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Option Release From Seller


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#1 <Steve>

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Posted 28 December 2006 - 07:46 PM

Just wanted to post this as it relates the the pinned thread: Need To Assign Agreement Back To Seller.

I am currently in the throes of closing a tenant/buyer on a SLO. I've found now that the attorneys in my little city here will not touch a double close if it resembles a "flip" and I am the "straw man" (as my attorney puts it) in the middle. hmmm

After speaking with a couple attorneys and contacting my RE attorney, it seems there was an knuckle head wannabee investor here that is now sitting in the jail house for loan fraud, while doing some kind of questionable flip deal(s). Now all the attorneys are running scared and won't touch a double close. Seems even if this is a "Lease Option" that I've had for almost 2 years (well seasoned) they consider this as a kind of flip.

After talking with the closing attorney, the way I will be able to do this is similar to the pinned thread. The attorney wants a purchase agreement between the t/b and seller and my $$$ at close will be called something like "Marketing" expenses on the seller side of the HUD. Doesn't seem I can mention any kind of L/O release. Although I don't know that for sure and I would like to include my option release agreement. Any idea what I should call this on the purchase agreement and HUD statement besides "Marketing" expense? Or does it matter?

So I will be writing this up on a purchase agreement and will be adding some kind of verbiage to include my fee at close. Also, will be having the seller sign a release. I am covered as I do have a memorandum. The seller will also be paying some $$ for the t/bs closing cost and I have increased the purchase price to the t/b to cover it.

Other than the closing attorney being a little pissy, I think I should have everything in order before presenting this to the seller for signature. I do appreciate the pinned topic Need To Assign Agreement Back To Seller. and "Jonathan's and "Adams" comments saved my butt on this one, or at least it looked like I knew what I was talking about with the closing attorney. hehe

If you haven't read the thread please do or review it again. It explains it a lot better than I ever could. I will also need to change my marketing spiel to sellers about doing a double close.

Just a kid living the dream


#2 Adam King (MI)

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Posted 29 December 2006 - 12:31 AM

I am currently in the throes of closing a tenant/buyer on a SLO. I've found now that the attorneys in my little city here will not touch a double close if it resembles a "flip" and I am the "straw man" (as my attorney puts it) in the middle. hmmm



HOW IN THE HELL ARE YOU A STRAW MAN?!?!?!?! Do you even know what that means?! It means FAKE! You're attorney is a SCHMUCK! They are telling you to commit loan fraud by avoiding it!

They're telling you to lie on the HUD for services you have not rendered. This is BS all the way through. Are you being paid for marketing expenses? Or are you being paid as an investor that performed a COMPLETELY LEGAL acquisition? Get another attorney. Straw man, my ass. AND YES ATTORNEYS LIKE THIS WILL GET YOU IN TROUBLE!

Here's mortgage fraud. Anything that is a lie on the HUD.

This subject has been pissing me off with all of the fear of the word "flipping" that is going around. Bogus appraisals, no intention of paying the loan, creating false rental agreements, lying about your job status, etc is mortgage fraud, NOT BEING PAID AS A PRINCIPLE IN A DEAL!

You DO NOT want to write up the purchase agreement between the seller and the tenant/buyer. You can create your own and assign it to the tenant/buyer so they know what to do on a new one between them and the seller. COVER YOUR ASS. Next thing you know you'll get nailed for acting as an attorney without a license by filling out contracts for other people!

Okay, you need to release your option from the seller to be paid, plain and simple. If you have a memorandum, then that's what you release. This is in the seller side of the HUD and should have nothing to do with the lender. Sure, the bank will not want to see an assignment but that doesn't make it illegal, it just gives them wet feet. AND THEY WILL STILL CLOSE IF THEY SAY NO! You need to simply created a promissory note from the seller for a release of your interest from the acquisition. Jesus, show a damn release of a promissory note from you having an equitable interest in the property if you have to. It's got nothing to do with settlement between the seller and the buyer except that you're legally in the way! Damn this stuff has been getting to me. Straw man...these guys don't know what the hell they're talking about...really.

Outline the release as much as you need to. Have it as a release of your memorandum, hell anything will work. If the lender has an issue with it then create a promissory note and have the seller direct the title company to pay you! IT IS ILLEGAL FOR THE TITLE COMPANY TO CLOSE WITH THE ACKNOWLEDGMENT OF YOUR INTEREST IN THE DEAL!!!!!!

