AngelMG

Rich08, Did you ever get anything figured out on this? AngelMG

We have been in a lease with an option to buy for over two years. The seller filed bankruptcy about 9 months ago. We have continued to make our payments directly to the lenders bankruptcy dept. We would like to able to sell the home now and are wondering how this bankruptcy will effect closing. Thank you, AngelMG

Yes, I totally agree, Michael. My partner & I have really been working on our presentation. We have started getting referral letters from our sellers and tenant/buyers just as protocol now. Angela

Hey, Everybody! Have been having some great highs and disappointing lows lately. We had a L/O set up - were supposed to be doing the paperwork yesterday. And the ex-husband who is also on the title called to say he was not going to do it. His ex-wife who called us still wants to do it, but he is not cooperating, now. The only thing we have signed with them right now is a Purchase Agreement. Is this enough for us to try to flip it to a buyer that can get financing or should we try to do straight option paper work with them? Or how big of a problem would it be if we only did the paperwork with her for the L/O? This is a general problem that we have been having. When we have a delay in signing paperwork, either because we need to get notary service or because they want to talk to their attorney or other 3rd party we have been losing a lot of these deals. What can we do to get the deal now so that we don't lose some of these great deals?! Thanks, Angela

I'm considering doing a short sale on a property I had planned to take subject to. I got the short sale package from the bank and have a question about one thing that it says: Short Refinance should have a loan total value (LTV) of at least 80% Do you know what this means?

When we lease/option we ask the seller to add us to their insurance policy as additional insured. What should we tell the seller to say to their insurance company if they ask why they are doing this or what relationship we are to them? Angela

Mark, I recently asked an attorney about this. I am in Alabama and my attorney said the POA could be used for all documents accept the warranty deed. He said you would need to mail that to him and have him sign. I also want to ask you about how you handle the land trust situation. In our first subject to deal it has been a real issue getting all this trustee stuff straight. We have been having someone else named as trustee, other than ourselves, when we create the trust. Who do you have as Trustee on the Deed to Trustee that you record? Angela

Some more activity on this deal. Actually we already recorded our deed on this house. Can we still work on the short sale? What kind of documents do we need? We already have the authorization to release from the seller. Actually, one of the sellers, the husband called us today to say he wanted out of this deal, that he was going to borrow the money from his brother. We did not know what we were going to do at this point. Now, he has since called us back and said the deal is back on. But, what would, should we have done if they wanted to back out now. Also, we said we would try to get them about $3000 so that they could move out and get into an apartment. What would be the best way to handle this?

Hmmm, I really like that part. They will have a lien against the property, though, when my T/B goes to get financing, right? Or, an even better option in this case, what if I get my retail buyer? They will get financing and have to pay off the mortgages first and then I get the balance. How do I get that $12,900 or would I lose that in this case. Would I need to negotiate a short sale or release of lien with the mortgage company of the second mortgage first? We are going to try to get it changed to a personal loan for the sellers too.

Thanks for the feedback, Option 8 and Kennon. I like the idea of getting them to pay the second. It is a mortgage company on the 2nd so I don't know if they would convert it to a personal loan, but if we kept it as a 2nd how would I know if they would pay? And does it matter on a 2nd? What can the mortgage company really do if it doesn't get paid?

This is how our first subject 2 deal has played out. This is another person that called off our signs. She said she was 3 - 4 payments behind. I set up an appointment. She called and cancelled, saying her and her husband were going to try another avenue, to sue the insurance company. She called back about a week later and said this wasn't working either and they would still like us to buy their house. Here are the numbers. It is a 4/4 1/2, colonial house close to a historic area. It does not need much work. Market Value: $250,000 - $260,000 1st mortgage: 173,000 2nd mortgage: 12,900 7,800 to catch up the 1st mortgage We knew about the 1st mortgage and called the mortgage company to find out the amount needed to catch up the mortgage. When we had the title checked we found out about the 2nd. What can we do about the 2nd? Could we go ahead and record our deed and do a short sale on the 2nd? We are familiar with the concept of a short sale, but do not have the documents to do it. Is this an option to do the short sale if we are keeping the 1st in place. Our intentions are first to try to sell it outright fast. Second, to find a T/B and L/O. Foreclosure proceedings will begin on Nov. 21. Thanks.

