Posted by David Krulac on January 26, 2002 at 10:31:14:
in other words you have been advertising for 2 months offering rent to own with bad credit and you don’t have a single taker?
That is not a good sign. With only knowing the details other than you provided I would think something is wrong. The price may be too high, the rent may be too high. Around Central Pennsylvania I would expect an $82k house to rent for a lot less than $855, maybe $650/$695.
1st property - Posted by DavePA
Posted by DavePA on January 26, 2002 at 09:55:59:
Hello all. I have my first property signed up on a L/O. I made sure I didn’t have to make any mortgage payments for 3 months. I now have about 34 days left to I make a payment, or walk from the deal. I would rather get a new T/B!! I am running ads that say: Rent To Own 4br 1bath Bad Credit OK Own this home for $855/mo. Now the house is in good shape, but I was wandering what if the new TB’s get an FHA mort.? They are usually strict about inspecting the house. And who pays for the inspection? I have had some potential buyers but their credit score is not good enough to get financing. And they usually don’t have ALOT to put down. The mort. on the property is $66K, I am selling the property for $82K. What ever they put down as a “non-refundable” option deposit, that amount is subtrated from the purchase price of $82K correct? I had my mort. broker fax me over about 100 names of people I can call to see if they are still looking for a house. Any comments and suggestions welcomed. Thx, dave
Re: 1st property - Posted by Woody (MI)
Posted by Woody (MI) on January 27, 2002 at 04:17:03:
Hi Dave,
I am not a real experienced pro like the others who have answered your post so take my comments for whatever they are worth.
If it were me, my ad would read more like
Lease/Option 4B/1Bath
No Bank Qualifying
To me, and this is only my way of seeing it, when read your ad I think of the rent to own companies and immedatly thnk that I am gong to be paying a lot higher price because of this. I also think that putting the price in it, because it is higher than a normal “rent” for the area, tends to scare people away before they look at it. That is just my way of looking at it.
I am confused about one thing though. In your post you say that you have had some potential buyers but their credit scores were not good enough to get financing. Isn’t that why they would L/O from you in the first place? Maybe I am missing something here. Like I said, I am not an experienced pro. Just my thoughts. Good luck to you
Woody
Re: 1st property - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on January 26, 2002 at 18:49:53:
Dave–¶---------
Good for you. You are moving forward.
I like the list from the mortgage broker. I would suggest you get out a card to them all right away, saying what you have available. They may even have some friend or relative who could buy if they cannot. I’d recommend that you have it very clearly in mind what you are requiring to move past the first telephone interview with them. Have a list of what the salespeople call “qualifying” questions. These are the questions which will knock out the ones who can not do the deal. Questions about job stability and future prospects, cash on hand, income level, etc. Then, when you have some that seem good, show them the place and get them to fill out loan applications for your loan broker to evaluate them.
Good Going.
Good InvestingRon Starr
A couple of suggestions. - Posted by Jim Kennedy - Houston, TX
Posted by Jim Kennedy - Houston, TX on January 26, 2002 at 15:57:05:
Dave,
A couple of suggestions. Do NOT call the upfront money you receive an option “deposit”. Call it non-refundable option “consideration” or option “fee”. Be sure to specify in your contract that the non-refundable option consideration is applied toward the PURCHASE PRICE, and ONLY if the optionee exercises his option. Be extremely careful about the exact wording in the contract. You don’t want anyone to construe based on the contractual language that the upfront money is in any way a deposit. It could be argued that, by their nature, deposits ARE refundable.
BTW, this next paragraph isn’t critical, it’s just my take on nomenclature and jargon. I prefer to use the term “tenant/optionee” vs. “tenant/buyer”. I’m of the opinion that it’s a more accurate characterization of the true nature of that individual’s legal standing. The only time I use the term “tenant/buyer” is during conversations and communications with other investors. Personally, I feel that “tenant/buyer” is a misnomer until such time as the tenant/optionee actually exercises his option. The only other time that I feel the term “tenant/buyer” is technically accurate is in the case of a lease/purchase agreement vs. a lease/option agreement. As is taught by most of the lease/option courses, I use two separate documents (a lease agreement and a separate option agreement) when dealing with the tenant/optionee. In the lease, he’s referred to as the “tenant” and in the option agreement, he’s referred to as the “optionee”.
Hope this helps.
Best of Success!!
Jim Kennedy,
Houston, TX
Re: 1st property - Posted by GL
Posted by GL on January 26, 2002 at 12:21:56:
If you are renting or L/Oing the property why worry about a possible FHA inspection which will not occur for 1 to 3 years? You can cross that bridge when you get to it. It is customary for the person applying for the martgage to pay the inspection fee in other words your TB.
Yes the option fee forms part of the down payment.