Posted by Jim FL on May 02, 2006 at 01:30:30:
"I have never leased optioned a home, but own numerous homes and apartment buildings. Needless to say, the lease option looks like a good tool to quickly control assets in a minimal amount of time. Nevertheless, my question is as follows:
If I find a house that I can lease with an option to buy, how do I gauruntee (or reduce my risk) that the current owner actually continues paying his/her mortgage? Is this just an inherit risk?"
This is why, should you for some reason decide to enter into a sandwich lease option situation, YOU send the payments directly to the lender.
Should there be a difference between that and your agreed monthly payment to the seller, send them the difference.
“Likewise, do you all recommend having this “option” recorded at the county clerks office for legal purposes?”
Nope, however, to be honest, I no longer do lease options, except when selling.
I’d rather own than merely control.
A personal choice though.
Rather than record the option, I’d use the performance mortgage, along with a deed in escrow.
Something whichever lease option materials you are using should cover.
If not, get something from here for a few bucks to learn the details…Bronchick would be my reccomendation.
“I would imagine that if the current owner is in dire straights, the smartest thing to do would be to somehow get them to sign the deed over to me. How is this process done? I have never done this. Can someone walk me through these steps?”
I agree, a much better idea.
The thing is, you may not like the answer to your question.
No, we cannot walk you thru a deal like this here, step by step.
We can help you along the way.
The thing is, while buying subject to the existing financing is a GREAT tool to use, and have, it does need to be done correctly.
Details are important, so having some foundation/education to use a reference, is your best course of action at this point.
They offer some materials here on that as well…I’d also make the same reccomendation, same author, he covers that in course materials as well. (Subject to that is.)
Do yourself a favor as well, and read the archives here as best as you can.
Search subject to steps, and how to…that should help you get a good idea of how it works,making any educational materials you study a little easier to digest and understand.
“Once the property is “controlled”, and I re-sell / re-lease option the property, should this be recorded as well?”
Nope, I don’t, and won’t.
However, check local laws and make sure you follow them.
No point recording an interest in a property for your buyer, when they have none until they exercise and buy.
Your lease and option paperwork need to be tight and address that issue…as well as a slew of others.
“The only big caveat I see in the lease option game/scenario is that the current owner may not make his / her payments-leaving me out in the dark. Can someone pls comment on this? thanks”
Hopefully the simple solution above works for you.
Just send the payments to the lender yourself.
Make it your company policy, and stick to it.
The only other scenario would be to hire a third party contract collection company, or attorney to manage the deal, and make the payments…and uneeded expense in my opinion, and merely a feel good feature for wary sellers. (meaning the investor did not do a very good job of developing trust in the first place.)