, as buyers, take over the responsibility for the seller’s existing mortgage payments instead of getting our own loan, avoiding the burden of the long and uncertain process and making waiving the financing contingency possible.

So it’s a simple sale in which, typically, the existing mortgage stays in place and it keeps getting paid down and eventually in full, following the payment schedule of the borrower who is selling.

Here’s a breakdown:

• The seller doesn’t pay off their mortgage loan: The seller doesn’t go through the process of closing out their current mortgage loan, avoiding the costs and paperwork, but very importantly, the time and hassle required for the process.
• Proxima Investors assume the payments: As buyers, we agree to make the mortgage payments on the existing loan in a legally enforceable contract that reflects and respects the terms of the mortgage loan agreement.
• The existing loan balance becomes part of the purchase price: The unpaid balance of the seller’s mortgage is essentially added to the purchase price you negotiate for the Seller’s equity position.

Advantages of Subject-to Existing Financing for Buyers:

• Lower upfront costs: We may not need a down payment or many closing costs since you’re not getting a new mortgage.
• Faster closing: This approach can bypass the traditional, burdensome, slow, and uncertain loan approval process, which is very expensive anyway, leading to a quicker and more convenient sale.
• Potentially lower payments: If the seller’s existing interest rate is lower than current rates, we could get a good deal that allows us to also resell more easily and quickly as a bonus for all parties.
• Easier qualification: This option can be attractive for investors who can avoid the need, in full or in part, for an expensive and complicated investment loan with all its negatives.
• Sanctioned by the Housing and Urban Development Federal Agency (HUD): Presented as an option on lines 203 & 503 of the Federal HUD-1 Settlement Statement, it is legal in all states.

Disadvantages of Subject-to Existing Financing for Buyers:

• Limited control: We can’t easily modify the terms of the existing loan (interest rate, payment schedule).
• Limited financing options: We can’t leverage features like down payment assistance programs offered with traditional mortgages.
• Potential for hidden issues: The existing loan may have prepayment penalties or other restrictions that we must be aware of through disclosures, review and research (our due diligence).
• Sophisticated, niche method of purchase: Although very popular in the early 1980s and during other periods of high mortgage rates, it became less used with the lowering of the rates, but it’s coming back in this tight credit environment. As an option new to many home sellers, they must put some thought into understanding all the details and features of this type of deal to determine if it’s a viable option, based on the goals, needs, and expectations of the sale.

Overall Considerations:

• Market interest rates: Subject-to might not be ideal if current rates are lower than the seller’s existing loan. Reduced costs and paperwork may still make the difference in favor of this method.
• Property condition: Any necessary repairs and potential costs have to be factored in, before buying subject-to.
• Legal and Tax implications: We should all consult with professionals to understand the legal and tax ramifications of this type of purchase, as always. Finding the right professional with specific experience is absolutely critical.

Proxima Investors have completed many of these transactions and they are often one of the simplest ways to purchase and sell homes and real estate in general, although every situation is different and another type of transaction may better suit a specific situation.

A general consensus is that a Stale Listing refers to a property that has been on the market for an extended period without attracting significant buyer interest or receiving viable offers. While the specific duration can vary based on market conditions, a listing is generally considered Stale if it has been on the market for more than 30 to 45 days, depending on local real estate dynamics.

Key Characteristics of Stale Listings

1. Duration:

• Listings are often deemed Stale after approximately 30 to 45 days, but this can vary widely. In a hot market, even a few weeks may be considered Stale, while in slower markets, it might take several months.

1. Perceived Value:

• Properties that remain unsold for a long time may be viewed as less desirable by potential buyers. This perception can lead to lower offers or a complete lack of interest.

1. Common Causes:

• Overpricing: One of the most frequent reasons for a listing becoming Stale is that it is priced too high compared to similar properties in the area.
• Poor Marketing: Inadequate promotion can prevent the property from reaching the right audience.
• Location and Condition: Homes in less desirable areas or those needing significant repairs may struggle to attract buyers.

Consequences of a Stale Listing

• Reduced Buyer Interest: The longer a property stays on the market, the more likely it is that buyers will assume there is something wrong with it.
• Pressure to Lower Price: Sellers may feel compelled to reduce their asking price significantly, which can lead to financial and emotional stress.
• Increased Carrying Costs: Ongoing expenses such as utilities, taxes, and maintenance continue to accumulate while the property remains unsold.

Strategies to Address Stale Listings

1. Reevaluate Pricing: Conduct a comparative market analysis (CMA) to determine if the current price aligns with market conditions.
2. Enhance Marketing Efforts: Improve online listings with better photography and descriptions, and utilize various marketing channels.
3. Consider Minor Upgrades: Making small improvements or staging the home can increase its appeal.
4. Timing: If market conditions are unfavorable, it may be beneficial to temporarily take the listing off the market and relist it later.

