Expiring Option-Tennant not getting financed - Posted by Buddy Schultheis

import · January 25, 2002, 12:02pm

Posted by Buddy on January 28, 2002 at 10:52:20:

>>>>Did you ever check this guy’s credit out before letting him have the property? Or did you just assume it will work out because he’s a mortgage broker?>>>

You are right, I assumed it would work out because he was a mortgage broker.

>>>>>As far as it stands right now, his lease and option expire at the end of Feb. I would send written notice that his lease is up and his option expires on the 28th of Feb, 2002. That you will NOT be renewing his lease or option because of his consistant paying rent late. So unless he intends to exercise his option to buy and can close by the 28th of Feb, 2002…he is to be vacated from the premises by midnight, the 28th of Feb, 2002.

Unless he’s late on the rent right now, then you can’t start any eviction process until after the lease expires and he hasn’t moved out. If he’s late right now then serve proper notice to pay or quit. Then if he hasn’t paid by the end of his pay or quit notice, then follow through with filing the eviction!>>>>>>

I don’t understand- Are you saying if is or is not behind on his rent I have to wait until his lease expires?

>>>>BTW…is that purchase price including his $4000 option money being deducted already or would that be deducted from the $113k?>>>>>> It would be deducted from the 113K

>>>>Do you have any other properties to L/O with that much equity involved going to the tenant/buyer? :)>>>>

Yes as matter of fact I do :). The reason the property has so much equity is I bought it as a foreclosure for 82K and did not spend a dime to rehab, the TB has rehabbed it. If I would have rehabed it a year ago, it would have been worth @120k with about 15K of work. It is also in an area that has taken off in the last 9 months, after averaging about 4% appreciation a year for the last 5 years.

I am not trying to be a charity, but I am fortunate enough financially that I can be flexible. It was not that long ago that I was in the same situation as my TB. That is why I have offered to be flexible. But, if he is unwilling to cooperate or continues to stick his head in the sand, I do not want to sit back and be taken advantage of either.

Thanks again for you replies.

import · January 25, 2002, 12:02pm

Expiring Option-Tennant not getting financed - Posted by Buddy Schultheis

Posted by Buddy Schultheis on January 25, 2002 at 13:02:04:

I Posted this on the legal forum, but thought I would post here also.

A little background. I have a SFR sold on a L/O that expires on 2-28-02. The tennant buyer is a mortgage brokers so I thought this would be a slam dunk when it cam time for him to finance. I am more than willing to be flexible on helping with his financing; ie. carry a second or pay more towards closing with an adjusted purchase price. I gave the TB a favorable price a year ago because the house needed some work, which the TB has done. The details: Purchase price 113,000;4,000 option consideration;I will pay 3,000 towards closing; FMV 140,000.

Now the problem: I offered to work with the TB and sat down with him in December. He was supposed to get back with me and I have not heard a word from him. He has been about 3-4 weeks behind on rent payment since May of 2001, but has always paid. I want to sell him the property at the agreed upon terms, but I cannot force him to cooperate. I have a feeling he is just avoiding the issue and will expect an extension of the option, (which I told him in December I would not do unless he kept me informed of his situation) and he has not been returning my calls. I have plenty of room to be flexible on this deal, but I am not going to be strung along by the TB.

Now finally the question: What should I do as far a filing a pay or quit notice or eviction if he does not let me know what is going on very soon (by the end of this month)?

import · January 26, 2002, 5:51am

Re: Expiring Option-Tennant not getting financed - Posted by JohnBoy

Posted by JohnBoy on January 26, 2002 at 06:51:06:

If he has been behind by 3 - 4 weeks on the rent since May, then he’s not going to be getting any loan! The lender is going to want to see cancelled checks to prove he has paid on time for the past 12 months! He’s a mortgage broker for crying out loud!!! He above all people would know this!

