Please help...need ideas for first L/O - Posted by Lisa Vosburg

Posted by Ben (OH) on June 03, 2000 at 08:32:30:

What courses do you sell?

Please help…need ideas for first L/O - Posted by Lisa Vosburg

Posted by Lisa Vosburg on June 01, 2000 at 21:24:08:

Hello all!
Im ready to make my first offer on a house, I think. She is asking $165k, which is about 15% above FMV. I want to do a L/O, but I need some advice. First, there is a Realtor involved who has already stated that she does not like or endorse L/O’s. This is going to be a problem, Yes? I had an idea of paying 3% of the realtors commission as Option Consideration (I plan to live in the house), 100% credited if the option is excersised. Is this fair to all involved? The seller, realtor and ME?

This is what I plan to offer:
Purchase Price $140,250
L/O 12 mos with two 6 mos renewals
$800 each month (about $200 above fair market rent)
$500 Rent Credit
Option Consideration $4207.50 to be given to Realtor and then credited if option is excersised.

The idea of giving the consideration to the realtor is to try and sweeten the deal for her so that she may be more willing to work with the L/O idea. Is this a sound idea or is there a better idea? Please, any imput is greatly appreciated

Lisa Vosburg

Re: Please help…need ideas for first L/O - Posted by B.L.Renfrow

Posted by B.L.Renfrow on June 02, 2000 at 07:38:38:


Lease option offers are not ones I would typically make when there is an agent involved. As you noted, the agent - who has already made it clear she doesn’t like L/Os - will be nothing but trouble. And even if the agent can be convinced to take the 3% you intend to pay as option consideration, what about her broker? One of the most significant obstacles to doing a L/O on a listed property is the commission will eat up too much of your profit. Option consideration is something YOU should be collecting from your tenant/buyer…NOT paying to the seller! L/Os usually are much more profitable for the investor when you can deal directly with the seller, not when an agent/broker is involved.

Next, have you actually spoken with the seller to determine what their needs are? If the seller has a need for a large amount of cash immediately, a L/O offer will be a waste of everyone’s time.

I realize you said you intend to live in the property. In that case…if the seller has no immediate need for lots of cash…a better alternative would be to use your $4207 as a downpayment with the seller holding the balance. Of course, the seller would still owe the broker a commission.

There is really not enough information in your post to make a determination whether L/O would be appropriate…aside from the fact you don’t know if it would meet the seller’s needs. You would need to know things like the details of any underlying financing on the property, seller’s monthly payment, etc…info you’ll probably have a tough time obtaining with an agent in the middle.

Finally, I would recheck your figures regarding market rent. In my (rural) area, I get monthly rents of $600+ from my T/Bers in $50k properties. It doesn’t sound right when you say fair market rent is $600 on a property worth $140k.

Brian (NY)

Re: Several ideas - Posted by Lori Samson

Posted by Lori Samson on June 02, 2000 at 01:29:42:

One thing I would be concerned about is not so much the Agents commission but what will the seller want! If you request to be present when the offer is presented you can then determine who may be the one you need be negotiating with. The agent can’t do a thing but grip and complain about the delayed commission if the seller wants to do a deal with you.It is your right by law to be present when the offer is presented. If the seller is willing to give some of the 4200. you are willing to pay to the seller as option money then let the two of them work it out. Don’t think for a second that an agent can present a L/O and it sound even remotely like a good offer. You are going to have to be there!
BTW- If the market value is about 140,000, I can’t see paying that cheap of rent!In our area if a house is in that price range we would be paying about 1250.00 for rent. If you can get a 140k home for 500 a month I want to move there! The under laying mortgage would certainly be 1200 a month and… you get 200 rent credit! If you can negotiate a deal like that you need to be selling courses not me! I must be missing something in your example. Lori

Re: Please help…need ideas for first L/O - excellent post - Posted by eric-fl

Posted by eric-fl on June 02, 2000 at 21:55:41:

I was going to reply to this, but then I read your post and took all the wind out of my sails. I think you just about covered it.