How To Set Up Your Real Estate Contract For Maximum Safety and Value
Part 6 – Miscellaneous Items
This final article in the series (part 6 of 6) covers “Late Fees”, other safety measures, and miscellaneous tips.
If you want to sell your contract, one of the factors that a contract buyer will consider is timeliness of payments. It is good policy to include substantial late fees in your contract, such as a $50.00 late fee for any payment that is more than ten days late. Such a clause tends to keep buyers focused on getting the payment made before the due date. The hefty late fee is good additional income if the payment is late.
Keeping accurate payment records is critical if you want to sell your contract. If you are using an Escrow Company (recommended) to service the contract, record keeping is handled for you. If you are “seller servicing” your contract, meaning the buyer makes payments directly to you, keep bank deposit slips together with copies of the checks that the buyer makes to you.
Having accurate records of the closing of the transaction is also important if you sell your contract. You’ve got to be able to show the “quality” of the down payment that’s shown on the contract. Standard New Mexico Real Estate Contracts always have a spot for “Cash Down Payment”, but often a seller will take something in trade (like a car) for the down payment. Trades aren’t as good as cash, but if there is a trade, document what was traded. For example, if a car is being traded, have copies of the title before and after the trade in your file. If a title company closed the transaction (recommended) for you, they will provide you with settlement statement(s) that show all of the details of the transaction. The settlement statement will show trades and other non-cash items as “Paid Outside Closing”, or “POC”. You’ll need to have documentation for POC items in your file.
Standard New Mexico Real Estate Contracts have a blank for Attorney’s Fees that you can charge if you hire an Attorney to handle defaults. It’s common practice to put $50.00 in that blank, which is not enough. If you put “Actual and Reasonable” in that blank, it is more likely that you’ll be able to recover what your attorney actually charges you. If you want to put a number there, use a minimum of $150.00, which is about what an Attorney will actually charge.
Another clause that is helpful especially if you handle defaults without an attorney’s help: “There will be a $100.00 default letter charge due each and every time a default letter is sent, in addition to applicable Attorney’s Fees.”