Can payment for the purchase of the business be made through future profits of the company?
Purchasers of a business, whether they are family members, current employees, or third parties may not have the money to immediately buy the business. However, there are purchase options that can include payment from future profits. It can be difficult to find a person to purchase a business for the amount of money a business owner would like to be paid upfront. However, a smaller upfront down payment can be followed over time with payments of a percentage of the profits for a certain number of years.
What are the most popular options when selling real estate and the buyer can’t obtain a loan?
There are many people who would like to buy real estate but cannot qualify for a loan. Maybe they have gone through bankruptcy or a foreclosure has damaged their credit, but they have a steady income source and can afford to make the payments. Sellers are becoming more flexible with how they sell their properties in order to find buyers. If the property is paid off in full, a seller may wish to deed the property to the buyer and then carry the loan, often called a “seller carry-back.” However, that is not the most popular way to sell the property since most sellers still have a loan on their property. It also requires the need for the seller to foreclose the loan if the buyer defaults on the payments. Some sellers still prefer this method of purchase because they no longer own the property and have no liability for anything occurring on the property.
The two most popular unconventional ways to sell property are by “Contract for Deed” or by a “Lease-Purchase.” A Contract For Deed is generally equivalent to an installment contract to purchase the property. Traditionally, a General Warranty Deed from the seller to the buyer is held in escrow at a title company to be released once the buyer has paid in full. Similarly, a Quit Claim Deed from the buyer which fully releases any interest in the property is held in escrow to be released if the buyer fails to make timely payments. The Contract For Deed was very popular for many years, but it was riddled with contract disputes and began to fall out of favor. In recent years, lease-purchase agreements have become a more popular option. They consist of a standard Lease Agreement with some portion or all of the monthly lease payment being applied to the purchase price if the buyer ultimately follows through with purchasing the property. An Option to Purchase Agreement accompanies the transaction setting forth the terms for the buyer to purchase if they timely exercise their rights under the option. A lease-purchase is usually the best for sellers since it is the easiest way to evict the buyer if they fall behind on payments. It can also be good for buyers when there is not a large down payment and the buyer expects to have better credit in the future to obtain a traditional loan.
Can I keep the security deposit?
Missouri law states that in regard to residential real estate leases, the landlord may not demand or receive a security deposit in excess of two months rent. Thus, if the landlord collects a security deposit along with first and last month’s rent, the security deposit should not exceed one month’s rent because by collecting the last month’s rent in advance, it would be considered part of the security deposit. The law regarding two months’ rent does not include any additional pet deposit. Thus, a pet deposit may be charged along with two months’ rent, so long as it is specifically stated in the lease that the additional amount is intended for use as a pet deposit. Within 30 days after termination of the lease, the landlord must send written notice of the time and date of an inspection of the property. The landlord must then inspect the property and provide the findings of such inspection in writing to the tenant in person or by mail to the last known address of tenant. During the 30-day period, the landlord then must either return the security deposit or furnish the tenant with an itemized list of damages for which the security deposit will be applied. If only a portion of the security deposit is being withheld, the itemized list of damages must be supplied to the tenant in addition to the remaining balance of the deposit prior to the end of the 30-day period. If the damages to the property exceed the security deposit, Missouri law does allow the landlord to file suit against the tenant for any deficiency.
For more information, see Section 535.300 or the Revised Statutes of the State of Missouri.