L/O vs Lease Purchase?(win-win-win-win) - Posted by MilNC


#1

Posted by MilNC on December 16, 1998 at 18:15:33:

ANYONE OUT THERE?? Lease option vs lease Purchase,
as to benefits/risks to seller-buyer-lender-etc.


#2

L/O vs Lease Purchase?(win-win-win-win) - Posted by MilNC

Posted by MilNC on December 16, 1998 at 16:08:47:

Same post as below. Sorry. I did leave my posting and
go to Claude Diamond’s article “Eight Ways…” and I
still couldn’t figure out a difference. I thought the
terms were synonimous. Then I couldn’t get back to my reply-in-progress, and couldn’t find the post again.

So, to the person who posted “win-win-win-win”, could you
clarify how the positions of the parties (advantages/disavdantages) that are changed or different
in L/P vs L/O or refer me to an article if I have missed
something. I have one of the L/O home study courses from this site, but I dont’ recall this distinction coming up, so
I must have missed something along the way.

Thank you.


#3

Re: L/O vs Lease Purchase?(win-win-win-win) - Posted by Brad Crouch

Posted by Brad Crouch on December 17, 1998 at 03:41:02:

Mil,

I posted something about this subject down near the bottom of the page. It has the subject, “Getting agents to help with deals”.

Since it is about to scroll off the board, I’ll paste it here:

There it is again! Rob mentioned lease options and you say “lease purchase”. I know that everybody seems to believe that these two terms are interchangeable, but I don’t see it that way at all. In fact, I see a BIG
difference.

Lease option is a unilateral agreement where the seller is obligated to sell but the buyer is NOT obligated to buy.

Lease Purchase is a bilateral agreement where the seller is obligated to sell and the buyer is OBLIGATED to buy, at some point.

If you really mean “Lease Purchase”, then you cannot disagree with Rob as he is talking about something entirely different. Apples and Oranges.

A Lease Purchase would result in the realtor® receiving their full commission (sooner or later). Rob was talking about Lease Options where the realtor® may never see any commission from an actual “sale”.

I realize that the term “Lease Purchase” might be easier for a seller to swallow, since he has the impression that the buyer will actually HAVE to buy.

It’s real hard for me to accept that the interchangeable use of these two terms are anything other than a “slick” misrepresentation of the actual
facts.

Now . . . with these two terms in mind, what is the “exact” status of the 4 “lease purchase” properties that you have on the market right now?

Just curious . . . nothing against you personally Justin, I’m just a little tired of seeing these terms used as meaning the same thing, when they clearly
mean different things. At least to me.

Brad


#4

Re: L/O vs Lease Purchase?(win-win-win-win) - Posted by hk CA

Posted by hk CA on December 16, 1998 at 20:33:38:

My original post was in the thread, “Option a Pre-Foreclosure???”

In that post I suggested that they use an OPTION TO PURCHASE rather than a LEASE/OPTION. The reason for this is that you don’t want to lease the property. You only want to tie it up for a while so you can find a buyer.

You’re getting confused by several different techniques with similar names. Loosely speaking:

Lease/Option - You lease the property and you have the exclusive right to purchase it at some time in the future IF YOU WISH TO.

Lease/Purchase - Same as above but you ARE OBLIGATED to buy the property at some time in the future.

Option to Purchase - You have the exclusive right to buy the property at some time in the future but you don’t have to. The seller can’t sell it to anyone else during that time. You have no other rights to the property, such as a lease agreement.

Hope this helps.


#5

Re: L/O vs Lease Purchase?(win-win-win-win) - Posted by Jimbob

Posted by Jimbob on December 16, 1998 at 16:58:11:

Mil,

Here it is in a nutshell:

Lease/Option: Buyer leases the property with an “option” to buy it, buyer has the advantage as buyer can walk away from the deal if not saitsfied. Buyer will lose option money and all rent credits if buyer walks away.

Lease/Purchase: Buyer leases the property and negotiates a purchase and sale agreement at that time time. Buyer is committed by contractual agreement to buy the property even if buyer does not want to. If buyer walks away from the deal, buyer loses all option money, and rent credits. Buyer can also be sued by seller for specific performance (not following through on purchase agreement).

