Quick Checklist for Any Contract

Did you enter into a contract to later feel duped? You agreed to the terms yet feel you were pressured by the other party? If you signed of your own free will, it will be difficult to claim duress. Most courts will not find coercion simply because you now regret the deal or believe the other party “pushed” you into a bargain that wasn’t in your best interest. Duress typically includes the use of threats and/or harassment.

This post is about contracts that don’t come on standard forms and applies where you have the opportunity to make modifications to the contract. We won’t address consumer contracts that are sometimes found to be contracts of adhesion e.g. leases, deeds, insurance policies, credit agreements etc.

Checklist For Your Contract

  1. Who? What? When? Where? This one is self-explanatory.
  2. Is time of the essence? If so, specify the expected delivery date(s).
  3. Is particular quality or materials required? Provide specifications.
  4. What are the due dates for payments? Specify amounts and due dates.
  5. What’s the break-even point? Turn a profit or bargain if desired.
  6. Plan for unknowns? Delays, hidden costs, third parties, change requests etc.
  7. What are minimum acceptable terms? Time, money, quantity, quality etc.
  8. Is the final agreement in writing? Clear, detailed, and signed by all parties.

If you keep a checklist like the one above, you can enter into simple contracts knowing that you’ve covered your bases. If a deal doesn’t feel right, WALK, or stick to your lowest acceptable terms!

Owner Finance vs. Assumption vs. Wrap

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Due to the complex structure of these real estate deals, we highly recommend that you get a lawyer to draft/review the contract documents prior to signing. As the saying goes, pay now, or pay much more later. In future posts, we will review pros and cons of each type of deal. The following are some notable distinctions among these forms of non-conventional financing:

Owner Finance

Seller has title free and clear and is willing to hold a note for a period of time. Usually, there is a fixed number of years when installment payments are being made by Buyer. At the end of that period, a balloon payment is due. If Buyer is unable to make the balloon payment, the whole sale is forfeited and Seller may retain title as if Buyer had simply been renting.

Assumption

Seller steps down and Buyer steps in to assume the loan that Seller has with the mortgage lender. Most mortgages created after 2005 are non-assumable. The few that are assumable often require a familial relationship between Buyer and Seller. Buyer often has to qualify for the loan independently although the screening process may be less stringent than the screening process for a conventional original mortgage.

Wrap / Wrap Around Mortgage

Seller has a mortgage loan to a lender. Buyer buys from Seller subject to that existing mortgage (without assuming it). Seller holds a promissory note from Buyer, which normally matures around the same time as the underlying mortgage. Usually, Seller gets monthly payments from Buyer and turns around and makes payment to Seller’s mortgage lender. Hence, the term “wrap” i.e. the seller’s note from buyer, wraps around the original note.

What’s In Your Wallet?

It’s time for the yearly check up. So, what’s in your wallet? Or more aptly, in your credit reports?

Improve Your Credit Score! As of 2015, according to FICO, the national average credit score in the U.S. is 630. Credit scores can go up to 900 and a score of 750+ is ideal. If your credit score can stand to be improved, talk to a professional that can analyze your credit reports and guide you in what actions to take to start improving your score. The credit score affects all aspects of life such as interest rates, credit limit, renting, insurance quotes, employment etc. Most credit reports have errors in them that can be fixed to boost the score.

I recently met with a top executive at Regions Bank who explained some of their financial programs to me. Their secured credit line program got my attention. Very few banks offer this program and the few that do, require a hefty initial deposit to open the account. At Regions, one can be opened for under $300! This is an excellent way to rehab credit rating because Regions reports monthly to the credit bureaus which quickly improves the score.

For more information on how to take advantage of this program, contact Bill Ownbey at 512.250.2242 William.Ownbey@regions.com

BONUS SUGGESTION: Draft or Update Your Will! The idea of a will may seem far-fetched and even a little morbid, especially when we are feeling healthy. You may say; “I am too young”; or “I don’t own any assets that can be put in a will.” You owe it to your loved ones and things get very messy and expensive when there is no will. A basic will provides for expenses, lists an executor or personal administrator, and provides for specific distribution of real and personal property. It will also appoint a guardian for minor children. You may also want to appoint a power of attorney for medical or other reasons. It always makes it easier for loved ones left behind to sort things out. Make sure to consult an attorney for more information on getting a Will drafted in 2016.

Let’s make it a good year!

What is it Worth to You?

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What is a glass of water worth? $1? $100? It depends on whether I’m in the desert or in the city. Lawyers are often asked to quote “the price” for a case.

Most lawyers are unable to quote an absolute price since not all pieces are within the lawyer’s control – unknown facts, the client, opposing party, opposing counsel, judges, jury etc. In limited circumstances, lawyers will quote an ultimate price.

Some criteria that lawyers (and service providers) use for pricing:

  1. Value added (benefit gained, negative consequence avoided)
  2. Labor (time and effort devoted)
  3. Materials (document production, expert reports, court transcripts)
  4. Difficulty / Complexity (requires expertise)
  5. Speed of Delivery (time constraint imposed by client or other parties)
  6. Ultimate Result/Outcome (finesse, quality of work done)

Next time you’re quoted a price, weigh what each item above is worth to you. You can then be confident that you’re making the best-informed decision for you.

