When doing a C/A I understand that the rent credits are added on to the purchase price.
In the manual Michael say's that he doesn't bother the seller with giving rent credits this has me a little confused.
I understand that rent credits are a big insentive for the T/B to pay his rent on time. so do I explain to the seller that after the contracts are assigned he will be responsible for keeping records and giving the T/B a credit for each rent payment which is made on time?
How does this work?

Wannabe,

You are confusing Cooperative Assignments and Sandwich Leases.


When doing a Sandwich Lease, don't worry about Rent Credits from the seller. You are in the middle of the deal. Your goal is to get to the seller's bottom line -- as low as you can get them to go, both monthly and option price. This in no way affects whether or not you give your tenant/buyer's Rent Credits -- one deal with the seller and another separate deal with your tenant/buyer.


Don't make it seem like a chore. When dealing with a seller on a CA, explain the benefits of Rent Credits -- find a tenant/buyer quicker, major incentive to pay on time, won't alter the NET you'd already discussed with them, etc.

wannabe, Kim hit the points I was going to. Are you clear on the difference of the sandwich lease vs. the CA? And when I do use rent credits and when I don't?

I'm not sure? I undertand how you use rent credits on the SLO but are you saying that you don't use them on a C/A?
I reviewed the manual but I'm still not clear on that.

What they're saying is that you don't need to get a rental credit from the seller when doing a SLO. You want to get their bottom price and trying to get a rental credit will generally confuse them and when someone is confused, they automatically say no.

What you'll do after that with both a SLO and a CA is offer rent credits to the tenant/buyer to ensure that your monthly payments are received before they decide to upgrade their stereo (and to make it a little easier for the t/b to eventually get financing). To simplify it, we offer rent credits to all of our tenant/buyers (SLO or CA). Does that make sense?

How do rent credits do this?

If the rent credits work as an incentive to make payments on time, that can only be a good thing when the t/b applies for financing.
And, depending upon the lender/mortgage broker, rent credits may be accepted as part of the down payment, also. Key word being "may". And if not, they still are a credit towards the purchase price, which should contribute to some extent the ability to get financing.

What Michael said. I probably should have said they may make it easier instead. Some banks will treat it like part of the down payment, but either way if they can show 12 months of timely payments and 12 months worth of rent credits as a seller concession, there chances of getting financing can only improve.

Thanks to all for taking the time to explain all this.. However I think I must not be making it clear exactly what my question is, let me try and do a better job of asking it.

I understand all the advantages of using rent credits as well as how it works. what I'm confused about is, on a C/A how do I explain to a seller that he will be responsible for keeping records and making sure the T/B gets credit toward the purchase price for all the payments made on time without confusing him.
He will be responsible for this will he not? Or am I missing something?

I recently had a long conversation with a very interesred seller, until I began to explain how rent credits would be added on top of her net and the T/b would be credited for this over the term of the option. This seemed to scare the witts out of her and she bailed on me. I just need to understand where I went wrong so I don't repeat this mistake.

Thanks to all

Jeff

I'm not sure why she bailed Jeff.

but...

Let the seller also know that if the t/b is late with the rent, the "rent credit" is added to their "net" price they receive at closing. So, the seller receives a bonus for late rent. Hell of a deal.

<Steve>

Wannabe,

Do a search for "Rent Credits" and read ALL of the old posts. If your seller bailed, because of your explanation of Rent Credits, it's not clear enough in your mind. You must understand it completely, before you can explain it.

Take the focus off of the seller having to keep records of the rent credits. It's not a big deal. Get the focus on the benefits of Rent Credits to the seller: large rent credits = tenant/buyer being much more likely to pay on time everytime (major $$$ loss to the t/b if late on rent payment), you'll find a tenant/buyer quicker (the sooner the seller has someone to make the mortgage payment for them), etc. Focus on the benefits. Focus on the benefits. Focus on the benefits. Not a chore. Focus on the benefits.

Got it?

What records? Therein lies the problem. The homeowner doesn't need to keep any records. The homeowner and the t/b have an agreement between them that specifies the terms. If/when the t/b exercises the option to purchase, that agreement states what has transpired during the past twelve months. If proof of timely rent payments are required by the lender, that would be the cancelled checks, and/or a written statement by the homeowner.

Of course!!! its all in the contracts. Man! why didn't I understand that once again I'm rescued by the pro!! Thanks MC!

Jeff

That's why he "Makes a mean Lasagne!" He knows the ingredients.

Sounds like you two attended the same Stand Up Comedy seminar... We have a straight man who sets it up, and the wise guy to knock 'em down...