Are seperate contracts needed when you are the tenant/buyer with a L/O offer - Posted by L

Posted by MDonovan on April 21, 2000 at 13:16:34:

You might want to consider a land contract instead of a lease/option. (aka contract for deed) It gives you better title, since you have the right to sell (equitable interest) and keep the profit. An option will also do this, but it is usually tied to your performance under the lease. Its far easier to evict a tenant/buyer than it is to foreclose a land contract.

Another idea is to save all of your cancelled checks made out to the seller. This will enable you to go get a lo-qualification re-finance loan after 12 months. (assuming money is still loose–but that’s another story).

Are seperate contracts needed when you are the tenant/buyer with a L/O offer - Posted by L

Posted by L on April 20, 2000 at 12:41:41:

Have seen many recommend seperate contracts(a sales agreement and a lease) when selling properties on a L/O

Plan to try and purchase a property on a L/O but I want want it for a home I plan to live in for a few years. My current living arrangement is no longer possible and unfortunately no tract record that shows I’m worth the risk.

I figured a L/O would help to establish a good payment history and replace the old credit history with a new and improved version.

Are the two seperate contracts really necessary when you’re the buyer and why?

Also how do you overcome a sellers objection to selling their property to you on a L/O other seller financing when you do have a “blemished” credit history.
The situation is not as it was a few years ago and is steadily getting better. But folks are a little nervous.

Do have some cash but didn’t want to put it ALL in one property.

Also how do I protect myself if I should have to put up more up front. Seller might run into problems and not pay his mortgage or someone may attach liens to the house, etc
How would that affect my investment.

Have learned a lot reading the posts on this site.

Thanks in advance for your help.


Re: Are seperate contracts needed when you are the tenant/buyer with a L/O offer - Posted by Jim IL

Posted by Jim IL on April 20, 2000 at 17:29:02:

As far as using two seperate documents for a L/O, you are right, this is usually done when you are selling. This is done so that if the T/B’er violates the lease, and breaks the agreement, you can evict them easier, based on the lease, and leave the option agreement out of it.
When buying, use ONE agreement that covers both the lease and the option.
There are a number of reasons for this, and to save space here, I will not go into it.
You may read some of the posts here in the archive to see “why”.
And, as far as your credit history, you can handle that several different ways.
For me, I just never bring it up, and have yet to EVER show a seller my credit report.
If a seller wants to know that I will perform, I give them references.
Another good idea is to develope an “alternative credit file”.
This will be a list of creditors that you have good credit with.
Utility companies, local stores, banks, personal loans, and whatever else you can come up with.
As far as putting cash upfront, if that is what it takes to make the deal, just be sure that you are not putting in more than you are comfortable with.
You may also try to have the seller take the funds as “pre-paid rent”.
This can give you some time until your rent payments start.

And, for security that the payments are being sent to the lender and the loan is current, you can set it up so the payments from you are sent to a third party escrow company, and they send the payments to the lender any excess funds are then sent to the seller.
And, as far as making sure the property is not encumbered any more, you can make sure of that a couple of ways, and I suggest both.
Make sure the contract reads that the seller cannot encumber the property any more than the balance on your agreement.
You can also record a memorandum of agreement with the county. This clouds the title and will draw red flags if a new lender tries to put a lien on the home.
They will see when checking title that you have an interest in the property, and will need to make sure they deal with your agreement first.

Hope this helps,
Jim IL