Doug(ON), JohnBoy, Others doing Co-Op.... - Posted by Richard

Posted by Richard on February 27, 2002 at 19:25:07:


I believe my post title was a little misleading. I was actually asking about a “co-operative lease option” where the seller gets the spread/back end and the investor walks from the deal with an option fee. I’ve read all I can find in the archives but am just a little unsure about the “Option Fee/Non refund Option Deposit” aspect of a co-op deal. However, you have given some very valuable information concerning deals involving HOA’s…many thanks!!

Doug(ON), JohnBoy, Others doing Co-Op… - Posted by Richard

Posted by Richard on February 26, 2002 at 21:11:30:

Is this the correct basic sequence in a co-op l/o?

#1-Sign up l/o deal with L/S.
#2-Sign up l/o deal with T/B.

  • collect “Option Fee”
  • there is no non-ref option deposit in a co-op deal
  • get release of liability from T/B
    #3-Sell or give your deal with T/B to L/S.
  • get release of liability from L/S

These deals should be structured to protect all parties; performance mortgage, document escrow, 3rd party collection.

I sincerely appreciate all responses,

Re: Doug(ON), JohnBoy, Others doing Co-Op… - Posted by JohnBoy

Posted by JohnBoy on February 28, 2002 at 24:09:35:

If you plan to assign your deal to your tenant/buyer then there is no option money at all paid by your tenant/buyer. That money is just called the assignment fee. You would already have a L/O deal with the seller. So all you’re doing at this point is just letting your tenant/buyer assume your contract you have with the seller. So instead of paying you any option consideration they will be paying you an assignment fee for getting to take over your existing contract you have with the seller. They are basically BUYING your contract from you that you already have with the seller.

Also, BEFORE you actually sign over anything to your tenant/buyer make sure you get the signed release of liability from the seller first. You don’t want to have already signed over your contract to only find out there is a problem with getting the seller to sign a release that releases you from the contract. Just get your assignment fee as a deposit up front from your tenant/buyer to hold the deal while you check them out. Then once you have checked them out and everything looks good, then get the seller to sign off releasing you from the contract and then finalize the deal with your tenant/buyer.

Number One Rule should be … - Posted by Frank Chin

Posted by Frank Chin on February 27, 2002 at 10:04:37:

checking co-op HOA rules with the HOA directly and not relying on a broker saying “I know there are rentals, or L/O deals done there”, or relying on an attorney’s word that he read the bylawss, as these rules are not in the original bylaws.

Hi Richard:

Many co-op HOA’s, condo HOA’s have rules which you’ll have to follow, and limit these types of transactions. For instance, they usually limit the number of renters there, and you may have to dicker with the HOA if a T/B under an L/O is in fact a renter or buyer. If I was a HOA Board member, I’d be concern about many T/B’s walking away and not completing a purchase and the co-op be stuck with a renter in that unit years on end waiting for the REAL buyer.

But then, that’s just my opinion.

One fellow who posted here recently did not check with the HOA, only to find out after closing, and looking for a tenant that the HOA did not approve of rentals. It reportedly cost him a bundle to sell the unit immediately for only $1,500 more than what he paid for it.

Frank Chin

Re: Doug(ON), JohnBoy, Others doing Co-Op… - Posted by Richard

Posted by Richard on March 01, 2002 at 12:04:01:


Thank you for your reponse.

One of the great things about this board is that one question can generate several money/time saving points in addition to the single answer being sought .

Thank you,