Keep it simple and let your mortgage broker know what's going on. They are the ones that have to direct the release to the lender. They will have a personal relationship with the underwriter. THIS IS WHERE YOU GET YOUR ANSWERS! If the underwriter gets cold feet they will tell your mortgage broker, again just have the seller direct your money to the title company. And once again, if the title company has knowledge that you're involved THEY MUST remove you from settlement! ESPECIALLY if you have the proper documentation! If they close without paying you, you could sue on fault of the title company that you were promised compensation and NEVER REMOVED properly from settlement!

The only issues you should worry about is if anything is unscrupulous on the appraisal and if the buyer lying on the HUD. Get a new attorney ASAP!
Just my two cents,
Adam

#3 <Steve>

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Posted 29 December 2006 - 10:54 AM

Thanks Adam for the reply-

I think the way I presented the closing to the attorneys as a "Double Close" is what raised the red flag for them. Legal or not, the attorneys I have spoken with are not going to touch a double close. Which they are calling a flip. When I mention I would release my option and the purchase agreement would be between the t/b and the seller they were comfortable with that.

You need to simply created a promissory note from the seller for a release of your interest from the acquisition. Jesus, show a damn release of a promissory note from you having an equitable interest in the property if you have to. It's got nothing to do with settlement between the seller and the buyer except that you're legally in the way!

This is how I am going to approach this, understanding your comments Adam, and the review of this issue that has been pinned up on this forum.

Purchase agreement between the seller and tenant/buyer with no mention of my $$$ at close. I have a good "Option Contract Release Agreement" that Jonathan uses, that the seller will sign and that releases my interest and gives instructions on how I get paid at close. I will give these two documents to the attorney for close and let them ask for any additional info. I would rather not give the attorney my "Lease Option Agreement" with the seller; however, could or should I included my memorandum? As far as what the attorney calls it on the HUD, if ask I will tell the attorney to call it a "Release Fee" on the sellers side of the HUD.

If all else fails, I will have the seller sign a promissory note for me to be paid after closing, but this is not how I want to do things.

I need to get this closing nailed down as I have a pocket full of SLOs that may end up closing in the next year or so and I want to have a system in place. I will be using a different attorney. Hopefully if I present the closing to the attorney this way it will not raise any "flipping" red flags.

Thanks again,
Steve

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#4 Adam King (MI)

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Posted 29 December 2006 - 11:08 AM

Steve,

Purchase agreement between the seller and tenant/buyer with no mention of my $$$ at close. I have a good "Option Contract Release Agreement" that Jonathan uses, that the seller will sign and that releases my interest and gives instructions on how I get paid at close. I will give these two documents to the attorney for close and let them ask for any additional info. I would rather not give the attorney my "Lease Option Agreement" with the seller; however, could or should I included my memorandum? As far as what the attorney calls it on the HUD, if ask I will tell the attorney to call it a "Release Fee" on the sellers side of the HUD.


I would do just that, start out with Jonathan's release of option agreement. If the bank doesn't like it then have the seller have the title company direct your payment at closing. If that doesn't work, get paid after closing. At least you tried to prove to the bank what you were doing and how you were involved. Disclosure is the key.

Again, if an attorney even begins to say "flipping" is illegal you need to dump him. That would prove to me immaturity with real estate investing as a whole with such a negative opinion. I am starting to use the word as much as I can now to allow the community at large to understand there is a difference between totally legal flipping and mortgage fraud. All we have had is some asshole with some authority interchange the word flipping with mortgage fraud and just like a pack of rats we all run for the hills. Pathetic.
Regards,
Adam

#5 <Steve>

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Posted 29 December 2006 - 01:16 PM

Just got off the phone with the seller, tenant/buyer and the closing attorney and everyone is on board. The attorney will be calling my fee a "Release Fee" on the HUD as I explained my equitable interest in the property and the memorandum. The attorney just needs the paper work signed and this should work.

Thanks Adam for your replies! and you, Jonathan's and MC's previous posts on this subject.

Here's to a successful year to come!
Steve

Just a kid living the dream


#6 Adam King (MI)

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Posted 29 December 2006 - 05:47 PM

Just got off the phone with the seller, tenant/buyer and the closing attorney and everyone is on board. The attorney will be calling my fee a "Release Fee" on the HUD as I explained my equitable interest in the property and the memorandum. The attorney just needs the paper work signed and this should work.

