MichaelC

Congratulations, Steve. Now use the profits to gas up that big, thirsty vehicle you've been cruisin' around in.

Can you give the specific citation in the law that states a Broker is required to assign a contract? I've been here doing these deals for 15 years and have never used a Broker to sign off on my deal. Hell, I've done deals with attorneys, both as sellers and as tenant/buyers, and no mention of this has ever been mentioned.

I'm not mhmi, but I'll kick in my two cents anyway. I always pass over Agents, Brokers, management companies, etc. The bulk of our business is going to come from dealing direct with homeowners. Yes, those Realtors have no problem posting their ads in the FSBO section, often not noting in their ad they Realtors. Frustrating, sure. Flag the bastards and move on.

Everyone wants to date the pretty girl, Daniel.

24 months should give most t/b the opportunity to get their financing in order. But if this property is truly out of their price range, they need to find out now so as not to waste your time and their money. Bottom line: they need to sit down with a professional who can tell them what their prospects are for obtaining a mortgage.

$30K will cover a lot of round trips to the property. But if the deal gets done, it's a good deal nevertheless. I'm assuming it's a 12 month lease? If these folks are as excited as you say, they ought to run to some mortgage brokers to see how they can get financing. Good luck, Daniel!

Hello, Daniel. First question: why are you selling it for less than it's worth? I'm asking because you seem to be having second thoughts about doing so. As for the prospective t/b, what about extending the deal to give them more time to save for additional down payment when they apply for their mortgage? Have they sat down with a few mortgage brokers to go over various scenarios and possibilities? Knowing they love the property and are willing to put down $10K, it's time for everyone to put their heads together and find a way to make this work.

I agree, Daniel. There are other deals with less baggage if these homeowners won't cooperate.

Gary, just got off the phone with a friend/colleague of mine who, in my opinion, has forgotten more about lease options than most of us know. He also has a law degree. He confirmed what I have been thinking and saying all along. Dodd-Frank has almost zero effect on what we do here. The above you linked to is a combination of common sense, (good thing), and speculation, (bad thing). No one knows for certain how any new law plays out until there is a legal precedent. Until that happens, until a case goes to court and there is a legal ruling, I see no reason why I shouldn't continue doing business the way I have for almost 20 years. And unless someone can point me to the specific citation within Dodd-Frank that makes rent credits illegal, it'll be business as usual for me. Call me Barney, but I'm a happy dinosaur. As for keeping all the option money, no, you aren't being greedy. That's our goal in every deal we do. But I don't think you can have a document, such as a Fee to Release the Option, that will make any homeowner agree to giving you all the option money. Some, make that most, are going to want a piece of the pie. Can you blame 'em? I offer them an amount equal to one month's rent as nonrefundable option consideration. Most accept and the deal gets done.

Hi, Gary, and welcome to The Naked Investor. First, be skeptical about much of the "stuff" on the 'net. It's often erroneous. That said. . . 1) It's true that option money needn't be reported as income until the option is exercised. But it's also true that option money is required to be reported as income when the option expires. 2) Don't get too stressed over Dodd-Frank. It is targeted more at seller financing than lease options. Rent credits come into play because a judge with an imagination could rule that they are a form of financing. An easy work around is to have a seller concession in lieu of the rent credits for the same amount. No big deal. With all parties wanting the same result, the property being sold/purchased, and an attorney and/or title company who is cooperative, the deal gets done. 3) Can you link to that part of the law? I'm not familiar with it. 4) Not sure what you are asking here, Gary. Can you clarify, please?

Everything Rex said is right on, particularly the above. If a lender is unable to collect payments from these folks, what is the likelihood you'll be able to, Daniel? Years back I leased a home back to the homeowner and it was a problem from day one. I understand the potential is there, but the aggravation and stress aren't worth it. Rexy, it's been a while. Good to see you around! Hope all is well up your way.

That's creative real estate, Steve. Do what you must to get the deal done and do it within the confines of whatever legislation needs to be worked around.

Call it what you want. But at the end of the deal, if both parties want the deal to be done, it will be. Any half-witted attorney can play with the numbers and the paperwork to make the deal fly to everyone's satisfaction.

It's unusual that a traditional mortgage from a major lender would incur a prepayment penalty, especially one of that size. It's not as if these days homeowners are trading in an 11% interest rate loan for one that charges 4%. Neither Fannie Mae, nor Freddie Mac, nor FHA loans incur prepayment penalties.

What does the lender consider to be "breaking the term"? Surely it can't be as simple as paying off the note early.

Mike, you are correct regarding the option consideration. You write in the amount you are paying the homeowner. The amount of option money the t/b pays is noted on the CA Assignment Agreement. I am working my CA deals to typically include a 50% rent credit.

Daniel, is that the norm with Canada lenders? Is that law?

Hello, Brian! Good to see you here in the low-rent district. Thanks for sharing the info. Dodd-Frank has many folks scared and confused.

. . .or the new USA.

Hi, Tom, and welcome to The Naked Investor. Yes, you can definitely do lease options in NC, including sandwich lease options. The Realtor is wrong. Lease options are not illegal in NC, or any state for that matter. Fellow board member Steve is in NC and has been working lease options deals for years. He may come along and chime in, or you can contact him directly.

I think there are any number of ways to get to the same end. Problem with the way you described is finding a t/b willing to pay you a fee that doesn't apply to the purchase. It would need to be one heck of a deal for the t/b to bite.

The tax assessor's office can't be counted on to determine FMV. They have their own arcane and random formulas for assessing taxes. Doesn't compute in the real world. You need to use comparable properties that have sold in the past six months for an accurate assessment. Hopefully with some digging around you can find the necessary sales data. As for sandwich deals, they come with their own risks and rewards. The potential for greater profits is there, but so is the potential for greater risk. Problem tenants, vacancies, meddling owners, etc. Weigh the pros and cons and make an informed decision as to the best approach to take.

Feel free to PM me if you want. My initial reaction is I don't see much of a spread here for you. If the FMV is $220K and she owes $200K, there doesn't appear to be much she can do to make the deal attractive for you. Do you think you can market the property for, say, $220K to prospective tenant/buyers? That's the only way I can see this having a chance to work and make it worth your time.

My first thought in this is why on earth would they put down $52K option consideration on a $140K house? Why not just buy it outright?? Any number of ways you can go with these folks. What about assigning your deal over to them for your equity? They pay you a $20K assignment fee, step into your shoes and then deal direct with the homeowner. Speaking of the homeowner, where does he stand with all of this? Is he willing to do anything creative on his end?

Dustin, the first thing that needs to be determined is what realistically will the market accept for this property? The homeowner paid $220K last year. Was that FMV, a great deal, a ripoff? Once today's true value is determined, both for selling price and rent, then we can see what options we have. Also, do you know anything about her mortgage? What does she owe and her monthly PITI? And, absolutely, I would definitely be up for working with you on this. Doing a deal in Ohio as we speak.