Mr. Reed says that lease optioning is morally wrong. - Posted by charlie Mccullough

Posted by danny on December 21, 1999 at 09:31:11:

It is my understanding that Reed thinks advertising your product is morally wrong. he believes if it is good, people should be able to find on their own. He also has football info on his site. This diminishes his credibility in my view. He should have a seperate web site for his football stuff. He isn’t very business savy for a guy with an MBA from Harvard.

Mr. Reed says that lease optioning is morally wrong. - Posted by charlie Mccullough

Posted by charlie Mccullough on December 18, 1999 at 08:35:53:

Mr. Reed says l/o is wrong because 90% of the time the leasee doesn’t get ownership of the house he is leasing. And the leasee is financially worse off than when he started. His chances of qualifying for a conventional loan are worse too. (He proabably could qualify for an unconventional loan.) Is Mr. Reed’s assesment of lease options correct?

Re: Mr. Reed says that lease optioning is morally wrong. - Posted by AL

Posted by AL on December 21, 1999 at 21:31:57:

CHARLIE,be careful of MR. REEDS writings, I know he feels he is helping people in real estate investing Ive done 7 lease options.5 exercised their option and 2 pulled out(their own choice).Ive read MR.REEDS bio and order a property management tape set from him about a year ago.A lot of so called "gurus" MR. REED does not reccomend Ive used Ive been full time investing 2 years now total time 5 years and I control more units then MR. REED has acquired in his twenty years(I beleive its twenty years.)His tape set and many of his recommendations are out dated,his advise is for the safe route,for the masses.

Step one: find unsophisticated seller - Posted by Potash

Posted by Potash on December 20, 1999 at 19:03:51:

all the responses you have recieved so far have focused on the tennant/buyer. In my opinion the most morally reprehensible part of lease options is apparent when lease option sandwiches are utilized. In most circumstances only a naive seller would allow you to sub lease (typical sub lease: irresponsible dirtbag couple with three dirt bag kids and a dirt bag dog) his property while he remains liable for the underlying loan. Most Sellers do not ask for nearly enough option money to cover their risk.

Re: Mr. Reed says that lease optioning is morally wrong. - Posted by Steve-Atl

Posted by Steve-Atl on December 20, 1999 at 13:38:17:

I don’t understand why it could be morally wrong, especially if you disclose fully and select tenant/buyers that have a reasonable chance of qualifying for a loan by the end of the term. We won’t select someone if it appears there is no hope.

We always look for someone that has a reasonable chance and also get them together with our mortgage broker, either before or right after they move in. If they can’t qualify by the end of the term, its usually because they chose not to do what was necessary to qualify.

Re: Mr. Reed says that lease optioning is morally wrong. - Posted by Mark (SDCA)

Posted by Mark (SDCA) on December 20, 1999 at 11:52:53:

Not at all. But I would advise disclosure in a few areas:

  1. The option consideration is non-refundable. If they don’t exercise, then they do not get it back.
  2. The rent credit goes to reduce the purchase price NOT to increase their down payment.
  3. You will do everything you can to help them get a loan but you are not a lender or a mortgage broker and you do not make guarantees in this area.
    Personally, I would only write a LO if I WANTED my T/B to exercise. Otherwise, I would do a straight month to month rental agreement. But I am not responsible for my T/B actions. For example, is it morally wrong if the reason they cannot qualify is they were late on their credit card payments or their debt ratios are too high because they just bought a new boat? No. That is a conscious decision they made. The boat was more important than the house.



Re: Mr. Reed says that lease optioning is morally wrong. - Posted by chris

Posted by chris on December 20, 1999 at 03:43:24:

There is nothing unfair or deceitful about these. Sometimes a property cannot meet the FHA criteria for financing. An investor will allow a handyman to live in the property as a tenant under a lease option while the place is being rehabbed by the tenant. After rehab. the property meets FHA standards and the tenant can get his financing through an FHA loan. If the tenant was getting rent credits to apply towards a down payment they are even further ahead. Both sides need to get something out of the deal.

According to Reed, every investor is looking for a little old lady to rob. There are rip off artists, but every investor is not one. I have even read posts about banks getting rid of their REO properties by lease optioning.

Re: Mr. Reed says that lease optioning is morally wrong. - Posted by Bill K. (AZ)

Posted by Bill K. (AZ) on December 19, 1999 at 13:41:40:


I don’t know where Mr. Reed gets his figures, but I personally know 2 successful L/O investors who successfully complete a lot more than 10% of their deals. And, regarding the moral issues, just ask the seller who couldn’t sell any other way, and the L/O buyer who couldn’t buy any other way, how morally wrong they thought it was. For something that Mr. Reed calls “morally wrong”, I’m sure that you’ll find more smiles than you will frowns.

I hope this helps.

Bill K. (AZ)

Re: Mr. Reed says that lease optioning is morally wrong. - Posted by Stephen P. Simpson

Posted by Stephen P. Simpson on December 18, 1999 at 22:26:28:

Well Id say it depends on the buyer, and how smart they are. You have to be smart enough to get a good rent ratio ( like 50% goes toward the option )plus any improvments you make. You must record the option in public records, and now the important thing, IF YOU DECIDE NOT TO BUY THE PROPERTY AS THE OPTION COMES DUE------SELL IT. Put an add in the paper and sell it. This option after lets say 5 years is worth 20,000.00 (your accumulated 50% rent payments for the down)this is your money. Sell it for lets say 15,000.00. DONT JUST WALK AWAY

Most Sellers… - Posted by Bill K. (AZ)

Posted by Bill K. (AZ) on December 20, 1999 at 20:49:38:

…that opt for a L/O do so because that’s the only way they can sell their home. That’s your typical “motivated seller”. I don’t know of ANY seller who wouldn’t prefer “conventional” methods of selling. However, for one reason or another, these “conventional” methods haven’t solved the seller’s problem(s). Hence, many of them are not in a position to dictate terms or demand much of anything. That’s not greedy. That’s not morally wrong. That’s not taking advantage of an “unsophisticated” seller. It’s called problem solving.

Do some investors not explain the disadvantages of L/O’s to a seller? I’m sure. Does that mean that most sellers who sell via L/O are “unsophisticated”? Hardly. That’s life!

Bill K. (AZ)