Posted by Carol on January 19, 1999 at 17:37:38:
I understand where you are coming from. The broker with whom I was speaking stressed the necessity of recording either the option OR the agreement for deed, but perhaps a notarized document might do the job with some lenders. The recording she discussed was IN ADDITION to the proof of payment.
Of course, as a buyer…
Anyway, thanks for all of the commentaries.
Carol
Rent credits for lease option deals - Posted by Nick DeMatteis
Posted by Nick DeMatteis on January 18, 1999 at 13:20:37:
When doing a lease/option deal you can use a Mortgage lender who will allow you to use a substantial amount of the rent credits. (Not just the amount above rent market value).This can be a powerful tool when putting your lease/option deals together! I’am looking for a mortgage lender who is licensed in New York State. please contact me by e-mail.
Thank You. Nick D.
Re: L/O -to add to the ‘confusion’… - Posted by Carol
Posted by Carol on January 18, 1999 at 15:39:06:
… was just talking with my mortgage broker who told me that, in many cases, if an option is RECORDED, and receipts showing the 12 months’ payments are provided, that the new financing can be considered a REFI, not a purchase. How cool. Perhaps everyone else knew this, but it was a revelation to me.
Carol
Re: Rent credits for lease option deals - Posted by JPiper
Posted by JPiper on January 18, 1999 at 13:54:52:
Nick:
Just want to make a small point.
Lenders do not have a problem with your use of rent credits, including rent that may not exceed fair market rent. However they may only allow it to be applied against the purchase price…not against the down payment. Big difference.
Yes, applying rent credits against the down payment can be a powerful tool if you have a lender who permits it. And since you do, why are you advertising for a lender??
JPiper
Re: L/O -to add to the ‘confusion’… - Posted by Ray Richardson
Posted by Ray Richardson on January 19, 1999 at 10:21:35:
Interesting. Bronchick recommends making darn sure your tenant-buyer DOESN’T record the option, since you don’t want them to be able to make any claims to an equitable stake, or to be able to cloud the title. This refi business makes that decision a little more complex…
-Ray Richardson
Re: L/O -to add to the ‘confusion’… - Posted by Nick DeMatteis
Posted by Nick DeMatteis on January 18, 1999 at 19:46:05:
Carol,Not many of us are aware of this product. Some of the best deal makers are just being introduced to this powerful tool. This is my first day on this message board and I am looking for a lender who is licensed in New York. Do you know of someone who can point me in the right direction. Thank you Nick D.
related question - Posted by Ray Richardson
Posted by Ray Richardson on January 18, 1999 at 14:30:46:
On a related topic: I’ve heard it said that one can offer L/O’s at a premium to FMV, say 5% over. Now, if the market doesn’t appreciate during the year that they lease, doesn’t having an exercise price in excess of FMV make it hard for them to qualify? Is this little mark up fairly standard operating procedure?
-Ray Richardson
Re: Rent credits for lease option deals - Posted by Nick DeMateis
Posted by Nick DeMateis on January 18, 1999 at 14:12:18:
JPiper
This is my first time posting a message!
I only know of a company in California called WMC Mortgage that does it. But I was told they are not licensed in New York. Good Luck! Nick D.
Re: L/O -to add to the ‘confusion’… - Posted by JPiper
Posted by JPiper on January 19, 1999 at 10:52:20:
The key here is not going to be recording the option. The key is going to be having proof of timely payment.
I have had buyers who have refinanced a number of contracts for deed, a similar type of transaction. These contracts were unrecorded. They were however formally written by an attorney, and we had clear proof of payment of the prior 12 payments.
This is a policy that may well vary by lender. Understand that the policy is attempting to make sure that the deal was really done 12 months ago. Recording is not the ONLY way that proves it.
Personally, I would not record an option as the seller.
JPiper
There Are No Guarantees… - Posted by JPiper
Posted by JPiper on January 18, 1999 at 14:48:57:
Ray:
I always price my lease/options above the market?.normally 5-10%?.or whatever I think I can get.
Here?s the thing. Who knows what the value of the property will be a year or two down the road?? There are no guarantees. The value could be higher or lower than my option price. If the market value is close, I?m willing to bet the appraiser will bring the appraisal in.
When the tenant/buyer wants to exercise his option, it?s up to you if the property doesn?t appraise. How bad do you want to sell?? Are you willing to lower the price?? Are you willing to extend your lease/option. You?ve got lots of choices?there are no rules.
Just in case you?re worrying about the buyer?..consider another factor. What happens if prices have a big drop?? This has happened in the past you know?? Do you think your tenant/buyer will exercise?? Unlikely. Therefore you will still own the property and will have experienced the brunt of a price drop. Actually the buyer of a property via lease/option has some advantages?and that?s one of them. They can walk away.
What happens if prices have a big rise?? Again, the buyer benefits because you have to sell at a lower price. This happens periodically too.
My suggestion is to price above the market to some degree?.and then deal with the ?what-ifs? when they arise.
JPiper