Re: Time to play “Who wants to be a criminal?” - Posted by Michael Morrongiello
Posted by Michael Morrongiello on February 28, 2000 at 11:33:11:
I assume you allow your “buyers” to get into a home under some sort of lease purchase or lease with an option type program? Along with allowing them into the home and paying you rent the promise is there to these “buyers” that at some point in time in the future they can elect to excercise their option and complete the purchase of the home from you.
Invariably a purchaser who is “buying” under this type of scenario will want to fufill their purchase from you and obtain legal title to the property in their name. It seems to me that the Hard money lender or any lender for that matter is fufiling these “buyers” wishes.
While it may not be morally or ethically right how these lenders go about their business they are assisting these individuals in completing the purchase from you. If a buyer makes a decsion to borrow money at 16%, then that is THEIR decsion.
I don’t feel you can prevent one of your “buyers” from completing the purchase of your home simply because they must borrow funds at a no more than a prescrbed interest rate. What if another peanut farmer gets in the white house again and interest rates rise above 12%, would this mean that your “buyers” cannot complete the purchase of the home from you?
That may violate restraint of trade issues.
I hold many mortgages where I collect payments each month. If I get paid off then I have to “work” to invest that cash once again and lose the income that the mortgage generated to me.
It seems you are concerned about being paid off early on these lease purchase agreements whereby you lose the “spread” in income each month. Perhaps you can build some type of “pre payment penality” that would be triggered in the event the “buyers” choose to exercise their option to purchase earlier than 12 months, etc. This would have the same effect as a prepayment penality inserted in a mortgage loan made by a lender . It would discourage individuals from paying off their existing agreement until they had the most advantageous circusmstances.