Even IF he could find financing right now, which I doubt because of all the late pays…he’d be the LAST person I would agree to carry a second for! Based on his payment history chances are high he will default on your second, if not the 1st and 2nd both!

Did you ever check this guy’s credit out before letting him have the property? Or did you just assume it will work out because he’s a mortgage broker?

Since he knows he screwed up, he could have tried to sell the property to a retail buyer by listing the property a few months ago! Then if he secured a buyer he could have exercised his option, done a simultaneous closing between you, him and his buyer. Then he could of cashed out by walking away with about 25k! This guy doesn’t seem to brite for a mortgage broker.

If you do end up extending him more time by renewing the L/O I would adjust the option price to the $140k that the property is worth! Unless you’re in the business of running a charity for people that don’t care enough about being responsible enough to take care of themselves and protect their own interests???

As far as it stands right now, his lease and option expire at the end of Feb. I would send written notice that his lease is up and his option expires on the 28th of Feb, 2002. That you will NOT be renewing his lease or option because of his consistant paying rent late. So unless he intends to exercise his option to buy and can close by the 28th of Feb, 2002…he is to be vacated from the premises by midnight, the 28th of Feb, 2002.

Unless he’s late on the rent right now, then you can’t start any eviction process until after the lease expires and he hasn’t moved out. If he’s late right now then serve proper notice to pay or quit. Then if he hasn’t paid by the end of his pay or quit notice, then follow through with filing the eviction!

Also, IF you do decide to be a charity and renew his L/O, at least run his credit first to see if he’s credit worthy or if he’s been damaging his credit all along! If his credit is shot or if he has negative stuff that has been there over the past year that he’s done nothing about, get him out! He’s never going to be able to get a loan!

BTW…is that purchase price including his $4000 option money being deducted already or would that be deducted from the $113k?

He’s sitting on a $140k property where he stands to make $27k in equity on this, or $31k if the $4k option money will be deducted from the $113k…and you’re offering to pay another $3k towards his closing costs AND carry back a second to help him get all the equity, despite the fact he’s been 3 - 4 weeks late every month since May of 2001??? What a guy!!!

Do you have any other properties to L/O with that much equity involved going to the tenant/buyer?

import · January 25, 2002, 3:13pm

Re: Expiring Option-Tennant not getting financed - Posted by Nathan(oh)

Posted by Nathan(oh) on January 25, 2002 at 16:13:10:

Normally, in this situation, I would be a little flexible. However, since he has shown a pattern of being late, then I would be looking to either get the financing now, or get him out. I try not to evict T/B’ers unless I have to, because I feel an obligation to get them qualified, but if they don’t help you help them, then there is not much you can do. Its obvious he is ducking your calls, so I would leave him a final message. Tell him that he has two options,

Procure financing now and show you an approval letter, or
2)Pay an additional 3k-5k option consideration to get an extension.

Chances are that he doesn’t have the money to pay and obviously can’t get financing, so you will have made your best effort. If he does not respond or take you up on the offer, put a 3 day notice on his door the minute the option expires.

As Barry has stated, it is business, and chances are that if you try to find a new buyer on this house, you will have good success. You don’t want to waste time with a tenant that won’t get financed.

If he does pay, you made plenty extra cash to make up for the late payments.

HTH

Nathan

import · January 25, 2002, 1:08pm

I agree with Barry! - Posted by smilin_mark

Posted by smilin_mark on January 25, 2002 at 14:08:29:

Get him out and make yourself more money in the process! Don’t complicate your life by trying to drag the T/B through the buying process.

Mark

import · January 25, 2002, 12:09pm

Re: Expiring Option-Tennant not getting financed - Posted by Barry (FL)

Posted by Barry (FL) on January 25, 2002 at 13:09:29:

I’m pretty new, but if it were me I wouldn’t wait. I’d start eviction now! Get a New T/B and another round of option consideration, also if FMV is 140K That’s the least I’d want for the house. Are you in business or charity?
Just the way I see it.

Barry