Another attorney

[MikeT/NC 5]

So, I went to see another attorney yesterday. I told him that my mort. broker told me I would probably need to have the t\b write the option check to XYZattorney trustee. So he says why would I want to get an attorney involved at this point. Because I wasn't doing a closing yet. And besides, the option money wasn't going to the seller anyway.It was going to me. So why not just forget calling it option and call it an assignment fee.Well, by this time we had been talking for about 30 minutes and I was so balled up with the fact and figures, trying to explain something to him that I didn't really know myself that I didn't think to tell him that I needed it be option money so it could be used as a down payment. To lower the money the t/b needed to get a loan. At this point he had another appointment so he just took my contracts to look over and said we could talk later. I've been working and researching this l/p for almost a year now. Spending hundreds if not thousands of hours trying to get everything ready including my "team" in place.I even bought some bandit signs last week hoping I could start advertising for sellers this week. But it seems there's another stumbling block at every turn. I seriously doubt that there is an attorney in my county or the surrounding counties that's ever done a l/p assignment. How would I explain to him how this works? If the money goes to me then how does it show up on a hud statement? Or does it.? Like I said, I've got too much time in this to give up but it sure does get frustrating.

[DanielSun 7]

i thought your attorney is right, why would you want to get an attorney involved at this point?

 

My understanding is that we don't need a lawyer, just need the seller, me and the buyer at the kitchen table, cheque made out to me. While I think this is the ideal situation, inevitably some buyers will want their lawyers to take a look at the contracts, and that complicates things.

 

 

p.s. I don't think I've spent hundreds of hours reading about L/O like you have, but I am pretty sure getting a contract first and a buyer is more important at this point, than worry about how the deal closes.That's not an excuse to stop you from start advertising.

[MikeT/NC 5]

Thanks Daniel for the input. But for me at least, I do think I need to know how the deal is going to close before I enter into a contract with someone. If I take someone's money and promise a bunch of stuff I can't deliver on then I can just smell a deceptive and unfair trade practices lawsuit coming. Which if I'm not mistaken carries treble damages among other goodies. I'll figure it out if I have to call every attorney in five different counties.

By the way. My hat is off to people who can start advertising and signing up sellers before they even receive Michael's manual. My learning curve is just greater then theirs.

[MichaelC 160]

Mike, Daniel makes some valid points, but I understand your concerns and even admire your need to try and provide the best possible outcome for all parties. This sentence struck me:

If I take someone's money and promise a bunch of stuff I can't deliver on then I can just smell a deceptive and unfair trade practices lawsuit coming.

What are you promising?

[MikeT/NC 5]

Michael, Lets say I take an option fee of 5K. I tell my t/b that the 5K will be applied towards his down payment. He does everything he's supposed to do to get his credit cleaned up. Then when it comes time to exercise his option he finds out that the 5K can't be used as down payment and he's now got to come up with the full DP. He then comes back to me and says hey, whats going on, you promised me I could use the 5K for my DP.What do I tell him? Tough Luck?

 

I just want to be able to tell my t/b that if he does the right things then he can get a loan. I don't want to be standing in front of a judge and say "Well I THOUGHT that was the way it worked."

 

Looks like I'm going to have to rethink this and start calling attorneys until I find one that has done this. I'm assuming that one anywhere in NC could handle this for my t/b with fax and phone.I'd rather have someone local but it seems that's not to be.

 

Thanks fellows for the input.

[MichaelC 160]

Michael, Lets say I take an option fee of 5K. I tell my t/b that the 5K will be applied towards his down payment.

That would be a mistake. You never tell a t/b that their option money will be applied towards the down payment. It could be, but you have no way of knowing that and so you should never say so. How that money is applied is between t/b and their lender. It all likelihood it will be a credit towards the purchase price. This is how the agreements are written.

[DanielSun 7]

coincidentally, I called up a couple mortgage brokers in my area during lunch today, and asked that exact same question. I asked them, is there a way to get the option money and rental credit to be considered toward 'down payment'. (what I really aimed at was to build some relationships...) lol turns out they are just as confused as I was, one guy said he have seen it been done, but he is not sure how to structure the deal, so he will get back to me. (not holding my breathe) I will try few more.