As you can see, buyer is in a better position with the L/O rather than the L/P.

Seller is in a better position with the L/P rather than the L/O because seller has more of a gurantee that a sale on the property will occur.

Does that help?

Jimbob


#6

Re: L/O vs Lease Purchase?(win-win-win-win) - Posted by MichaelR (NoVA)

Posted by MichaelR (NoVA) on December 17, 1998 at 13:49:50:

I think the argument here is that just because you call something an apple doesn’t make it so. It’s what the actual “object” is made up of that determines whether it is an apple or orange.

My understanding of the contractual issues of a Lease/Option vs. a Lease/Purchase is that they CAN be the same, or they CAN be different. It depends on how the contract is written. In other words, putting the words “Lease/Purchase” at the top of your contract does not make it so, if the rest of the contract doesn’t support it.

In a pure sense, however, an option is unilaterlal while a purchase is bilateral.

My main source of this answer is Bill Bronchick’s L/O course, which I do trust as an authority on the issue.

Michael


#7

Re: L/O vs Lease Purchase?(win-win-win-win) - Posted by Scott(AK)

Posted by Scott(AK) on December 16, 1998 at 18:38:18:

If your using the right contracts, Lease Option and Lease Purchase, are interchangable terms. The contract I would like to use would have a clause stating if the buyer failed to close escrow then the seller keeps all monies paid by the buyer as LIQUIDATED DAMAGES. Now that’s if I am buying.

When we sell…Well, let me say like my bud says. We don’t sell like we buy, and my buyers are not as lucky as I am when I buy form my seller. Get my point?

Wether the title says Lease Option or Lease Purchase it’s the body of the contract that determines what the parties agree to. Lease Purchase is a sweet little HOT BUTTON though.

Just my opinion,
Scott


#8

Re: L/Option vs L/Purchase(win-win-win-win) - Posted by MilNC

Posted by MilNC on December 16, 1998 at 17:31:49:

Thank you very much! WHERE OH WHERE is your
win-win-win-win post? I want to ask some other questions, but I want to refer to your post. Sorry
to trouble you, but I’ve tried and tried. Maybe you
could cut and paste it?

I’m trying to learn this in and out–who is committed
to what and for how long, who has what risk, etc. Your post
was a help, too bad I didn’t print it!


#9

Re: L/O vs Lease Purchase?(win-win-win-win) - Posted by Brad Crouch

Posted by Brad Crouch on December 17, 1998 at 21:55:48:

Michael,

I realize that a purchase contract with a “liquidated damages” clause can be legally construed as an “option” since the only risk to the buyer is the loss of his deposit.

The point is that to head the agreement “Lease Purchase” seems to be designed to make the seller “comfortable”, not realizing the impact of the “liquidated damages” clause.

In my view, this is actually misleading the seller, lulling him into a false sense of accomplishment. I guess some would say “caveat emptor”, let the buyer beware . . . and that he should know what he is signing, and that it’s not our job to teach him and run the risk of loosing profits.

Maybe some of these sellers have already been burnt at some time, and maybe that’s why they sometimes now are looking for “proof of funding”, making our lives more difficult and complicated, currently.

I guess this is mostly a philosophical point, but it bothers me. Are we using this term because we don’t feel up to the task of explaining the process in such a way so as to convince the seller? Are we using this misleading term because we really DO have an attachment to the outcome? Man! This “attachment” stuff gets pretty deep.

Is it really so bad to be “completely” upfront with the folks we deal with?

What say you? Am I all wet, or what?

Brad


#10

Re: L/Option vs L/Purchase(win-win-win-win) - Posted by Jimbob

Posted by Jimbob on December 16, 1998 at 17:57:32:

I dont recall ever writing a post called win-win-win-win but you can ask questions freely on this board and you’ll get answers from many people, myself included.

Fire away Gridley


#11

Re: L/O vs Lease Purchase?(win-win-win-win) - Posted by MichaelR (NoVA)

Posted by MichaelR (NoVA) on December 18, 1998 at 14:12:37:

Brad,

I agree with you on the ethical and philosophical issues. My response before was a purely “legal”, not ethical, response.

As you pointed out, it really calls into question our abilities to educate the people we deal with.

Michael