Lease Option - I being the leasee - Posted by Rich

import · May 18, 2000, 2:13pm

Posted by Lori Samson on May 20, 2000 at 01:16:01:

Hey, don’t be so hard on him! If this is a property you are wanting to move into yourself you can offer a lot more and be willing to pay a market value. If that’s what you are WILLING to do. Would I do it… possibly. I don’t think you should rule out lease optioning it. Yes, if you could get the deed I would but if they are not needing the money they aren’t going to walk away from all that equity. I think you would be better off if you could lease option it for as long as you can if you can lock in the sales price and have a good rent credit, that beats a mortgage anyday! I have perfact credit and I lease optioned my current house for about 6 months before I got my loan. I wanted as much credited to the sales price as possible before I made the loan. If you are renting now, you have nothing to lose in leasing with the option to buy. If you were talking investment property I would sound a little different. Lori

import · May 18, 2000, 2:13pm

Posted by Rich on May 18, 2000 at 14:13:09:

I just found a property that a retired couple has been trying to sell for 2 years. They spend 1/2 of their time at a vacation home, and the other 1/2 at this property. They want to sell this home and move into their vacation home full time. They are willing to ‘owner finance’. They own this home free and clear. I want to propose a lease/option agreement where I actually move into the home. I want to create the L/O that is best for me. I don’t want to pay a ‘downpayment’. I want to pay monthly payments that 100% of which will come off the agreed upon purchase price if and when I exercise my option. Is there a site where I can find such a contract? Thanks in advance.
Rich

import · May 18, 2000, 4:11pm

I wouldn’t even do the deal. - Posted by JohnWe (NoCA)

Posted by JohnWe (NoCA) on May 18, 2000 at 16:11:06:

I’m not sure what your goals are, but if you’re trying to buy this property as an investor, I would probably advise against it. The main reason is that I don’t see much motivation with the seller. You HAVE to have a motivated seller to get a good deal.

With that said, if even after that I still wanted to do this deal, I wouldn’t go for the L/O right away. I would try to GET THE DEED! Much better situation if your buying. Getting the deed doesn’t mean forking over a large downpayment – or any downpayment at all, but you do need a motivated seller.

Even with all that said, if you STILL want to do this deal, I would check this URL:

http://www.legalwiz.com/forms.htm

I’m pretty sure Bill has an EXAMPLE form that you might want to take a look at. Regardless, you’ll want to run ANY form by your own attorney.

BTW, good luck trying to get 100% option consideration. If they’re motivated enough to give you 100% option consideration, then they’re motivated enough to give you a deed.

Hope that helps.

import · May 18, 2000, 7:04pm

Kind of motivated. - Posted by Rich

Posted by Rich on May 18, 2000 at 19:04:09:

Thanks for the comments. They don’t need the money. They’re retired and pretty well off. They just want to sell in order to liquidate this particular property. I don’t think they’re going to give it away, however. I don’t know what you mean by GET THE DEED. How do you get the deed? They said they would like to get 15% down and finance the balance at 7 1/2% for 30 years. I was hoping to move in with no money down, and do a lease for one year until I could round up enough for the downpayment. If you can fill me in on the GET THE DEED part, I may be able to think in another direction.
Thanks again.

Rich

import · May 18, 2000, 9:30pm

Re: Kind of motivated. - Posted by JohnWe (NoCA)

Posted by JohnWe (NoCA) on May 18, 2000 at 21:30:01:

Not very nice, Howie. Rich, don’t pay attention to comments like that. We all have to learn from somewhere.

Get the deed basically means get title to the property. In other words, I’d rather own a property than lease it. Your problem seems to be, if the owners sell it to you, then they want a down payment that you don’t have.

You still need to figure out what their motivation is. WHY do they need the 15% down? Do they need the money? If so, what are they going to do with it? Maybe they just want to feel like you have something in the deal, and they don’t feel comfortable with a “No Money Down” deal. Don’t offer suggestions to them, but in a round 'bout way you need to know what they want. Don’t just accept “We need 15% down”. Dig deeper.

In this situation, I think I’d pitch a subordination. Here’s how it works. Let’s say they’re asking $100K for the house. You said they’d take $15K as a down payment, and carry $85K at 7-1/2%. Okay, tell them this…

“I’d be willing to give you $30K cash, would that work for you?” (Appeal to his sense of greed. At this point his mind is thinking about what he could do with $30K), He’ll probably agree. You say,

“The only way I could make this work, however, is if you agree to a subordination clause. Are you familiar with this term?”

He’ll probably say no.

“Basically it means that you are allowing me to take out another loan on the house, and your $70K loan would then be a 2nd mortagage instead of a 1st. Does that sound okay with you?”

If the seller agrees, then you get a new 1st mortgage for $30K, and give the money to the seller. The 1st mortgage is a no-brainer, and any bank will do that loan since it’s only $30K in 1st position.

If that doesn’t work, try to get the seller to agree to a Land Contract with no money down. I don’t have time to explain what that is, but it’s a better legal position than a L/O.

Hope that helps.

Good luck!

import · May 18, 2000, 7:14pm

WTFAYNs !!! - Posted by Howie B

Posted by Howie B on May 18, 2000 at 19:14:17:

15% !!! WTFAYNs! or what? I’d pass on this and find a motivated seller. Also if you don’t understand what “Get the Deed” means, ahhhhhhhh, I would not be trying to do what you’re doing. You need to do some educating of yourself first!

Howie B

import · May 18, 2000, 8:17pm

GCBUYRH!!! - Posted by Rich

Posted by Rich on May 18, 2000 at 20:17:29:

If I knew everything like you do, I wouldn’t need to be asking the question in the first place, would I Einstein?