Posted by Ernest Tew on September 17, 2003 at 06:14:36:
It isn’t necessary that the option price be paid in cash when the option is exercised. Typically, we agree to finance the mobile home for the remainder of the lease. The buyer need only notify us that they are exercising the option and pay the sales tax on the option price (which is lower after having made a number of payments).
The title is then transferred to the buyer.
Question re: structure of note vs lease/purchase - Posted by Lynn
Posted by Lynn on September 14, 2003 at 11:38:10:
I’m back with a simple question. When you sell on a note, downpayment is due at closing and then the first note payment is due 30 days later or on a chosen date just like when I get loan at the bank, correct? Is this how most of you are doing the notes?
When you sell using Ernest’s “lease” and “option to purchase” agreements. Option Money is due at the signing of the lease. Is the first lease payment due at that time (or when the tenant/buyer takes possession) just like in a rental situation? Since it’s lease, do they pay ahead like rent, or in arears like a loan? How do most of you structure these?
If in the lease/option situation, the lease payment is made up front like a rental–and then the person exercises the option later, and you carry that amount on a note, does the monthly payment then become due at the end of the month. (The tenant/buyer gets to basically skip a payment during the transition??) I’m just wanting to make sure I fully understand the proper procedures and treat someone properly and fairly.
Structure of note vs lease/purchase - Posted by Ernest Tew
Posted by Ernest Tew on September 17, 2003 at 06:09:44:
Lynn, it would be better to collect the lease payments each month in advance. But, keep in mind that an agreement can be anything that the parties agree to–as long as no laws are violated.
There are several good reasons for doing a net lease with an option to buy: The customer is able to defer and reduce the sales tax, if any, with all their cash payment being applied toward the cost of the home. That, in turn, lowers their payments. Since the home isn’t sold, the owner isn’t required to pay taxes on the entire gain in the year of sale as would be the case when selling for cash or on terms. And, the owner can take depreciation deductions to offset some of the rental income.
Question re: structure of note vs lease/purchase - Posted by Bart
Posted by Bart on September 14, 2003 at 15:25:02:
If they simply exercise the option the balance is due. If you convert from a LO to a note then yes, in theory they would skip a lease payment and the 1st note payment would be due in 30 days.
re: structure of note vs lease/purchase - Posted by Tony-VA/NC
Posted by Tony-VA/NC on September 14, 2003 at 14:07:36:
Break it down to simplicity.
A lease is a lease and as you guessed (like a rental), the rent is paid in advance (for the following month).
If you are selling, the Option should also be a second document. Even if it is not, the Option is a separate contract right.
When they exercise the option, they simply pay you the agreed upon price granted in the option. They would be liable for the rent until that date.
Tony