Warning for Lease Option Investors - Posted by Rob
Posted by Rob on May 27, 2000 at 15:39:48:
I recently had taken a lease option on a property and sunlease optioned it to my tenant buyer. As is my practice, I made my tenant buyer go to a lender to make sure that he had a snowballs chance on getting the loan in the next 12 mos.
The 12 mos. rolled around and the tenant/buyer got prequalified for the loan. Note that the tenant buyer was a C buyer at this point. There was plenty of loan to value in the deal since I am in a nicely appreciating market.
We were set to close and when the lender got the appraisal back noting that I was not the recorded owner, they stopped the deal. I gladly showed them my recorded memorandum of option and the deed signed by the owner that was held in escrow and they still refused to do the deal.
I have done a few of these deals never having a problem with this. My attorney tells me that he has seen the same thing happen in a handfull of transactions with buyers who are sub-prime borrowers.
We all know that the lender had no basis for pulling this deal but the fact is that they did not loan the money.
The moral to this story in my mind is to get a performance mortgage recorded so that you show up as a lien holder.