Posted by JohnBoy on March 19, 2001 at 10:25:56:
I apply any option consideration and rent credits towards the purchase price, period! NOTHING is applied towards the down payment on my end of the deal. It ALL goes towards the purchase price.
When they go to exercise their option and get new financing, it’s their LENDER that may “allow” their option consideration and rent credits apply towards their down payment. A lot of lenders will allow the option consideration and any rent credits that exceed fair market rents to be applied as part of the down payment.
I have NOTHING to do with the way their LENDER will allow them to apply their option consideration or rent credits. That’s between them and their LENDER! In MY contract, EVERYTHING in the way of option consideration and rent credits go towards the PURCHASE PRICE!
Doing it this way means that the ONLY way they can ever take advantage of the option consideration and any rent credits is by EXERCISING the OPTION and BUYING the property! If I were to apply it as part of any down payment and they were to decide NOT to exercise the option, then they “might” try to claim that since the money was stated it would be applied to the down payment AND since they won’t be exercising the option…then they should be entitled to getting their down payment money back! After all, if you’re NOT going to be BUYING the property…then HOW can you be expected to lose a down payment on something you aren’t BUYING??? ME? I just don’t see the need to create any possible or potential problems later on by having this issue decided before a judge that would most likely favor the tenant/buyer over the BIG BAD INVESTOR!!!
ALWAYS, apply everything towards the PURCHASE PRICE! That way you MUST PURCHASE THE PROPERTY IN ORDER TO TAKE ADVANTAGE OF ANY CREDITS!!!