Equitable Interest

[AmyB 0]

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Amy,

What were the terms between the HO(A) and you ? Doesnt the option term end with the end of the lease usually ? How could you have your T/B[C] in that house after your contract with HO(A) expired ? I'm not sure what you don't understand. Yes they are both expired, but the HO(A) is only now saying they don't want to sell. I didn't think it's expiring would affect closing.

This scenario could be possible if you had a lease of say, 2 years with your HO but your option term was only for the 1st year. That way after your first year, your lease with HO(A) would continue, but your option would end. Is that how you did it ? Did you lose your option money to HO(A) ?I didn't have to put up any money.

Also if you have SLOed it, doesnt your T/B[C] get a one-way right to purchase the house as per your option contract, if T/B decides to exercise the option ? Can you tell your T/B[C] that you cannot sell the house because the original HO(A) decided not to sell anymore ? a one way right to purchase? I don't understand that. Technically their agreement expired too, so I wouldn't have a problem getting out of it. I bet the seller will let them stay or close with them for more money.

Please let me know. I am a little bit confused. Maybe my understanding of this whole thing is wrong.

thanks

- Ardy

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[AmyB 0]

happyardy, sorry I tried to highlight my answers with blue and it didn't work...if you can't read my answers between the [blue] notes, let me know.

[Gordon Holtner 0]

Gordon,

 

Just curious as to what forms you are using/intend on using for CA's?  I am in Ontario and I also bought Matt Bowman's courses and forms.  I know that Doug uses forms that are more like a Land Contract with assignment due to the power of sale process here.  Doug...would these forms not give the t/b equitable interest in the property even if they defaulted?

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Krusty

 

I was going to used Matt's all in one L/O document but since I didn't understand that it gives the TB Equitable interest. I would not suggest that you use Matt's forms for the reasons that Adam gave here earlier. I thought that maybe this was just a trick that gurus use to sell their course like the spin they put on the due on sale clause but I'm glad I was corrected by someone who knew better.

 

Gordon

[Gordon Holtner 0]

West Coast Girl

 

I 've tried to give Matt the benefit of the doubt I think that he acts a little self righteous

at times giving me the impression that his way is the only way with his 8yrs of real estate experience. Doug proved to me that Doing LPs are not illegal or acting without a realtor licence. I think Matt is just bent on selling his courses. I also think that he has been turning some boards into nothing more than personal ads for self promotion.

 

Gordon Holtner

[MichaelC 160]

Also, it is impossible in today's market to ask some to take a discount and then tell them that they have to wait 3-5 years for their money. That is just plain ridiculous (around here anyway, in this hot, hot, Vancouver market I am experiencing). I've tried working this for over a year now with absolutely NO LUCK!

Nor will you. Different market conditions require different approaches and techniques. This is definitely not a one-size-fits-all business.

WestCoastGirl, I don't know Matt Bowman, nor am I familiar with his materials. But let me respond to the issues raised...

1) First, it isn't the seller who needs to get financed. It's the buyer. How hard is it to pick up a phone and speak to a few mortgage brokers? There is also a wealth of information available online. I don't see ignorance or the financial process as being a major stumbling block to having a deal closed. Just as we seek motivated sellers, there are also motivated buyers. And if someone is serious about exercising their option and buying a house, you can be sure they will make the effort to do what needs to be done.

2) We have discussed this "acting as an agent" issue mucho times. It just ain't so. The way we set up the deal we are acting as principals, assigning our interest in the deal. We are not Realtors, nor are we brokering without a license.

3) The equitable interest argument is another old saw that we have discussed numerous times. Again, I base my belief on my personal experiences, and those of many others I know. Including a few attorneys I know, who also invest in real estate this way, and even a few who have used my agreements.

No need to take my word for all of this, though. If you spend any time here, you'll find many fellow members who are doing the very things we discuss daily, and no one to my knowledge has been jailed yet.....well, except for Jason and Bev, but that's an ugly story that need not be told here.

I need to feel all warm and fuzzy that I am doing the right thing here!

Warm and fuzzy is what I'm all about, girl. You've come to the right place.

[West Coast Girl 1]

Also, it is impossible in today's market to ask some to take a discount and then tell them that they have to wait 3-5 years for their money. That is just plain ridiculous (around here anyway, in this hot, hot, Vancouver market I am experiencing). I've tried working this for over a year now with absolutely NO LUCK!

Nor will you. Different market conditions require different approaches and techniques. This is definitely not a one-size-fits-all business.

WestCoastGirl, I don't know Matt Bowman, nor am I familiar with his materials. But let me respond to the issues raised...

1) First, it isn't the seller who needs to get financed. It's the buyer. How hard is it to pick up a phone and speak to a few mortgage brokers? There is also a wealth of information available online. I don't see ignorance or the financial process as being a major stumbling block to having a deal closed. Just as we seek motivated sellers, there are also motivated buyers. And if someone is serious about exercising their option and buying a house, you can be sure they will make the effort to do what needs to be done.

