Posted by Matt B on March 13, 2001 at 12:02:46:
Don’t worry about the confused sounding questions. There is a lot more to a lease option than just a quick answer that you might read here. I highly suggest buying a decent lease option course from this site under Books/Courses if you want a complete education. This would be necessary before you start trying to do these deals.
OK, the way it goes is that as a lease option investor, there are different criteria for when you buy versus when you sell. First of all, you do not look for “uneducated sellers” to do these deals with. You use your own marketing to attract MOTIVATED sellers to call you. These are people who aren’t going to care what your credit looks like or even if you have any money to put down. They are simply people who are stuck in a situation that they need someone to solve.
You would not put any money into these deals and your credit should never be an issue. You are simply there to offer someone a solution to their problem. If they don’t like your solution, well, I’m sorry, Mr. Seller, that we couldn’t work something out to help you out, and good luck selling your house. If anything changes or you’d be interested in talking to me again, feel free to give me a call.
On the other hand, when you are putting a sub-tenant/buyer into a house that you have lease optioned, you will pull credit, but of course, you will not be dealing with people with good credit. The best way to handle this is by having a mortgage broker who can pull credit and be able to tell you if this is someone who would be able to get financed at some point in the near future. If a mortgage broker is promised the future business of actually getting these people funded, they may do this for you.
It is important to pull credit to know what sort of people you will be dealing with, but even more important to collect that non-refundable option deposit. Your tenant/buyer MUST believe that they have an ownership interest in the house. They must know that they are not merely renting, they are future homeowners. Making them put up enough to establish a financial stake in the property helps with this.
I hope this helps answer your questions. If you need any clarification or further help, feel free to post it and I or someone else will help you out.