Thanks Adam for your replies! and you, Jonathan's and MC's previous posts on this subject.

Here's to a successful year to come!
Steve


Steve,
That's good news. You can always think of a release as if it were a lien that you are removing because you're getting compensated. It's just a release without the lien, but it doesn't make the instrument used to lien irrelevant.
Cool stuff,
Adam

#7 nck-mail

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Posted 29 December 2006 - 11:22 PM

Might you all or Jonathan have that "release of option agreement" document available to share? I've been going through this thread ravenously because I've got a similar situation brewing with my pain in the @%& SLO that I'm only going to make $3k on. And I still have enough time to file a memorandum, which I'm going to do next week.

Seems my sellers weren't so motivated anymore once I solved their problem... My buyer is unbelievably motivated, though, thankfully, and is working incredibly hard to buy the property.

FANTASTIC thread.

~Naomi

#8 MichaelC

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Posted 30 December 2006 - 09:59 AM

Steve, many thanks for sharing your experience. It's threads like these, based on real world experiences, that make this board so invaluable for all of us. A few observations. . .
First, Adam needs a few Coronas to take the edge off. B) With that out of the way, you are to be commended for hitting an apparent roadblock and finding away over, around, and through it. We're all wiser as a result. And what Adam said about seeking out the services of a new attorney might be justified. That reminds me of an old joke. . .What do you call the med student who graduated last in his class? . . . . .doctor! Get it? Hehe. . . My point being, not all professionals are created equally. The attorneys in this case may very well be good at what they do. But experienced real estate investors they are not, apparently. It pays to shop around if you find this becomes an ongoing hassle each time you attempt to close out another sandwich lease. Glad it all worked out for you, Steve, after all is said and done.
When is the closing, by the way? Let us know how that all goes down and how and when your check is in hand.

Adam, thank you for your impassioned response.

Might you all or Jonathan have that "release of option agreement" document available to share?

Naomi, the release of option agreement can be found here, fourth post in the thread. Courtesy of Jonathan Rexford.

Seems my sellers weren't so motivated anymore once I solved their problem...

Get used to it. Money changes attitudes. Which makes me have to ask you: why haven't you filed a memorandum yet?? That should be done from the get-go if you are staying in the deal long term, such as in a sandwich lease.

FANTASTIC thread.

Indeed! It's been pinned.

#9 <Steve>

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Posted 30 December 2006 - 04:11 PM

That reminds me of an old joke. . .What do you call the med student who graduated last in his class? . . . . .doctor! Get it? Hehe. . . My point being, not all professionals are created equally. The attorneys in this case may very well be good at what they do. But experienced real estate investors they are not, apparently.

That's for sure. The last couple of closing I have completed smoothly, half of the paper I had to sign as a seller were documents protecting the attorney in the closing. Like realtors, attorneys can be your best ally or worst nightmare.

When is the closing, by the way? Let us know how that all goes down and how and when your check is in hand.

Thanks MC the closing is scheduled for Jan. 17th. I will post as how this goes down.

First, Adam needs a few Coronas to take the edge off.

lol...I think I owe Adam a sixer! B)

Steve

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#10 <Steve>

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Posted 12 January 2007 - 09:09 PM

OK closed today! :) Earlier than the 17th. Done deal. A little over $6K back end. ^_^

We did change attorneys. I had to hold the tenant/buyers hand until we closed but all is well. The t/b just had the typical home buyer's jitters.

I think the key to making this whole thing work was a Recorded Memorandum. This allowed me to release my Lease Option with the seller for a fee and be placed on the HUD as a "Release Fee" on the seller's side.

There is a new law in my state. If a seller was married when buying a property and later divorces, then the property is sold, both persons need to sign off at closing, even when only (1) person is on the deed. The attorney and seller had to scramble to find her ex-husband in another state to sign over the deed. I think the state legislators here need something to do. :lol: Well this will be a new question I will have to ask before another close.

Anyway looks like I'll be eating good next week. ;)

Thanks again for all the assistance! And that sixer is coming Adam. ;)

Just a kid living the dream


#11 MichaelC

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Posted 13 January 2007 - 09:35 AM

Glad to hear it all went according to plan. Congratulations on another deal well done, Steve!




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