seasoning issue

[Gary (MO) 0]

Mandomin:

 

I'm trying to follow this:

 

rq200 was originally asking about a sandwich lease: You obtain 3K from T/B upfront as option money. Seasoning issues come up 12 months later because you haven't been on the title more than a day by the time the T/B is ready to close. You then are asking 10K as an "assignment fee" from T/B?

 

Do they agree to this up-front? Are you doing this because you want the T/B to not be able to purchase and keep the option money? I don't understand why you would risk the deal?

 

Gary

[Mandomin 0]

Gary,

 

The purchase price of $210k was agreed to in the beginning. My delima is just the opposite of what you may be thinking. I desperately want my T/B to be able to purchase. My point is that I feel that having to come up with $3k cash option consideration then a year later needing another $5.8k cash for the assignment fee may be a problem for the T/B. It all boils down to my concern that the T/B may not be albe to finance the entire amount when doing an assignment rather than a double closing because the lender won't recognize the assignment fee as part of the purchase price.

 

We may be seeing the deal differently.

 

This is a sandwich lease. I lease the property from distressed seller with an option to buy for $200k. I then lease the property to T/B with an option to buy for $210k. I charge an option consideration of $3k. I give $100 rent credit per month (I would actually give more but lets work with this figure). I market a rent-to-own to someone who may need some time to rebuild credit. In one year, ideally the T/B would finance $205,800 (provided lender would approve the LTV). I forsee that lender will have issue with the title not being "seasoned" so I've structured the deal to be an assignment rather than a double close. Lender says to T/B "I see you are buying the property for $200k and giving Mandomin $5.8k for the right to purchase at this price. We can finance the $195.8k ($200k-Rent Credits-Option Consideration) for you but not the $5.8k." This is the problem I'm anticipating.

 

Hope this clears things up. Thanks for your input so far.

[Gary (MO) 0]

Ahhh!!! I think I understand your scenario now. It really boils down to what you "name" your profit; is it an "assignment fee" or is it simply the purchase price to your T/B - right?

 

If you did a CA with the seller you could still collect the 3K option money up front and negotiate with the seller that anything you can sell the property for above his asking price would be yours at closing. That would make the seasoning issue go away and would not give the lender anything to squawk about as far as assignment fees. $210k (minus option(to you) and rent credits(to seller?) ) would simply be the price of the property.

 

Thanks Mandomin,

 

Gary

[Mandomin 0]

Thanks Gary. Good thing we have this arsenal of strategies to work with. I have a feeling a good lender would have one or two of his own to address this situation.

[MichaelC 160]

Thanks Gary.  Good thing we have this arsenal of strategies to work with.  I have a feeling a good lender would have one or two of his own to address this situation.

Mando, I'm glad you said that. Truth is, when the deal dies, everyone loses, including the mortgage brokers and the lenders. Everyone should be on the same page and motivated to get the deal closed. If you find you are working with individuals who don't share this way of thinking, finding someone else who does. Let them earn your business and, when they have, reward them with your loyalty.

[Gary (MO) 0]

Thanks for sharing that thought Michael, I had not looked at a mortgage broker in quite that light. I can see where they too would have a stake in the deal and SHOULD be very interested in making it work.

 

Gary