Lease Option - Posted by Evelyn


#1

Posted by phil fernandez on November 09, 1998 at 14:11:44:

Evelyn,

This is excellent advice from Bud . You have many more questions to be answered here to have a successful transaction. Bill Bronchick’s forms are a must.


#2

Lease Option - Posted by Evelyn

Posted by Evelyn on November 08, 1998 at 21:10:23:

Hello out there,

I’m finally on my way to a lease/Opiton. I am very excited, and although this was not my first choice, it is actually much better considering the circumstances.

Here are some of the basics of the home:

Asking price: 239,900.00

Asking Interest: 8.00% (Due to small down payment)

Deposit: 2,000.00

Offering to pay 1st years rent upfront: 6,840.00

Pay towards down payment: 500.00 a month for 12 months

Will have an extra 12,000.00 at end of term

Down payment at end of Lease; 20,000.00

Interest rate: 7.00% (talked them down from 8.00%)

Questions:

  1. When do I bring in an inspector and/or appraiser?

  2. If I choose not to buy, I lose all deposits and monies that have gone towards down payment, right?

  3. Tenants apartment where we will moving into will potentially be giving us/owners a hard time. Whose responsiblity will that be on?

  4. Should I put a clause that if these tenants need to be evicted it will be at the cost of the owners?

  5. What do I do if the house is appraised at a lower amount?

I thank you all for your advice, and look forward to hearing from you.

Evelyn


#3

Re: Lease Option - Posted by Bud Branstetter

Posted by Bud Branstetter on November 09, 1998 at 12:24:15:

Sorry Evelyn but your post was confusing to me. I take it that you are L/Oing for yourself to live in. My comments below are directed that way
Asking price: 239,900.00
Asking Interest: 8.00% (Due to small down payment) ARE THEY GOING TO OWNER FINANCE?
Deposit: 2,000.00 OK
Offering to pay 1st years rent up front: 6,840.00 WHY? Below market rent?
Pay towards down payment: 500.00 a month for 12 months WHY? A bank would have trouble with this because rent is below market.
Will have an extra 12,000.00 at end of term
Down payment at end of Lease; 20,000.00 Is that 8K more or 20K more?
Interest rate: 7.00% (talked them down from 8.00%) They can only get 5% in CD?s and mortgages are 6%
Your not going to default if you have 20K into this are you.
Questions:

  1. When do I bring in an inspector and/or appraiser? Inspect the place before moving in.
  2. If I choose not to buy, I lose all deposits and monies that have gone towards down payment, right? Correct unless your contract states otherwise.
  3. Tenants apartment where we will moving into will potentially be giving us/owners a hard time. Whose responsibility will that be on? If this is a town home make it contingent that it will be vacant.
  4. Should I put a clause that if these tenants need to be evicted it will be at the cost of the owners? Per above.
  5. What do I do if the house is appraised at a lower amount? If they are owner financing you only need to get it appraised if you are not comfortable with their representation of value. If a new mortgage will be required the lender will require an appraisal. You could add a clause that that will be the sales price or you get all option money back.

To protect yourself you want your option recorded. You want all documents signed by them and held in escrow. You want the insurance to have you as an additional loss payee. You may want a performance mortgage recorded to be able to clear judgements against them if necessary. You need to get some leases/option forms like Bill Bronchick?s and run them by your attorney. Don?t do this blindly.