having all my forms

[chitown83 0]

I am trying to put my first deal in place. I have read a good amount on L/P. The one thing I would like to make sure of is the paperwork end of it. Could some one tell me what documents I should carry with me when visiting with sellers. I have a L/P course but am a bit confused as to when each different doc. should be signed/notarized/recorded. If a veteran could please tell me when and where each doc. should be executed. Thanks.

 

Jim in Chitown.

[MichaelC 160]

Hello, Jim, and welcome to The Naked Investor. We're glad you joined our community, and I'm sure it will be a mutually rewarding experience.

The paperwork you need will be determined in large part by the deal itself.

For example, I'll assume you are setting up a sandwich lease type deal. You would need a Residential Lease with Option to Purchase Agreement for use between you and the homeowner. This Agreement, of course, would be appropriate to allow you to sublet and/or assign the deal to a tenant/buyer. This does not require notarization, though it can be if the parties involved prefer to do so.

You would also want a Memorandum of Option to protect your interest in the deal. This document does require notarization in order to file with the County. In addition to the Memorandum, you might use an Affidavit of Equitable Interest, or a Performance Mortgage to protect your interest in the deal. These, too, need to be notarized to be recorded with the County and act as a cloud on the title.

Those are the basic documents you would use to secure your deal, Jim. Depending upon the specifics of the deal, there may be another doc or two. Don't over think this stuff. Get out, market like a madman, make offers like one, too. Things will start to fall in place and you'll have a much clearer understanding of the process, once you actually do a deal from start to finish. There is no education like experience.

Good luck! Stick around and let us help you.

[-Tony- 0]

Jim,

I agree with Michael on the preformance mortgage here is part of a post from another site I found before this one

 

(although I would love to take credit for this it is not my post)

 

There is a very simple solution to minimize this risk.

When you sign a lease option with a seller, and the terms are laid out, there is a second document you can use to secure your position.

This is called a "Performance mortgage".

This is a lien on the property that states you and the seller have an agreement, and you each must perform according to that agreement.

Should the seller default, in any way, like by refusing to close, then you can simply foreclose, and remove the seller from the picture, and being able to deliver title to your end buyer.

 

In the scenario you described above, a performance mortgage would prevent the refinance from going thru.

When the lender would go to check title, they would see that the property is encumbered by a first, as well as your performance mortgage.

This would make their refinance stop dead.

 

A performance mortgage is also a great tool for closings.

If you record one, and then decide to minimize closing costs, or eliminate possible title seasoning issues, you can assign your option with the buyers, to your sellers, at close.

Before closing, the title company, attorney, or escrow agent will check title, and see your performance mortgage.

They will contact you for a payoff.

This payoff will just so happen to match the difference between your purchase price with the sellers, and your purchase price with the buyers.

So, you get paid at close, as a lien holder, in exchange for releasing your lien on the property.

You save closing costs because there will only be one close.

 

A nice neat way to get these done.

 

The performance mortgage often scares new investors, because they wonder how on earth they will present all these documents to the sellers for signing.

This is wasy, you just incorporate your performance mortgage as "Just part of the paperwork for the deal, a docuemtn for public records that assures each of us the other will and must perform according to our agreement."

 

Works like a charm.

So, are your fears unfounded?

NO!

Absolutely not!

 

There is risk in this business, but we are in luck, the law is on our side and affords us the ability to use several different methods to minimize those risks.

 

hope this helps I like the closing part, except it sounds like your t/b would now how much you are making

Tony