 

I too want to be able to provide the best solution for them, so I do want to find a mortgage broker who would do that. but I think it's more complicated than just a couple calls to an attorney or a mortgage broker, i think i might need to ask both, and come up with a solution myself. after all, they are not in the L/O business.

 

there is a post about this in REIclub i remember, i will go home and search for it.

[MikeT/NC 5]

Michael, Are your t/bs usually able to get the OC used as DP? If so, then how are you structuring the deal. What line does it go on the HUD?

[MichaelC 160]

Michael, Are your t/bs usually able to get the OC used as DP? If so, then how are you structuring the deal. What line does it go on the HUD?

Back in the day when I was getting started, yes, option money as down payment money was not difficult to do at all. But that has all changed now and option money is usually a credit towards the purchase price, just as stated in the documents we use.

Have you contacted fellow member Rachel Robertson? She is the go-to gal for financing matters: http://www.naked-inv...?showtopic=8426

[MikeT/NC 5]

Michael, I have contacted her but she isn't licensed to work in NC.

 

I was thinking this morning when I woke up about how to best work this.If I can't use rent credits per my brokers instructions, and can't use the OC as a down payment then that only leaves the seller concession as an incentive for the t/b. So in the contract where it mentions rent credits I need to reword that to say something to the effect of "seller will contribute X amount towards funds to close if t/b exercises,pays on time ect."And since I can't use OC or RC then I would go with the max allowed for the SC. Which I think is 6.5%. Right? So doing it this way would effectively lessen the amount the t/b would have to bring to the closing table. Does that make sense?

 

Also, I would need to use the regular assignment, not the CA assignment, since OC isn't figuring into the deal other than being used as an assignment fee.

[MikeT/NC 5]

After rereading my post I'm now thinking I could use the OC to lower the purchase price. Since it's just monopoly money anyway and wouldn't be considered a seller concession. And I could still go with the 6.5% concession to sweeten the deal for the t/b.

[<Steve> 82]

I have had OC be used as part of the down payment. I just don't promise that it will. It may or may not be used as part of the down payment dependent on the tenant/buyer's lender guide lines.

 

RC maybe or may not be used to help with the buyer's closing cost. I just don't promise that it will. It may or may not be used for closing cost dependent on the tenant/buyer's lender guide lines.

 

I have not a clue what type of financing the tenant/buyer will end up getting, or if the rules will change down the road. I am not sticking my neck out promising something I have no control over.

[DanielSun 7]

Now that I start to market I noticed there are many 'rent to own' people in the local area. Some of them are just mortgage brokers advertising a low interest mortgage buying program, some of them are deals created by Realtors (and they say buyers can pick any house, I don't know how they do it. ) , some of them are private people doing our kind of lease option.

 

So there are all kinds of ways of doing L/P in different places, Mike maybe you can contact a few people in your state that does this? Maybe one of them don't mind giving you tips about the questions you have.

 

Personally I want to just network with them. I've found 5 private companies so far, and 3 didn't bother to respond to me. I will try calling the other 2.

[pilot76180 51]

Unless an attorney is in the lending business as well, they won't know about what the lenders require on the OTP etc.

So, you are wasting time talking to attorneys on this matter.

Also, you don't need an attorney to "close" the LO.

We keep all receipts of option money paid, and make sure they don't pay in cash.

The buyer also keeps all receipts.

Our OTP has specific verbiage in it so the option fee will reflect towards the lenders required down payment.

The OTP also does not mention a rent credit, rather, it only states that at the time of finance, the seller will contribute $3600 or whatever to the Optionee for funds to close. (closing costs)

So when the underwriter sees the OTP, it's all spelled out, even the closing costs.

I put a copy of part of our OTP on the forum somewhere. Maybe under Financing?

[DanielSun 7]

Oh I should search for it then!

 

Oh another question!

In my local place, by law Landlord must take care of maintenance, even if it's put into contract that the tenant should. So i was thinking, what if I move my maintenance clause from the lease into the "Option to purchase" paper, and then remove the option fee part? Since in contract law, it requires an exchange of value for a contract to be valid, I get the option to buy, in turn the seller get the tenant to take care of the maintenance while the option is in effect. How's that? any thoughts?