Lease Option or Warranty Deed To Trustee? - Posted by Brad

Posted by Maurice (Ca) on June 03, 1999 at 15:19:04:

I think you make great comments Jim, whether new or not & as a fellow newbie it’s great to hear your opinions.

I know it’s been touched on before on this board, but for some reason I just cannot get contract for deed through my clouded brain…I mean I understand l/o pretty well & wholesaling, but deed for contract continues to puzzle me. So maybe if some of you would do this hypothetical situation, it might help some of us.


You are talking to an anxious seller who advertised in the paper: “must sell now. flexible, will consider l/o. asking $100,000”.

You find out that he’s already been transferred & has listed the property for 6 months unsuccessfully & owes $95,000. Fair market is right around $100,000. He’s not behind & he already has another house that he’ll have to start paying a mortgage on soon. His p.i.t.i. is let’s say $800 monthly (remember this is hypothetical) & the fair rent for this property would support up to $950. He’s asking $5,000 down is very open to l/o; so how would you bring up contract for deed: the benefits to the SELLER & why he should do this.

Also, if this seller is willing to do this, how do you write it up? Is there closing? etc. I know, everyone’s gonna say: get a course. And trust me, I will be slowly building up on my library. But with the 2 courses I do have, none goes into detail on how to set it up.

I’m sure other newbies out there wonder this: especially with Legrand saying “go for the deed first”…so now, we just want to know the tactics.

Thanks all & Jim, keep up the good comments!

Lease Option or Warranty Deed To Trustee? - Posted by Brad

Posted by Brad on June 02, 1999 at 20:17:12:

I recently cam across a chance to lease option, or possibly get a deed from a gentleman who is highly motivated to get rid of his house. All he wants is to walk away, no cash in hand. He has already expressed interest in the LO, but I have always been told it is better to get a deed. My only concern is that his credit may suffer as a result and hinder him in rebuilding his credit (He had a bankruptcy 1 year ago). He is currently 1 payment behind which he is making up this month. There is a 5000 second, and an 81000 first. FMV is between 90-94k. I have a 6:00 apt with him tomorrow! I think I should do the lease option, simply because his brother co-signed, and he is worried about his credit. I know I can swing the payments, but won’t the loan show on his credit report still? ( I plan on taking the loan subject to with a beneficial interest in trust if I go for the deed) My gameplan is this, I want him to know the ins and outs of his credit choices with the warranty deed, and I know what the implications for lease options so I will explain those also. I am going to make the deed a little sweeter than the lease option, making me a winner either way. Any other suggestions? Think I can go a different route?

Re: Lease Option or Warranty Deed To Trustee? - Posted by Bud Branstetter

Posted by Bud Branstetter on June 05, 1999 at 21:59:42:

You bring up the bankruptcy. If he did file and has not been released he has no authority to convey the property to you. It has to be approved by the court. You can get a deed but it may be worthless. Get a contract for the sale also. Then start investigating the title situation. We used to not file that deed until we checked title on foreclosures but with the land trust it can be done without implicating you.

So how did the meeting go?

Get the Deed - Posted by Jim IL

Posted by Jim IL on June 02, 1999 at 22:02:02:

Recently I lost a deal due to my procrastination. (still kicking my own rear end!)
I found a guy who was in the same sitaution as yours.
We talked on the phone and I decided to “call him back the next day” and discuss it further.
He had agreed on the phone to go either route. (L/O or “subject to”)
Well, to make a long story short, I called him the next afternoon, and found out that another investor got the deed (that morning), and I got SQUAT!
The old adage of, “you cannot steal in slow motion” applied BIG time!
(I still have NOT told my wife about this little “oops”!..hope she doesn’t log on here later)

So, next time someone tells me that the home they are selling, which is current on payments, and has a little equity, can be “GIVEN” to me, I’m running to them and getting it signed.

So, get the deed, and then you can do with it as you please.
You can then L/O it or sell it “seller financing”, with NO qualiftying and a nice down payment, or many other things.
Just get it signed over to you ASAP!
Honestly, the deal I let slip away, the seller was a little concerned about his name remaining on the loan, but with his high interest rate, either my new buyer or T/B’er would have refied quick anyway, to make the payments smaller. And this explanation is what got him to agree to the “Subject to”.

So, don’t do what I did,
Jim IL

P.S. And even though I feel lowsy in losing this deal, I did learn from it, as I do in all my failures.

Re: Get the Deed - Posted by Erskine

Posted by Erskine on June 02, 1999 at 22:33:11:

Question: If a property is signed over by a current owner to a new buyer does it trigger the due on sale clause? Why is the deed more valuable than the l/o arrangement?

Re: Get the Deed - Posted by Jim IL

Posted by Jim IL on June 02, 1999 at 23:02:35:

Remember, before reading the rest of my response, that in dealing with this type of a transaction, I am a newbie.(Heck, I’m a “Newbie” to all of REI)
But, it is my understanding, both from reading the actual “due on sale” clauses in mortgages, and from posts here, nothing “triggers” a “Due on sale” clause.
The due on sale clause is an “option” that the lender may use.
Most say that the lender “may at its option”, require the note paid in full.
To many, getting the deed may not be more valuable.
It is just an opinion.
My opinion is that by getting the deed, you have more control, and more options opened to you for an exit plan. You will no longer have to worry about the seller having any say or control at all, the house is yours, and the loan his.
Plus, IF the lender calls the loan due, then you have the deed, and will be able to refi a lot easier.
These were just my opinions, but that is what this board is for.
The free excahnge of ideas, and opinions.
And, since others are quoting Rayrick, I’ll do the same, but not verbatim, (cannot remember his words anyway, just the idea)
I am a newbie and may not know what I’m talking about at all. I was just offering up my thoughts and how I might handle the situation.
Take care,
Jim IL