Many people have heard about the “debt” clause in real estate. The “debt” clause states that if the seller defaults, the buyer has the right to rescind the sale.
The debt clause is often a big reason that real estate agents reject a sale if a buyer is not willing to pay off the seller. It can be very frustrating to a buyer when you fail to deliver on the obligations that you promised.
The truth is that the debt clause is a fraud. It is a form of extortion, and it is a form of extortion that I know a lot of people have been caught up in. I have a friend named Chris who says that he bought his house from a REALTOR after he defaulted on a loan.
The debt clause is a form of extortion. It is a form of extortion that I know a lot of people have been caught up in. I have a friend named Chris who says that he bought his house from a REALTOR after he defaulted on a loan.
The debt clause, as I understand it, is an illegal loophole that allows a buyer to take more money back than the property is worth without the buyer ever hearing the truth. Chris says that one of his REALTORS told him that he was never going to ask for the money back in the first place. He then told Chris that he could buy his house for what it would truly be worth, and it would be the worst of all worlds.
This is the part that I keep thinking about. I know that the law is probably outdated, and that there are laws that protect the consumer, but I can’t begin to imagine a scenario where a REALTOR would tell a buyer that he’d never want to ask for the money back. He’d be crazy and wouldn’t understand why the buyer wouldn’t want to be paid for what he’s done.
I think this is what I’m talking about. Hed’s story is an example of property being sold to the highest bidder. The person who buys it now could be the one who will be making the decision to not pay the bill. It’s a win/win situation.
There are also laws that protect consumers, but they don’t protect the seller. A seller may not sell you something if you give him or her $5.00. It is an issue here because it’s possible for a seller to be in a position where they are legally obligated to pay you back $5.00. This is just as applicable to real estate as it is to any other business.
there are two types of defeasance clauses – those the seller is obligated to honor and those that are not. In the case of the seller being obligated to honor the defeasance clause, he or she is required to honor it because he or she is legally obligated to pay you back the 5.00. In the case of the seller not being obligated to honor the defeasance clause, that is a separate and distinct case because its a contract case.
The buyer’s agent or agents that have to honor the defeasance clause are also prohibited from buying the property. In other words, they are prohibited from selling to you.