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raquelm

What is the lease option payment used for?

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I understand that a tenant buyer is purchasing the option, but what is that money used for? Is it pure profit for the person selling the option, or is it somehow applied toward the purchase price of the property? I ask because it seems like people pay a lot of money for the option without any clear benefit.

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The option credit is both. It is your "paycheck", but is also used to pay for the house if they take the option to buy. For example, if the seller wants to net $100k and you advertise a $5k option, then you really need to advertise the price of the house for $105k.

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Raquel, it depends upon the type of assignment you are working. If you are putting together a Cooperative Assignment, the option consideration is both an assignment fee and it applies towards the purchase of the property, So if the cost of the house is, say, $250K and the t/b pays $7K option money, the balance owed is now $243K.

On the other hand, if you are working a straight assignment and simply assigning or selling your interest in the deal to a third party, whatever assignment fee is paid to you does not apply toward the purchase. Apparently, you negotiated good terms on the deal and someone else recognizes the value and is willing to pay you something for it.

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Ok, I'm getting it now. Can't wait until my manual arrives tomorrow. I've already learned more from this forum than from the two skimpy lease option books I've purchased so far.

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Ok, I'm getting it now. Can't wait until my manual arrives tomorrow. I've already learned more from this forum than from the two skimpy lease option books I've purchased so far.

Thanks for the compliment, Raquel, but now I'm thinking I should have charged you more. B)

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