Need help with lease-option - Posted by John

Posted by Erskine on December 26, 1999 at 09:47:39:

Is it a common procedure for sellers to request a copy of the buyer’s credit report,especialy when the buyer intends to locate a T/B for the property?

Need help with lease-option - Posted by John

Posted by John on December 26, 1999 at 04:17:15:

I’ve found a nice little house, appraised last year at 104k, and the seller has a 85k mortgage (and is willing to take “85 or 90k”). She’s motivated (this is a second mortgage) and willing to do a lease-option. My plan is to move into the house and clean it up. My question is: I have a recent bankruptcy…that’s why I’m looking for a lease option! When we looked over the house with her, she said if I was interested in doing the deal, fill out her “application” so she could do a credit check. I know what a credit check will say… This is a sweet deal that should net us 20k or more in two years (when we plan to move up or to simply hang onto as a rental or lease option it out). Should I just give her my offer and lay the credit problem out on the table, or try to skirt around it? I was full of spit-n-viniger going in to meet her (thanks to this board) but felt like I lost control of the deal when she mentioned that ‘credit’ word. Help please…

Re: Need help with understanding your question - Posted by Michael Murray

Posted by Michael Murray on December 27, 1999 at 18:38:43:

John
I don?t think I understand what you are asking here. Your post says:
? I’ve found a nice little house, appraised last year at 104k, and the seller has a 85k mortgage (and is willing to take “85 or 90k”). She’s motivated (this is a second mortgage) and willing to do a lease-option.?

  1. Are you trying to buy the house from the person holding the second mortgage??
  2. Are you trying to buy the house on a straight lease/option for your own ownership??

Then your post says:
?This is a sweet deal that should net us 20k or more in two years (when we plan to move up or to simply hang onto as a rental or lease option it out).?

  1. Are you negotiating a lease/option with the right to sub lease?
  2. Are you sure you are understanding the process of leasing with the option to buy with the rights to sub-lease to your tenant/buyer with the option to buy from you?

It sounds like you are simply leasing with the option to buy for yourself. If that is the case, then of course she will want your credit report and will probably not allow you to sub lease. However, if you are planning to lease to a tenant buyer with the option to buy from you, while you buy from the seller at the same closing, then you need to be sure to have that language in your contract. Also you should disclose that intent to the seller and stress the point that it is your tenant/buyer?s credit she should be more concerned with, not yours.

Could you please clarify?
Thanks,
Michael

Re: sweeten the offer - Posted by leslie

Posted by leslie on December 27, 1999 at 12:12:24:

Dont fret over the credit issue. And don’t hold out for the low price. I would suggest you give her the higher of 85-90. Don’t skirt the credit issue, let her know your credit has flaws and be open. Most people expect this from l/o buyers. You might have to offer her more money up front due to the credit issues, but try to get a longer lease term in exchange. Sounds like you have one or two years so far.

good luck

Re: Need help with lease-option - Posted by chris

Posted by chris on December 26, 1999 at 08:54:27:

Just continue on with her. You don’t have to say anything about it. She may not even bring it up again.

If she does a credit report and has a problem with this, just be honest and say that you have learned your lesson and have gotten your finances together. The nice thing is that you can’t refile for bankruptcy for some time. Remind her of that. Which Chapter is your bankruptcy? If you took the route where you have a payment plan with the creditors use that in your favor in the discussion.

A little extra money in her pocket on the way in can help things also. Have you ordered a copy of your credit report from all three bureaus lately? I would do this to look for inaccuracy which is common.

Good luck and don’t worry too much about this.

Re: Need help with understanding your question - Posted by john

Posted by john on December 27, 1999 at 23:37:26:

We are looking to occupy the house ourself, using a lease-option. I’m offering her 2k option consideration, which would more than cover her expenses if she had to evict us. I do want the “right to assign” clause so that we can sub-lease if we HAD to. Our plan would be to occupy for the first year or so and do some re-hab, then sub-lease.
To complicate things further, we’ve had several other responses to our “want to lease-option” ad…some other very good deals. Seems that most are military folks from the local base that buy, then get transferred. Our only intent at first was to find a house for ourselves. Anyone in the South Puget Sound area that wants some leads?
I don’t fully understand the lease-option & sub lease-option, that’s why I started hanging out here :wink: I was simply looking at the equity we could build in a 36 month lease-option…and wanted the option or clause available to sub-lease.