1 - Would you mind sharing a copy of the contract you use, if you can without violating any copywrite laws? Or at least give me some help with how I might word the clear title part without letting the buyer down. I want to be sure the buyer gets a fair deal, but I do not want to be worrying about having to come up with money to cover the improvements and repairs that the buyer might make.
2 - This sounds good. I guess that I will have to look at the underlying mortgages to discover my comfort level. I was primarily concerned with keeping the seller from creating further encumbrances. I understand writing things into the agreement, but I don’t want to get a nasty little surprise at closing. I know the odds are slim, but I like to cover all of the angles on long term deals. Do you get title insurance at the lease signing or at the close?
I am still studying lease/options, and I need some advise.
1 - I want to be sure that the property I lease to sub-lease has clear title when my sub-leasee is ready to exercise his option. What are your thoughts and recommendations?
2 - Has anyone had any problems with Due On Sale clauses when trying to lease/option properties? I want to record my option, and I would prefer to avoid any hassles. Do I also need to study all recorded documents before making deals? I would prefer to close deals at the first meeting, since I am only going to be doing this part time and I don’t have a lot of time to spare.
3 - I have heard something about deals with no payments to the property owner until I get someone to lease the property from me. Can someone suggest some sample phrases that might not scare the seller?
Re: L/O - TITLE, DUE ON SALE, 1ST MONTH - Posted by B.L.Renfrow
Posted by B.L.Renfrow on June 19, 1999 at 12:23:00:
I am working right now on a couple sandwich L/Os, so this is based on my experience here in NY.
Check the title carefully (or use an attorney or title company to do it) before you execute your lease agreement with the seller. I also include a clause which prohibits the seller from further encumbering the property without my consent during the lease term. In addition, make sure your option agreement contains all the purchase terms. I also include a title examination clause which allows me cancel the contract if the seller is unable to transfer clear title at time of closing. Of course, if you are doing a sandwich lease-option you should be certain your tenant/buyer’s purchase agreement allows YOU an escape if you are unable to transfer clear title.
I know plenty of people on this site are more knowledgeable than I am regarding due-on-sale issues, but my understanding is that the Garn-St.Germain Act prohibits triggering of a DOS clause based upon a lease term of less than three years. For that reason, my maximum term is 35 months, 30 days, with as many extensions as you can negotiate until the underlying mortgage is paid. You should also use separate lease and option agreements. I have, thus far, elected not to record my options, specifically because the underlying mortgage note on every property I’ve optioned allows for triggering of the DOS based upon an option to purchase OR a lease term of 3 years or more.
As far as your ability to close deals on the first meeting, sure it’s possible if you’ve done enough preliminary work on the phone and your sellers are significantly motivated. Just make sure you show up with all the necessary forms.
“Lessee agrees to pay rent in the amount of $xxx per month in advance on the first day of each calandar month beginning 30 days after sublease to a qualified tenant/buyer.”
I would strongly suggest that if you have not already done so, you study all the articles pertaining to lease options on this site, specifically in the “How to Articles,” “Money Ideas” and “Legal Corner” sections. They will explore all your questions in more detail. Also consider at a minimum reading Ron Legrand’s book on the subject.