 

 

 

How to Sabotage Your Case

My house catches on fire. Firefighters arrive on the scene. I begin arguing with them as they instruct me on how to get out. Am I being reasonable? Am I overcome by panic? Know about fires so I doubt the advice?

Clients hire attorneys to provide guidance. Yet, some will constantly question, challenge, and generally resist the attorney’s advice. At best, creates a difficult relationship. At worst, the attorney is unable to work the case effectively. Continued resistance may be due to:

  1. Bad hiring decision.
  2. Personality clash that seriously impairs communication.
  3. Poorly managed anxiety regarding the legal matter.
  4. General distrust of the particular profession/ trade.

If you know more about the law than your attorney, or simply can’t bring yourself to trust the attorney, you ought to change attorneys. If there is a major personality clash, the client should fire the attorney or vice versa. Otherwise, manage any situational anxiety and unearned distrust, and avoid self-sabotage (paying someone to do a job yet refusing to let the person do the job).

Risky Business – Co-signing a Loan

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Just say no. If you can avoid it, don’t. If you must, then you deserve to be fully versed on all the risks. This is one where there is barely any advantage and a lot of exposure.

PROs

  1. Can potentially help build your credit if payments are made timely.
  2. Credit profile will likely improve if the debt is successfully paid off.

CONs

  1. If primary borrower dies, you are still on the hook for the balance owed.
  2. In case of a default, you are 100% responsible for repayment.
  3. Late payments by primary borrower will hurt your credit.
  4. Non-payment by primary borrower may expose you to lawsuits/ foreclosure.
  5. Your debt-to-income ratio may affect your ability to obtain new credit.
  6. You may be unable to qualify for a second mortgage / home loan.

To sum it up, if you must co-sign, make sure it is for an amount you can afford to pay off, know the terms of the loan (especially duration), and instruct the lender to notify you of late payments.

Bracing Yourself for Litigation

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Many enjoy the shenanigans of TV character Saul Goodman (S’all Good Man). He is infamous for encouraging litigation with wisdom such as Who can you sue?; Sue ‘Em Now!”  So, someone has heeded Saul’s advice, or perhaps litigation is unavoidable. How do you brace yourself for what’s coming?

Truth is, litigation is more stressful than pleasurable. Here are four ways to prepare for the mental, emotional and financial demands of a lawsuit:

  1. Budget Money: Get a rough estimate for attorney fees and court costs, then double it. Lawyers can’t always anticipate the level of resistance, rigidity, or hostility that you and/or the other party will put up. The more resistance, rigidity and hostility, the higher the costs.
  2. Budget Time: Schedule time off well in advance for consultations, court hearings, mediation, depositions, etc. Remember to engage the help of babysitters, co-workers, and bosses ahead of time.
  3. Gather Information: Ask your lawyer for a checklist of needed documents. Start early. You may need to complete questionnaires, help gather documents from banks, vendors, insurer, funds managers etc.
  4. Plan R & R: You can expect higher than normal stress levels and periods of heightened anxiety. Rest, relaxation and hobbies will help. A visit with a therapist is not a bad idea either, especially in family law litigation.

Do a cost-benefit analysis for tasks that you will handle yourself rather than delegate, and figure out the opportunity cost. Lastly, keep in mind that constantly discussing the case with family and friends may cause added anxiety and stress.

Keep Calm & Stay Sane During Litigation

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Let’s examine some Don’ts for keeping cool, calm and collected during a legal battle. These are true whether you have a lawyer or not. If you have a lawyer, the primary objective is to get out of the lawyer’s way! It is to your advantage that your lawyer isn’t hindered in any way and is able to effectively advocate your position.

To keep sane while your case is ongoing, here are some Don’ts:

  1. DON’T withhold hard facts from your lawyer. The truth comes out at the most inconvenient of times. Avoidable surprises are a no-no.
  2. DON’T make your ultimate goal a continuously shifting target. You will come across scattered and tentative to the court and opposing side.
  3. DON’T share details of your case strategy with the opposing side (including via friends or social media). Refer questions to your attorney.
  4. DON’T make promises or offers relating to your case without first consulting your attorney. Your lawyer is there to help check blind spots.
  5. DON’T micromanage your lawyer. If you don’t have faith in the lawyer you hired, find another one pronto!These tips should help reduce the stress and anxiety that comes with litigation. You will also be proactive by doing your part to avoid hurting your case. Remember, anything you say or do is indeed often used against you in the court of law.

Keep Calm & Let The Attorney Handle It

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Easier said than done right? Well, you can at least keep sane and let the attorney handle it. You’ve somehow found yourself in court – maybe you sued someone, maybe someone sued you. Either way, it’s seldom a pleasant experience. You can still stay sane while doing all you can to help your case. If you’ve hired an attorney, then take advantage of being able to outsource your worries. A good attorney will provide some reassurance or at least let you know the things that are actually within your control. No use worrying about the things outside of your control right?

To keep sane while your case is ongoing, here are some Dos:

  1. DO check your facts and write up a timeline/ account of events complete with names, dates, etc.
  2. DO gather and organize helpful documents and correspondence.
  3. DO set clear goals for a desired outcome and prioritize those goals.
  4. DO make a clear plan of action while keeping flexible depending on goals.

If you have an attorney to walk you through these steps, great! If not, the steps still work to reduce your stress. Next time, we’ll talk about Don’ts for keeping your sanity. Remember, keep calm.