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The OTP I use has been reworked and reworked several times over the years, but you can see that ours does not refer to a rent credit, so you may want to use this as a sample if anyone wants to make some adjustments on yours. Removing the rent credit and just putting a flat concession makes it easier for financing nowadays.

Hope it helps!

sample OTP.pdf

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***stands up and clap both hands for pilot*

 

Thanks for your generous sharing.

 

Can I ask since this document is kinda intimidating, (4 pages for an option) do you get objections from sellers? Like they want their lawyer review it? how do you handle that

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Some of the verbiage is for TX and is overkill, I don't worry about seller's objecting to my paperwork to be honest.....I send an e-mail to them with the docs discussing different sections, and they may have one or two questions, but that's about it.

I don't give a flip if they want their "attorney to review it"....fine...I've had attorneys wanting changes made that violated state law....when I told the seller, they would respond .."Well, let's just go ahead with what you have then.."

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John-

 

Do you typically offer 6% in conessions (allowed by FHA)? I noticed in the example you posted it is about 2%. Is that just due to the numbers of the deal?

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John,

 

Since rent credits give a tenant-buyer an incentive to pay their rent on time, have you had any issues with offering a seller concession instead of rent credits and on time rent payments?

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John,

 

Since rent credits give a tenant-buyer an incentive to pay their rent on time, have you had any issues with offering a seller concession instead of rent credits and on time rent payments?

Or maybe it could be written that the t/b receives $300. per month in seller concession for 12 months totaling $3,600. when rents are paid timely. somethig like that

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I offer ceoncessions on the back end and being in a buyers market concessions are a good thing. The problem for me is that at times I will offer a 75% or even a 100% monthly rent credit, which is a greater amount that FHA or VAs 6%. I know conventional can be up to 9%. I am not a lending pro but I did find in the FHA guide lines that if the seller's concessions exceed the six percent limit, the extra dollar for dollar, must be subtracted from the property's sale price before applying the LTV. So in effect any extra concessions offered can also lower the purchase price. Correct? Has anyone had any experince with this?

 

John...?

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I normally just offer a flat concession, of $3600, $4200 etc., depending on price.

So you could figure it as 300a month, 400 a month or whatever. TX law doesn't allow you to withhold a rent credit for a late payment, so it doesn't apply to me anyway, as far as withholding a rent credit.

FHA is 6% and most conv. lenders max at 3%. Never heard of one allowing 9%.

I don't spend much time at all putting figures together.

My thought is, what is the value so I can set the option price, what's the assignment fee going to be, and how much will the monthly payments be.

So I really don't haggle with the owner, unless the monthly payment I set didn't quite cover their payments, then we can review that.

I guess when they come to me...it's like going to CarMax with your car...you get what you get and you don't throw a fit!

I set the numbers so it's really the most the seller could get.

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Thanks for the reply John. I like the attitude keep it simple, you get what you get, so lets get on with it. TX still has a pretty good market, relatively speaking. My market is so flat people just aren't moving around. Straight rentals are hot. I am finding that my own properties compete with each other lol. So, a larger rent credit on a slow property can improve the properties interest. But anyway, thanks for sharing the info. something to think about in keeping the business model in line with market conditions.

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That sounds like it might be a good idea.

 

Or maybe it could be written that the t/b receives $300. per month in seller concession for 12 months totaling $3,600. when rents are paid timely. somethig like that

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