2) We have discussed this "acting as an agent" issue mucho times. It just ain't so. The way we set up the deal we are acting as principals, assigning our interest in the deal. We are not Realtors, nor are we brokering without a license.

3) The equitable interest argument is another old saw that we have discussed numerous times. Again, I base my belief on my personal experiences, and those of many others I know. Including a few attorneys I know, who also invest in real estate this way, and even a few who have used my agreements.

No need to take my word for all of this, though. If you spend any time here, you'll find many fellow members who are doing the very things we discuss daily, and no one to my knowledge has been jailed yet.....well, except for Jason and Bev, but that's an ugly story that need not be told here.

I need to feel all warm and fuzzy that I am doing the right thing here!

Warm and fuzzy is what I'm all about, girl. You've come to the right place.

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Michael,

 

No, he didn't mean the Seller's getting the financing. He meant the T/Bs. He was referring to the Seller's not knowing how to get them financed.

 

I told Matt. No probs. I will help the sellers with that too (I have my mortgage brokers who also specialize in L/P already lined up personally).

 

Also, I explained to Matt, that I would still be acting as Principal. I have explained all the Agent thing to him.

 

Again, I said to him. Listen, it is EXACTLY like a SLO (the kind that you sell and teach to people). The only difference is that there is NO RISK involved for me. I get in and I get out. I am actually providing win/win/win situations. Everyone WINS. The Seller. The Buyer. And me!!!

 

That's when he started to point out all these "points" to me.

 

Again, like I said, I did not pay much attention to his nonsense. It makes no sense since he teaches this stuff himself. Again, I don't know what his problem is.

 

Anyway, I just needed reassurance that my head was on straight and that I hadn't misinterpreted anything incorrectly (I don't want to go to Jail, Mikey) as Matt suggests that I have.

 

So, thanks for getting back to me so quickly and for clearing these "issues" up.

 

Cheers,

 

WCG!

[MichaelC 160]

(I don't want to go to Jail, Mikey)

The Big House ain't so bad. Martha Stewart came out ten pounds lighter and with a smile on her usually dour mug.

[happyardy 0]

happyardy, sorry I tried to highlight my answers with blue and it didn't work...if you can't read my answers between the [blue] notes, let me know.

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Amy,

I couldnt see the blue font etc but could figure out where your answers began and ended since they had a [/blue] tag word preceeding them.

I am a novice to the LOs etc and there could be flaws in my understanding. So please bear with me. Let me know if my understanding is wrong.

SLOs are basically lease-option followed by sub-lease option.

Please let me know if my understanding of the definition of “option” is incomplete.

An option is the right to buy a property. It is a unilateral or one-way agreement wherein the seller obligates himself or herself to sell you the property, but you are not obligated to buy it. So, it is a 1 way right to purchase. Right?

Can a seller refuse to sell his house when the buyer wants to exercise his/her option? I don’t think so. Let me know if I am wrong.

If your T/B (3rd party) had decided to exercise his/her option before the contract expired, the HO (1st party) would have had to sell it, right?

I mean, under your option contract (2<-->3) you (2nd party) couldn’t have refused to sell it to T/B (3rd party) and since you (2nd party) wanted to exercise your option (1<-->2), your HO (1st party) couldn’t have refused to sell.

So the thing that happened in your case was that your T/B (3rd party) didn’t make a decision to exercise their option before the term ended, right?

And since your contracts have now ended, your HO (1st party) might let them (3rd party) stay or close with them for money as you have said.

Am I getting it right ?

Also, you said you didn’t have any option money put up but if you have taken option money from your T/B, then you would be keeping it now.

Usually what happens to the rent credits Are they forfeited too ?

 

Thanks

- RD

[Doug Pretorius (ON) 9]

4 Canadian's in one thread, this must be a record!

 

Krusty, contract law. Of course a judge could recharacterize it as a lease or a mortgage, putting it under the respective jurisdiction, but that's not something you can control. In general the judge should go by the contract as long as it's not terribly unreasonable.

 

West Coast Girl, as has already been pointed out, every one of Matt's objections are nonsense. It's obvious he simply doesn't understand how CA's work.

 

After I sign the assignment contract I hand both the buyer and seller the names and numbers of an L/P specialist mortgage broker and of the best real estate lawyer in town. What they do with those names, the deal, or to each other, is no longer any of my business.

[Kimberly 0]

It makes no sense since he teaches this stuff himself.  Again, I don't know what his problem is.

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Hmmm...could it be that CA's are NOT in his course?

[Kimberly 0]

Let me know if my understanding is wrong.

Not Amy, but hopefully this will answer some of your questions.

 

SLOs are basically lease-option followed by sub-lease option.

Yes.

