joe mcall's lease option program

Thinking about joining
his program…has anyone heard good or bad things about it/him?

I replied once and it was deleted. So I’ll try once again. . .
What I’ve heard isn’t too positive. Overpriced, lots of hype. Save your money.

Personally I would stay clear of ANY Lease Option program. Many States including Texas and Colorado have already passed laws to make the tougher and they are making them harder every year. So personally I don’t mess around with them. They are passing the laws simply because they consider Lease Options to be predatory on people with less then perfect credit. The main problem they are having with the Lease Option is that you are giving people a specific time frame in which they have to purchase the property or they lose the option money all together… There is a much cleaner alternative to the Lease Option so personally I would not take a course on the Lease Option… I know I am going to catch flack for this post and people are going to say this is not true… Do some research before you post back on this. Also Google Lease Option predatory and see what comes up… Then Search Lease Option Texas Law and Lease Option South Carolina law. You will be shocked how many lawsuits come from the Lease Option. So sc7777 I can send you a copy of the cleaner way to do this if you want me to.

I respectfully disagree. Predatory laws are aimed at predators, not legitimate investors. Do the right thing, use the correct agreements that are in compliance with the law, treat people fairly, and for the most part you will be fine.
By the way, everything you wrote about lease options can also be said about Sub To investing, wholesaling, foreclosure investing, etc.

Agreed AJ…Hey, maybe sc7777 should Google “Real estate Scams” and get so scared, that he/she avoids real estate altogether, curls up in the fetal position in the closet and twitches uncontrollably.
I think telling someone with a blanket statement that “Lease Options are predatory” is poor judgment.
As AJ is aware, I’ve done LO’s for over 9 years…and I run a solid people oriented business.
Oh…BTW…I’m in TX…in case anyone cares…
Everybody has their own thoughts about different strategies.
For example, I think mortgage assignments are horrible, and put a fake bandaid on a problem that when the bandaid falls off, the cut will have turned into an infected laceration.
I think AJ is spot on with his reference to Sub-2, wholesaling etc.

SB 629, introduced as an amendment to another law passed in 2001 which revised part of the Texas Property Code (Chapter 5, Subchapter D, Section 5.061) and governed installment land contracts, is a silver bullet for many investors.

Under the previous law passed in 2001, installment land contracts are now considered ‘executory contracts’ and, as such, the seller is required to provide several disclosures. In and of themselves, most of these disclosures are not too great an issue for most sellers; however, the law also stipulates mandatory penalties (which are ridiculously disproportionate to the supposed harm suffered by the buyer) for non-compliance on the part of the seller. The obvious liability for the seller is the fact that any buyer looking for a payday may enlist the services of an attorney for the sole purpose of exploiting a seller’s technical non-compliance with disclosure requirements that the seller may not even have known existed at the time the contract was signed.

With the introduction and subsequent passing of SB 629, the effect is that lease-options, which were not addressed in the previous 2001 law, are now also considered executory contracts along with the installment land contracts already mentioned. This is where things get bad.

One of the primary issues with this change is the fact that investors no longer maintain the benefits of ownership in regards to taxation (as was previously possible) nor are these investors able to take advantage of the capital gains tax rates due to the fact that these lease-options are now legally considered an actual sale of real property instead of a traditional rental scenario with the option to purchase. Because lease-options are now considered a sale, there is a negative tax implication for sellers desiring to defer profits through the use of a 1031 exchange when (and if) a tenant/buyer exercises his option to purchase the property. The sale is deemed to happen as soon as the lease-option is signed and not, as has previously been the case, some time in the future when the tenant/buyer actually chooses to exercise his option to purchase.

As if this isn’t bad enough, very few investors are ‘cash heavy’, meaning that few people actually hold the property that they are selling ‘free and clear’ and that most have some sort of underlying mortgage on the property.

However; under SB 629, a potential seller cannot enter into an executory contract with a potential buyer if the seller does not own the property in fee simple, free from any liens or encumbrances. In addition, the seller also has to maintain fee simple title for the entire duration of the contract. The exception to this requirement (Section 5.085) is that it does not apply to a lien or encumbrance placed on the property that is placed on the property by the seller prior to the execution of the contract in exchange for a loan used only to purchase the property if the seller, not later than the third day before the date the contract is executed, notifies the purchaser in a separate written disclosure of the terms of the seller’s underlying loan.

In short, a buyer could agree (but is not required to do so), before the contract was executed, to accept property that was not held in fee simple if the encumbrance on the property resulted from the seller obtaining a loan in the past to purchase the property. The caveat to this is that the seller must inform the buyer, in writing, as to (a) how much the seller paid, (b) the remaining balance on the current mortgage note, (c) the seller’s monthly payment amount, (4) the seller’s mortgage loan number, and many other traditionally confidential pieces of information that seller’s would never normally release to a prospective buyer. Furthermore, a buyer also could agree (at his discretion) after the contract was executed, that an encumbrance may be placed on the property in order to obtain a loan to make improvements to the property.


Reading in much the same manner, HB 1823 was the companion bill to SB 629 above and it, in effect, allows individuals who purchase homes under traditional contract-for-deed or rent-to-own scenarios the same rights as other buyers using any other method, including use of the standard Texas homestead exemption, the right to pass the home to a family member if the purchaser dies, and right to take advantage of tax exemptions and deductions (which the seller subsequently loses). Under this new law, lease-options and contract-for-deed purchasing arrangements are now considered ‘executory contracts’ to convey real property and, as such, it takes many advantages away from sellers and gives them to the buyer.

