Posted by Phillip on December 20, 1999 at 09:43:50:
I strongly suggest that you consider buying the Bronchick’s Lease Option Course all of these answers are to be found there and more. I am one of his students who is learning lots, and lots of stuff about the legal CYA techniques when doing L/O’s.
I will take a crack at answering your questions… Approaching the owner is a process that involves “educating” the seller to the whole concept; a soft sell approach. L/O will not work for a seller who has to have all of their money at one time.
You can try and get the broker to work with you on the deal with the understanding that at some point he will receive his commission. Something later is better than nothing at all. L/O can be a win-win situation for al concerned; the seller is free of the financial responsibility of coming up with a second mortgage payment, you as the buyer received cash up front (option money), and when the property sells one to two years down the road, the agent can get his commission.
Bill Bronchick’s course includes legal forms that spell this out. The lease and the option are two separate transactions. They should not be combined to stay clear of legal problems. The key is to locate a tenant buyer who with a little help will be purchase ready in a year or so, especially at that point they would have created a sizeable layer of rent credits and hopefully a good payment history. There are mortgage brokers out there who can then pick up the “baton” and move the buyer toward closing. I am told that Countrywide Mortgage is very favorable toward lease option situations.
I am not an expert but hope that this information can be helpful to you.
Questions to the Seasoned Investors on Lease Options - Posted by Jim LaVerdi
Posted by Jim LaVerdi on December 19, 1999 at 10:57:56:
Question #1. Is it ok to submit a Lease Option offer to a seller that has their house listed “For Sale” or should I ask the seller first if they are willing to go that route, or should I only target the ones that say they are interested in a Lease Option?
Question #2. When working with a listing broker on a property that is “For Sale” and a seller decides to go the route of Lease Option, or subject to, the broker always seems to be concerned as to where there commission is coming from. Well where will it come from? If I am putting very little or no money down and the seller was planning on paying the brokerage fee with money received from the buyer, then where will it come from? I surely wouldn’t want to pay a commission on a property that I didn’t really buy! What to do here?
Question #3. If I include in my Lease Option “Addendum” that Closing will take place when a suitable tenant is found to occupy the property but in no event before (any given date). Does this give me an “out” say if I can’t find a tenant to pay the money needed to operate in a positive cash flow, even it goes past that given date? I will also inclue that the seller allows me to show the property to prospective tenants prior to the closing. I am lead to believe that the date thing is not as important as the finding tenant part.
Question #4. Is this a true statement> A buyer can take title to a property when buying “subject to” even if the loan has a due on sale clause, the only requirement is sellers approval.