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ErikOk

Questions on some items in the manual

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Hi Michael,

 

I have a few questions that I would like you to please answer and hope others will chime in as well with their experiences.

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Page 23

How do I ensure receiving the payments when I finance a portions of the buyer's assignment (Example: Buyer assignment fee is $4500. Buyer currently has $3000 and you can finance $500 over the next 3 months). What forms would be required, and would they need to be notarized/recorded?

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Page 24 and elsewhere in the manual

How can the seller pay zero closing costs? Don't some lenders require that the seller pay some of the costs?

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Why do you use a Lease Option contract between you and the seller, but separate Lease and Option contracts between you and the tenant/buyer?

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Page 57

You mention taking the lease application and a deposit. Is this deposit considered part of the option consideration once you receive a tenant that passes the credit check? I assume that it is NOT considered damage/security deposit as described on Page 58, since damage/security deposits are refundable. Do you have an example of the Deposit Receipt that you use for your deals?

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Page 92

Do you have a sample of a promissory note that you have used in your deals?

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How do you personally close on your sandwich lease option deals? I suppose this is different whether or not a bank is involved.

 

For example you mention on page 60 that your agreement with the seller was 10% down and the seller carried the remainder. I supposed you could have just assigned the contract to the tenant/buyer, right?

 

But you mentioned you closed it in the traditional manner. Can you please explain how it was closed?

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Thanks for the help,

 

Erik

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How do I ensure receiving the payments when I finance a portions of the buyer's assignment (Example: Buyer assignment fee is $4500. Buyer currently has $3000 and you can finance $500 over the next 3 months). What forms would be required, and would they need to be notarized/recorded?
You can't be 100% certain that any agreement will be adhered to, Erik. It's a risk and a judgement call on your part. Would you rather receive 50% of something or 100% of nothing? I use a simple promissory note between myself and the t/b, with the specifics of the agreement noted.

 

How can the seller pay zero closing costs? Don't some lenders require that the seller pay some of the costs?
Depending upon the lender and the type of mortgage, the seller may very well need to pay some closing costs. To play it safe, write "Seller will pay all allowable closing costs".

 

Why do you use a Lease Option contract between you and the seller, but separate Lease and Option contracts between you and the tenant/buyer?
The separate lease and option agreements are done for legal reasons, to make it more difficult for a t/b to argue that they have a valid option agreement if they end up defaulting on the lease agreement. Therefore, having the agreements combined can be considered a stronger agreement for us. That's why we do it this way. Legal BS, in other words.

 

You mention taking the lease application and a deposit. Is this deposit considered part of the option consideration once you receive a tenant that

passes the credit check? I assume that it is NOT considered damage/security deposit as described on Page 58, since damage/security deposits are refundable. Do you have an example of the Deposit Receipt that you use for your deals?

Yes. Your assumption is correct. I use a receipt from a booklet that can be purchased at any office supply store. No need to overthink deposit receipts.

 

Do you have a sample of a promissory note that you have used in your deals?
Again, keep it simple. A one paragraph doc stating the terms of the agreement, both parties date and sign it, each receives a copy, and your done.

 

How do you personally close on your sandwich lease option deals? I suppose this is different whether or not a bank is involved.
Every deal is different, Erik, depending upon the lender, the lawyers, the title company, etc. I know that's a vague answer but it's real world. When you find yourself in such a deal, contact a title company or two for starters and ask them how they can work with you to close the deal. If everyone has the same goal, to get the deal closed, it will happen.

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Hello Michael C. Recently I got a referral from my buyer's agent in Long Beach, CA. I am wondering if the documents in your manual are valid in California.In other words, have they been vetted and can I just put my letterhead and company registration on the documents as use them as-is?

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Charles, my agreements were originally created by a California based attorney. In addition, they have been used many times over the years by myself and students I have worked with to do California based deals. So I'd say you can use them with confidence, as-is.

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