Michael, We have made this mistake of leaving the documents with people. Sometimes it has worked out fine, they have still come back to us, but one person we think did exactly that and we should have known better because they were rental properties we were looking at with her.

This is how we got our first L/O deal. We put out 170 we buy houses signs around the city. We got tons of calls. Signs definitely work. We are going to end up getting 11 to 12 deals from those signs. So, the seller of this first house called from our sign. The owners were a couple that was living miles apart. The wife had already moved back to Illinois where they were from and where her daughter lived with her father, her ex-husband. The husband was still here working his job. They needed someone to take over their mortgage payments so they could afford a new house payment in Illinois. The wife was currently living with her parents. Once the husband gets to Illinois the wifes daughter will be able to come live with them. They were very motivated to get their house sold! We negotiated the deal with them the first night we looked at it, to take over the balance of their mortgage and their exact payment. They had one prospective buyer that they wanted to check with before they signed the paperwork. We let them do that and they called us a few days later. We signed the paperwork and got keys to the house. We had two group showings for the house. We found our buyers in the second showing, which was 10 days after we did the paperwork with the sellers. We celebrated when we got the house and celebrated when we got the buyers and we will continue to celebrate as we get more and more! Angela

You are so right, Michael. We should have given them the option to extend the option What do you say to these questions: Another issue we are questioning is if we should have a rent increase each year of 10%? And should we give a rent discount if they pay their rent early? Also, do we need to have a rental security deposit which is separate from the option deposit money? AngelMG

Should we be doing a Standard Purchase and Sale Agreement with the T/B along with the Option to Purchase Agreement and the Rental Agreement? AngelMG

Michael, Yes, we did receive 5 yrs form the seller and we gave the tenants 4 1/2 yrs. They know they can get financing within 3 yrs, but when we negotiated the terms to get up to $800 per month rent we let them have a longer term. Another issue we are questioning is if we should have a rent increase each year of 10%? And should we give a rent discount if they pay their rent early? Also, do we need to have a rental security deposit which is separate from the option deposit money? Thanks for responding so fast, Michael! Angela And, Bill, I'll be happy to do that for you. I'll write more about my overall experience tonight after our appointment with the T/B's.

Mark, What about the notary in this case? They probably won't back date it. Angela

Main Question: When do we get the option money? We showed the house to the family on Mon. night, they paid $50 for the appl. fee and $500 as an earnest money/binder deposit to hold the property. We are ready to do the paperwork with them tonight and they will be moving in Dec. 1. The option amount is $2000. Should they be paying this tonight or on Dec. 1! And here is our profit in our first L/O deal! $15,000 on spread between our purchase price and their's They have a term of 4 1/2 years, we have 5. We have a monthly cash flow of $150, with $80 going toward their purchase. And they have $2500 for upfront money. Thanks for your help with this deal Michael and Troy. Angela

We did our first subject to purchase today. We did form a land trust for the seller and then had them transfer beneficial interest to us. We took the Warranty Deed to Trustee to be recorded after our title company does the title work. Here are the questions we had after going through the paperwork. Our trustee is out of state. Is it Ok if he signs the Declaration of Trust document a few days after all the other forms were signed by the sellers? Also, are there any other documents we need to record other than the Warranty Deed to Trustee? Thanks, Angela

Yes, the contract was already signed. We had not recorded it yet and we told them this. They decided to back out because they are going to try to get an equity loan against it. We told them they would not be able to after we recorded it. Our second and better deal is a done deal! Yeah!!! We will be showing it to 3 prospective T/B's tomorrow! Angela

