gfranz

That sounds great. Now I feel a lot more comfortable. Thanks for your help. Gary

Here's what I had on Question #3: http://www.deangraziosi.com/real-estate-forums/contracts-and-offers/151725/how-does-dodd-frank-act-affect-investors Special Notes on Lease Options: 1) A lease option between a seller and an investor (non-owner occupant) is not restricted under Dodd/Frank; 2) Technically, since a Lease Option between an owner and a tenant/buyer does not convey title, it is not a sale, which means it does not fall under the regulations of Dodd/Frank; however, if either the IRS or a court determines that it is an installment sale to a consumer borrower, it would be deemed a loan. To avoid such designation, and avoid lawsuits: a. Use Separate Documents for lease and option, executed on different dates, and with no reference to each other. You can charge option consideration with the option agreement as it is a legal requirement of an option, but do not accept option consideration in installments; b. Keep Term of lease to tenant buyer under 3 years; c. Offer No Purchase Credit/Rent Credit on monthly or periodic payments d. Major repairs and maintenance are the responsibility of the owner—do not assign these to the tenant/buyer; e. Complete some basic lease option underwriting and pre-qualification i. Conduct a Credit Check; ii. Confirm Employment; iii. Confirm Income; iv. Recommended: Request information on all Monthly Loan Payments, Other Loan Payments, Other Mortgage Obligations, and Alimony and Child Support Payments; v. Run a Debt to Income Calculation, including their monthly Lease Payment. 3) Suggested: For any arrangement that could fall within Dodd/Frank legislation, have borrower complete a Uniform Residential Loan Application, such as the FNMA 1003, (Reference:https://www.fanniemae.com/content/guide_form/1003rev.pdf ) or modify such a form for your own usage—then use that information to research borrower’s repayment capability per the instructions above. As for question 4, I remember reading (somewhere) that an investor didn't want the seller to get any of his TB option fee, so someone wrote back to charge a "fee to release the option" and that way the seller couldn't get any of the option fee or consideration. So I just answered #4 myself (use one or the other). Do you have a way of keeping the seller from getting any percentage of the option fee you charge the TB? or am I just being too greedy? ;-) Thanks, Gary

I’ve been hearing a lot of stuff on the net lately. Anyone have any answers to these questions for me? 1) Option down payment from buyer is not taxable under IRS Rules (?) until the tenant-buyer exercises the option. If he doesn’t exercise the option, is all that money forever tax-free? 2) Rent Credits can be considered installment payments and can trigger Dodd-Frank - are rent credits dead? I've been reading about concessions here on the boards. How do they work? 3) Making the tenant-buyer responsible for repairs can trigger Dodd-Frank - This puts the responsibility back to the seller. No longer an advantage to the seller? 4) Is a “fee to release the option” used in addition to the option down payment? Thanks to everyone who can help me answer these questions.