How to Handle Non Paying Land Buyers
What do you do when you're in a contract with a buyer, and they stop paying? In this quick guide, I’ll walk you through exactly how to handle that situation. If you're in the land investment business, chances are you're selling deals on seller financing terms. This exit strategy is very popular and very easy to scale. However, many people are asking: what the heck do you do when people stop paying?
Decide On Your Contract Terms
So, let's say you have an asset, your piece of land, and you list this piece of land online for $50 down and $50 a month for forty-eight months. Someone will reach out to you and say they want to buy that property on seller financing terms. That’s fantastic, so they send you $100 for their down payment and first payment. Upon receiving payment, you're going to fill out a contract, and you're going to email it over to them. They're going to sign and send it back to you. Now you’re officially in a contract, and they are paying you monthly for this property.When it's paid off, you can deed it to them.
So, month one goes by, month two goes by, everything is good. Maybe we get up to month six and then…crickets. They stop responding. This is a situation I prepare for in the beginning. In my contract, I have a clause that says if a buyer ghosts me (it doesn't actually say ghost me, but you know what I’m saying), if they ghost me for ninety days, they forfeit the property and I can resell. So let's say after month six, the buyer stops paying. First, try to connect and see what’s going on; maybe they want to get back on track. However, if nonpayment continues until ninety days out, you can re-list the property. When someone stops paying you on a deal, you won’t have any trouble dealing with nonpayment if you’ve prepared for this and written it into your contract beforehand.
Prepare For Nonpayment Often
Now you may be saying, well, how often does this happen? It actually happens often, except for the window between 2020 and2022, when incredible amounts of stimulus money hit everybody's bank accounts. Most people paid off all their deals because there was so much stimulus money. People had a lot of cash on hand, so they would go full term, or do early payoffs.
In general, though, there’s about a fifty percent default rate on all land deals. Out of every ten deals, five of them will default. Then you can resell them again, and resell them again, and resell them again until someone eventually goes full term. You could also say I’m just done with these properties. I’ve sold them so many times; let's just fire sell quickly to get it off the list and bring in some fresh inventory. Sometimes it's fun to do that as well. Really though, there’s no reason to get rid it a property; you could keep cycling it through forever if that’s what you wanted. However, sometimes I just get tired of looking at the same old deals and want to clear the books. Then go after some fresh inventory, spice things up, and start some new marketing.
So don't worry so much about people defaulting on you. Simply be prepared and have a fair clause in your contract. When I say fair, I mean some people say if you don't pay me by next month, I’m taking it back right away. It's your business; you can run it however you want. But for me, I’ve been all over the scale of the financial game. There have been times I’ve been dead broke and times I’ve had money. I know what it's like to fall on hard times, and I want to give people a fair chance. That's why I do a ninety-day clause. If someone falls on hard times, there are ninety days to fix things. Someone could definitely clean up a mess in that amount of time if they're focused. After that, if they don't want to get back on track, that tells me they're good with reselling the property, and there are no hard feelings. That's how I structure my whole deal. So once again, don't worry about people not paying you. It can be an opportunity to reuse land without searching for more deals.
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Check out my YouTube channel if you’re interested in more land investing tips. Also, if you have any questions about the land investing business and need a little bit of coaching, shoot me a text an EMAIL. Then, we can see if we're a right fit for each other and lock you in for a coaching call.