Michael, Thanks so much for your help! This first L/O deal ended up not going through. We took too long to get it recorded and they ended up backing out. We were not sure about the area, whether we really wanted property there, but, now we have had so much interest from T/B's there that we wish it had gone through. It was a bigger house for the neighborhood and in really good shape. But, oh well, live and learn! And we suspect they will come back to us again, anyway. We have signed up another L/O deal since then. This one is even better. A definite great neighborhood and we were able to negotiate the same deal, to take over their mortgage payments of about $650/mo and their mortgage of $75,500. We can get rent from $750 - $850/mo and will sell it for $95,000. I'm going to respond to your questions below. We are probably mixing together the subject to and L/O. What we have agreed to do is pay their remaining mortgage balance whenever we exercise our option. And to pay their monthly mortgage payment of PITI until then. And this amount being applied to their mortgage. We are even sending the payment directly to their bank. Where should it be written in that the balance due at closing is the remaining balance of the mortgage? Or should this be an exhibit with an amortization chart? No, we didn't put any type of clause in this. We forgot. Now, we have started to write in our offers "This offer is contingent upon Buyer locating and accepting a qualified T/B of Buyer's choice for this property." In the option agreement we are using it says that an extension will be accompanied by "so many $'s " of option money when you renew. Do we have to pay option money each year to have legal consideration or just when this option is started? We had been fretting about whether our options should be in a land trust. We understand more about this now and will have to do more work on setting up an LLC or corporation. We will have many more questions about this later, I'm sure. For now, we will put the options in our personal names. We are working on doing subject to's now, as well. We have several people that have called and are behind on payments. We think that we understand now how to form a land trust for the seller and then transfer the beneficial interest to us. Thanks Michael and Thanks Troy Ross for the help and support! Angela

Michael, Thanks for the help! I have been so busy making deals that this is the first chance I had to get back to you. Yes, she had already agreed to those terms over the phone so I had actually rushed over there while you were typing back to me. I did exactly what you suggested. I did a lease option with them for 48 months for the amount of their payment and the purchase price to be the balance of their note with 100% of the monthly payment going towards the purchase. Our payments start Dec. 1. I did know that I was making mistakes on the paperwork going in and after doing it I realize I made even more mistakes. My mistakes: 1) I did not put it in a land trust, we put it in my partner's personal name. We do not know exactly how to put this in a land trust. 2) When filling out the Option to Purchase Agreement in the section about the extension of option period I filled it out in a way that really reads as a two year option instead of the 4 year period that they agreed to. 3) I don't know if this is incorrect or not. Again, in the extension part it asks for a $ amount that is given to the Optionor for additional consideration. I put nothing in this blank. 4) When we pay an option consideration of $10, are we supposed to just hand that to the seller. (not that I'm worried about $10 5) Oh, the other thing, I didn't make it contingent upon finding a tenant buyer. Nothing too devastating for the first L/O deal! Angela

We can take over the loan of $38,000. The monthly payment is $374 with taxes and insurance. We can get $475 - $500 in rent. We plan to L/O 1st choice, rent it out as a 2nd choice. We would try to sell for $49,000. We have not done either a L/O or subject to before. We have learned a lot about these methods, but realized there was a lot we didn't know when it came time to do the paperwork. We would like to take the route that is best, and also the lowest costs for us upfront. Thanks, Michael. Angela

Can you, please, give me some help in making this deal. I have people willing to sell their property either L/O or subject to for what they owe. I don't know which way to go on this. I am not sure this is a property we would necessarily want to keep. My other concern is the upfront costs that we would have with doing it either way. We need as little costs on our part as possible. It is an ok deal as far as their monthly payment. They have insurance and taxes escrowed into the mortgage now. And do we need to pay for a full title search if L/O or is a preliminary search enough? Any help would be appreciated. Thank you, Angela

Michael, Yes, I was warned about this from my commercial mortgage broker mentor, but he said that if I make it clear that I am acting only as an investor agent, not a realtor, mortgage broker or an attorney, and write an agreement that describes it as a consultation fee for the buyer and we would be hired by the buyer. Angela