A big real estate contract carry back quandary.

The terms you have given him are about the best I've heard for private or 'Hard' money.  I'm happy if I can get my regular private lender to give me 8% and 2 pts, interest only, late fee is 10% of the payment amount. I've paid 12% for a one year loan.

If he can't make this work on your terms he shouldn't be in the game.  There are a bunch of things you could have done to protect yourself a little better but I don't think you are going pay tuition to the School of Hard Knocks by getting burned on this one.

Take the $53 late fee and take the wife out to Chili's or something

Assuming that you get the late fee, not the escrow company, then yes, absolutely take the late fee. That is a 3% return... In 1-2 months. 

jgrewe said:

 

Take the $53 late fee and take the wife out to Chili's or something

 

I'd go with the "or something".

Unrelated rant time: Chili's, TGIF, Olive Garden, they have their place. Their place is a random town in the middle of nowhere; you've stopped for the night at a hotel and you see that there is one of the above walking distance from said hotel. You go there, get a plate of hot brown - it doesn't matter if its meat, potatoes, sandwich or soup, all it is is salty, hot, and brown. How it got hot is irrelevant (deep fryer or microwave), why there are no plants outside of wheat, corn, and potatos is even less relevant. It is hot, brown, and in front of you. 

You know exactly what you're getting. Hot Brown. You leave satisfied in that it was exactly what you were expecting: slightly overpriced, mildly disappointing, Hot Brown food. For the time you were there, you din't know if you were in St. Cloud, MN, Panama City, FL, or Logan, UT. You were just in America, eating American food. When you get the bill, you'll either be happy that you're charging it to the company card, or else you'll be slowly coming to the realization that you could have had a better steak at Waffle House or better Italian food at Taco Bell. 

Don't take your wife there. Don't take anyone there, except in the situation described above. Why would you do that? You have access to Yelp, right? If it is where you live... Well, you know the local restaurants, right? 

Why these places are always packed on Friday through Sunday nights by locals confuses the hell out of me, but not my problem. As long as no one wants to take me there, I won't begrudge them. But I will judge you.

In reply to mtn :

Lol, you are spot on. I just couldn't think of any place that I'd only end up spending $53

I'd never put myself in this type of situation, even for family.  When I sell something, I'm not carrying back the loan.  No matter your relationship with the tenants, you need to protect yourself financially.  You are your own concern, they aren't.  It's not like your friends are going to be worrying about making you financially whole if something happens and you get screwed here.

In reply to mdshaw :

The scenario I laid out was a lot worse than the reality you are experiencing.  I re-read your initial posting.

3 year deal and you are already 1.5 years into this deal.  In that time period there have been a couple of "late payments."  Your contract has "if/thens" written into it.  One of those if/thens is late equals $53.  It seems the $53 is being paid without protest.  

In general, I think your contract is being followed as written.  This whole thing is half way from being over with only 1.5 year remaining.  With the limited info I have here, I would say your buyer/borrower has been a quality customer.  At least a grade B customer, certainly not a grade F customer; a customer to flunk out and call the loan.    In what you have written, I have no reason to believe that he wont continue to be at least  a passing grade customer.   

Yes he always pays but I shouldn't have to call & remind him. My good friend who is a realtor who actually sold it for us & found the buyers,  says I should call it if he is late again. 
It's a 5 year deal then balloon, 3 1/2 years left.

Why shouldn't you have to call him?

You are a lender. All lenders have late and slow payers. 
 

I'd be much more concerned about the balloon payment then the minor slow payments you are describing. 

It seems to me that making the call solves all the problems. It'd be different to me if the call yielded no result.  Otherwise the call seems like high reward for low effort. 

SVreX (Forum Supporter) said:

Why shouldn't you have to call him?

You are a lender. All lenders have late and slow payers. 
 

I'd be much more concerned about the balloon payment then the minor slow payments you are describing. 

Agreed. If you're 100% confident in that balloon payment, keep charging $53 for a 2 minute phone call once a month. If you're not 100% confident - and based on what you've said here, I would not be, but that is your call - then call it.

If I learned one thing when I had investment real estate it's that you play by the rules, no favours.  The minute somebody's late, you put the hammer down.

Fred Flintsone was right. Nice guys finish last.

Pay me the $53 each month and I'll call him for you.

Next time you call him tell him you want him to set up an automatic draw from his account that goes straight into yours.