According to John Henneberger, co-director of the Texas Low Income Housing Information (TLIHIS) Service, a non-profit entity whose goal is to assist low income Texans; “After more than 40 years of abuse, the contracts-for-deed system has finally been fixed once and for all. For more than ten years, we have worked with Senator Lucio to curb the predatory practices of those who would take advantage of low-income residents. With this bill, Senator Lucio has ensured that residents of ‘colonias’ and low income neighborhoods all along the Border will no longer be subject to arbitrarily losing their homes under the old contract-for-deed system.”

Senator Lucio, sponsor of the bill and author of SB 629, also stated that “The Texas Senate sent a strong message to those who would prey on the innocence of our low-income Texans with this unanimous vote that we will not let the unscrupulous take advantage of our constituents.”

Under HB 1823 (similar in large part to its parent bill SB 629), some of the key points affecting investors and other sellers who may want to use a lease-option are that:

lease-options and other contract-for-deed arrangements are now clarified and considered as ‘executory contracts’ which entitles buyers with certain protections;

purchasers now have the option to convert their lease-options or contract-for-deeds into traditional mortgages;

sellers are required to keep the property free of liens during the term of the contract although it allows certain prior mortgages liens with certain protection for the buyer;

What this means: If the seller already has a preexisting mortgage lien on the property (regardless of whether it contains a Demand Clause or not), the seller must notify the purchaser in writing before the third day that the new lease-option contract is executed of the lien holder’s contact information, the outstanding loan balance, the loan servicer, payment amounts and due dates, etc. which means that the purchaser will know both the seller’s monthly and overall profit – which the purchaser may use as a negotiating tool against the seller.

a purchaser, at any time and without paying penalties or charges of any kind, is entitled to covert the purchaser’s interest in property under an executory contract into recorded, legal title.
What this means: Per HB 1823, a seller must give the purchaser legal title to the property if the purchaser provides an appropriate promissory note that contains the same interest rate, due dates, and late fees as the contract. Also, on or before the tenth day after the date the seller receives the aforementioned promissory note, the seller shall either schedule a mutually-agreeable date to execute the deed and deed of trust or otherwise deliver to the purchaser a written explanation that legally justifies what the seller refuses to convert the purchaser’s interest into recorded legal title.

In other words, if you as a seller have an underlying mortgage on the property and the purchaser provides a Note and you must then give the purchaser legal title, the ‘Due on Sale’ or ‘Demand’ clause in your mortgage loan will probably be triggered and you must pay off this underlying debt. However; as indicated in both bills, sellers are prohibited from refinancing the property (to pay off the aforementioned mortgage loan) since the seller is required to keep the property free of additional liens unless the new lien is obtain for the sole purpose of improving the property and it is authorized by the purchaser.

sellers may not impose any provision that forfeits an option fee or other option payment paid under the contract for a late payment;
sellers may not impose any provision which increases the purchase price, imposes a fee or charge of any type, or otherwise penalizes a purchaser leasing property with an option to buy for requesting repairs or exercising any other right under Chapter 92 of the Texas Property Code;

property sold under contracts for deed are required to be legally platted/subdivided and contract for deed owners are now enabled to obtain information in order to determine whether their property has been properly platted;

Due to the enactment of these new laws, lease-options in Texas, which have long been a source of debate and varying legal opinion, have become even more convoluted. Because of this, low-income and credit-challenged buyers will probably find it more difficult to realize the dream of home ownership and investors, along with other sellers of real property, may be well served to invest in markets that do not generally require lease-option alternatives for buyers while actively searching for less-complicated and more mainstream sales techniques such as wraparound mortgages, seller-financing (with the subsequent sell of the mortgage note), and traditional mortgage financing.

There I did the research for you… I never said that you can’t do them I simply said Personally I would not do Lease Options anymore that there is a better way of doing business… Much cleaner much smoother and it will totally bypass these laws… Why confuse the situation???

Nothing in the law states the seller has to provide title to the purchaser of the lease option except of course when they exercise the option. Although Title 2 Chapter 5 mentions this, it is in reference to an owner finance not a lease purchase.
Some people assume all of Title 2 Chapter 5 applies to a lease option, but only a portion of it applies.
I wrote an entire CD on TX Lease Options, so I’m a little familiar with the specifics of the code.
Either way, why not tell everyone what the super clean way is…
I’m always open to new ideas and strategies

You may want to do some more resarch on dealer dispositions. According to the tax code, a dealer disposition is not eligible for 1031 tax treatment. When you have a property flipping business, your sales are dealer dispositions. When you purchase a property, then immediately put it up for sale, you are engaged in a property flipping activity. When you use a lease option to facilitate the flip, you are still flipping the property and 1031 tax treatment is not available to defer the capital gain.

Nice point Dave!

I agree nice point Dave T… See personally I say that it sounds like a lot of red tape to try and make sure you are always on the right side of the law… Personally I say that if you want to live a happy life then you should really try and do business where you don’t have to worry about being sued in the first place. BTW that was just a copy paste off of a website that explained the law… Lease options were wonderful for many years IN MY OPINION! Now I just personally don’t care for them. Notice I said personally there pilot76180 I know you teach them or something and I am really happy for you that they work. Thats awesome! No need to get so defensive. I also prefer Rocky Road Ice Cream… Is that your favorite?

uuuhhggg…Rocky Road…I loathe marshmellows…can’t even spell it right!

And indeed many, if not most, of them are predatory. Especially RTO scams.

The main problem is that most people see MONEY they don’t see People…