By understanding what constitutes a stale listing and implementing effective strategies, sellers can reinvigorate interest in their properties and improve their chances of a successful sale.

It’s a Purchase & Sale agreement where the transaction is:

• partially in cash or and the rest is financed by the Seller or

• financed by the Seller entirely

In this type of transaction the Seller typically receives regular monthly payments (installments) in addition to a possible, initial downpayment that is credited towards the purchase price. There can also be no downpayment, that’s when the whole amount is financed.

It’s similar to a regular bank mortgage loan, and it’s equally secured by the property that acts as collateral and security for the lender. The Seller can be described as “the bank”; despite different rules, generally more favorable than for banks and other large lenders, it holds a very similar position in a Seller Financed deal.

The Seller carries a note for the installments, which can usually be easily sold for cash if the Seller opts to, and a mortgage for security that allows to force the sale of the property in case of breach of contract. The note can be recorded to notify the general public of the existence of a secured loan on the property, to put the lender/seller in a strong position.

Proxima Investors are the financed as Buyers and typically we simultaneously sell on Seller Financing to our end Buyers also. We extend credit in a mirrored deal, or we sell on a variation of lease-option, depending on their Buyer. Depending on the circumstances and what appears to be the overall best type of deal, we may lease, sell conventionally, hold or whatever seems best.

Seller-Financed sales are executory contracts that have a variable duration; we classify them as short-term (5 to 7 years), medium-term (7 to 15 years), and long-term (15 to 30 years or longer). Most Seller-Financed deals that we’re involved in as Proxima Investors, are short-term.

Like many other Deals on Terms, Seller Financing offers several, strong Tax advantages that a Seller can and should evaluate with their Tax Advisor as each Seller has a unique tax position. We strongly recommend a thorough analysis to make the most of the tax benefits that Seller Financing offers to Home Sellers.

Seller Financing is particularly popular in periods of time when interest rates are particularly high, like in the late 1970s and early 1980s, and more recently, 2023/2024, when rate hikes are needed to tame inflation.

In such economies, the amount of interest that needs to be paid is a great incentive for Home Sellers who want to sell fast, easy and cash in the most, and certainly more than in a conventional sale that involves an institutional lender or bank.

Seller Financing is also called in many other ways including Owner Financing, Purchase Money Mortgages, Owner Carry and many similar variations without significant variation in meaning.

An Assigned Lease-Option in residential real estate is a specific type within the broad category of transactions with a Lease with the Option to Purchase a home on preagreed terms, within our range of real estate deals on terms.

It refers to a legal arrangement where a Real Estate Investor enters into a Lease Option Agreement with a Property Seller and then Assigns that Lease Option to another buyer, usually with a markup or a fee to realize a profit having setup the deal as a facilitator.

The bundle of rights transferred consists in the position in the original Lease Option contract with the Owner of the Property or with the Buyer or, alternatively, it consists in the position in the Agreement with the Buyer.

The transfer of such rights happens with an Assignment agreement, with both parties, Owner and End Buyer on Lease-Option.

Whatever the position, the exact Rights and Obligations transfer and put Owner and End Buyer (on a Lease-Option) in a direct relationship with the removal of the real estate investor whose exit is definite, upon approval by the parties of the new Lease-Option Agreement.

It differs from the Mediated Lease-Purchase as the deal becomes completely owned by the sellers who are the only one in control of the lease-option on the owners’ side, while the buyers deal directly with the

Based on this setup, the owner will have a turnkey lease-option deal; it’s ideal for the sellers who don’t want or can’t market the property on terms and design a deal on terms. Tired landlords are great candidates, but so are those who want or need to extract as much equity and value as possible from the deal. Other categories of sellers are good candidates, as those who want direct and total control of the relationship with the end buyers, or the buyers themselves, for whatever reason, may want such direct relationship.

Typically, the deal goes into effect with the critical requirement of seller approval, which is fair as the sellers are going to be handling the deal to the end, with the exercise of the option and the execution of the Purchase & Sale of the property.

The main benefits for the Buyer are the ability to anticipate possession of a home while setting up for the purchase, avoiding an immediate need for financing, and, for the seller, likely tax benefits, higher sales price, and further income in the form of regular cash flow. It also helps the house sell more quickly than conventionally, as it’s a rarer opportunity for a buyer. The buyers, therefore, often reduce or waive contingencies entirely, are willing to pay more than in a conventional transaction as it’s less appealing and, in the long term, more expensive for them.