 

Please let me know if my understanding of the definition of “option” is incomplete.  An option is the right to buy a property. It is a unilateral or one-way agreement wherein the seller obligates himself or herself to sell you the property, but you are not obligated to buy it. So, it is a 1 way right to purchase. Right?

Correct.

 

Can a seller refuse to sell his house when the buyer wants to exercise his/her option? I don’t think so. Let me know if I am wrong.

Technically, no, provided that the buyer is within terms of the agreement -- the agreement has not expired, proper notice of intent to exercise the option has been sent to the seller, rent was paid on time IF lease option AND that was a condition, etc. However, sure a seller could balk. Then it would be up to the buyer to enforce the Option.

 

If your T/B (3rd party) had decided to exercise his/her option before the contract expired, the HO (1st party) would have had to sell it, right?

Yes, provided the buyer was completely within the terms of the agreement.

 

So the thing that happened in your case was that your T/B (3rd party) didn’t make a decision to exercise their option before the term ended, right?

And since your contracts have now ended, your HO (1st party) might let them (3rd party) stay or close with them for money as you have said.

If the Option has expired, the ball would be back in the homeowners court.

 

Also, you said you didn’t have any option money put up but if you have taken option money from your T/B, then you would be keeping it now.

Option Consideration is the price someone pays to have the choice of whether or not they want to purchase the property. Should they decide NOT to purchase, they do not receive any sort of a refund.

 

Usually what happens to the rent credits  Are they forfeited too ?

Basically, rent credits have no value UNLESS the t/b decides to exercise his right to purchase. So, if they don't buy, they don't get any cash from you just because they paid their rent on time during their lease.

 

Kim

[happyardy 0]

Let me know if my understanding is wrong.

Not Amy, but hopefully this will answer some of your questions.

 

SLOs are basically lease-option followed by sub-lease option.

Yes.

 

Please let me know if my understanding of the definition of “option” is incomplete.  An option is the right to buy a property. It is a unilateral or one-way agreement wherein the seller obligates himself or herself to sell you the property, but you are not obligated to buy it. So, it is a 1 way right to purchase. Right?

Correct.

 

Can a seller refuse to sell his house when the buyer wants to exercise his/her option? I don’t think so. Let me know if I am wrong.

Technically, no, provided that the buyer is within terms of the agreement -- the agreement has not expired, proper notice of intent to exercise the option has been sent to the seller, rent was paid on time IF lease option AND that was a condition, etc. However, sure a seller could balk. Then it would be up to the buyer to enforce the Option.

 

If your T/B (3rd party) had decided to exercise his/her option before the contract expired, the HO (1st party) would have had to sell it, right?

Yes, provided the buyer was completely within the terms of the agreement.

 

So the thing that happened in your case was that your T/B (3rd party) didn’t make a decision to exercise their option before the term ended, right?

And since your contracts have now ended, your HO (1st party) might let them (3rd party) stay or close with them for money as you have said.

If the Option has expired, the ball would be back in the homeowners court.

 

Also, you said you didn’t have any option money put up but if you have taken option money from your T/B, then you would be keeping it now.

Option Consideration is the price someone pays to have the choice of whether or not they want to purchase the property. Should they decide NOT to purchase, they do not receive any sort of a refund.

 

Usually what happens to the rent credits  Are they forfeited too ?

Basically, rent credits have no value UNLESS the t/b decides to exercise his right to purchase. So, if they don't buy, they don't get any cash from you just because they paid their rent on time during their lease.

 

Kim

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Kim,

It is very clear now. Thank you for that explanation. I appreciate it.

regards

- Ardy

[West Coast Girl 1]

It makes no sense since he teaches this stuff himself.  Again, I don't know what his problem is.

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Hmmm...could it be that CA's are NOT in his course?

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CORRECT.

 

However, he teaches Sandwhich Lease Purchasing, which is ALMOST identical to CA's.

 

The difference is that he believes in getting a good deal (by getting it 20% or more under market value) and then putting a T/B in there at a higher price. than he is paying for it. However, the seller doesn't get cashed out for 3 - 5 years. In the meantime, sellers are upset because they've lost all that appreciation.

 

Now, don't get me wrong. There is nothing wrong with this type of investing if you:

 

1. Have a nice cash reserve in case the T/B screws up (you could put the option deposit aside, but that means not being able to touch it until the house gets sold).

 

2. It's a down market and sellers REALLY need to do something about their situation. If you are helping them, then that's fine. However, it will not work in a market where homes are appreciating 20 - 30% year-after-year (like here in Vancouver.) You may be able to find something in VERY RARE circumstances, if you want to waste more time and money finding these situations.

 

However, we all need to be putting cash back into our pockets today. NOW! We need to recoup all that money that we have already invested in TIME & MONEY (for signs, flyers, business cards, web sites, courses, seminars, etc., etc.).

 

That's why I really like CAs.

 

Cheers,

 

WCG