Getting Out of a Lease Option

General Real Estate Investing
1

I signed a lease w/ option to purchse in 2012. The option is coming due in Mar 2014 ~ I have been asking the Owner to provide the bank statment since April. I followed up a few time throughout the summer to no avail. I ran a search and found that she did a refinance in Sept. With that I decided to follow up yet again AND withhold my October payment until I received an answer.

She finally got back to me and is stating there is a 2nd mortgage on the home and wants to sell it to me for $230k. Our option stated the price would be Market Value or Loan balance as of March 2014. I knew then we would get no higher than 202k or so. Her loan at the time was $219k taken out in 2007 - so 2014 would put us at roughly $203k.

When she processed the refi it only confirmed my math was correct, but now she is bringing up a 25k 2nd she wants to include i nthe price. Can I sue her? Has she breached our contract by not being willing to sell me the property at the agreed upon rate? or will I need to wait it out until Mar 2014? Its not too far away, but I dont want to give this lady one red cent considering she has my deposit of $6000 as it is. And now she is attempting to have me re-sign a lease to “fix” this problem rather than refunding my money and moving on.

PLEASE HELP!!!

2

Evidently you failed to record a Notice of Option, or Notice Of Agreement against the property.

As a result, the seller was able to borrow money underneath your option.

Unfortunately, you don’t have much negotiating power, because the terms of your option price is to pay either the “balance owed” on, or “market value” of, the property [whichever is greater].

So, you either agree to 1) pay the balance of the seller’s loan(s), or 2) pay market value, or 3) you walk.

Is the seller’s second secured by the property? Many are not secured.

Regardless you should immediately record a Notice Of Option against the property in order to keep the seller from further encumbering the property, AND perhaps give you a chance to buy at the “market value” price, whatever that amount happens to be (based on an appraisal).

It would be just delicious if you found that the second hadn’t been recorded (or was a silent second), and you filed your lien; and proceeded to exercise your option.

The seller would probably fail to cooperate at first, but this would just give you more leverage in a specific performance suit, if not getting your option consideration returned to you to avoid legal action…

An unsecured second, coupled with your Notice of Option, would also open the door wider to buy at the price you originally anticipated.

If the second was secured, then you’re kinda stuck with a lemon deal.

3

THANK YOU for your response.

I did not record any notice or memo. But I will be doing so today. And no, just 1 DT is of record. That is why I am so upset. She is attempting to swindle me.

I will definitely get this memo recorded and we should be on track. I don’t foresee her getting out of this one. :slight_smile: And if she does, she’ll have to refund my money - and I am ok with that too. I just don’t see myself losing my money and option because of her scamming ways.

Thanks again.

4

I hope it all works out well for you and I would hope that you get the house at the price you initially agreed to pay instead of just getting your money back. Good luck!

5

Check your lease option contract very carefully. Many times the initial deposit is non-refundable as are all of the payments that you made - even the ones that were above and beyond the market rent to cover the purchase price of the home.

This is one of the downsides to a lease option. If you do not go through with the option - all payments are lost.