Lease Option 2 Sub2

Hi guys, my first post… I am excited to have found this place, I am alone in this craziness!!!

Here is my situation. I am new to this, and this is my first “deal” which happens to be my first house I want to buy. I have a lease option pretty much under wraps…the only thing I don’t have is the numbers plugged into the option.

The seller is giving me the house at loan balance, she wants to get out of dodge and just wants to pick up and leave, I am taking the house as-is on a lease option. The balance is 198,000. I told the seller I will pay All Closing costs. The option will be for one years time, so I have enough time to figure this out, but the sooner the better.

I am not sure what the market value is in relation to the county’s tax website which gives a taxation on the value of 232,00. How can I set this deal up so I can %100 finane and pay her closing costs. Every bank or mortgage place I go to practically laughs at me when I talk about refi on a lease option (even though it is splattered everywhere pertaining to lease options)

If I get the seller to Deed me the house, I would assume that trumps the whole lease option contract… but I still am not sure how this plays out at the closing table or with financing.

Please Help.

Hello Mr C,
You are talking about two different things here. Take one at a time…and don’t choose either. First closing cost on a lease option might be as much as $50 bucks at the county to record the option. Get the contract longer w/ 2 one year extensions. You need the flexibility.

Second, Closing fee’s on a purchase of 198k will be thousands, check with a Mortgage Broker that is part of your investment team. No not the bank, but a mortgage broker.

Third. Buy it “subject to” as she wants out now. You take title now, fee’s on the West Coast are about 400 bucks. Check with your Title lady on your team. This property is a great sub2 purchase candidate. Give her pay off in one year if you choose , but ask for 2 or need options ! You are an Investor.!!
If you get the title you will have to get refied when it is time to pay her off. Years down the road hopefuly.
Hope this helps, Darin

Lease options don’t require financing today only at the end of your lease…or sooner if you prefer. If you are going to TRY to value this home by checking the counties website…you might want to call and see if your day job is still available. Call 3-5 realtors describe the home have them do a drive by and tell you what it is worth. Ask them to run comps, ask them to bring up all the homes listed sold and pending in the 180 to 250k price range to see if your Deal fits any where in there. You may then have an Idea what it is worth.

lol. thanks. I still have my day job… However, I am trying to loose it.

I am wanting to buy this house for me and my fam at this point, you see… sub2 normally would be great, however… she got took on the Primerica scam and got conned into believing 8% was a great deal… on top of paying bi-weekly… so you see… I want to refi… the monthly mortgage is 1600 not include tax and insurance which is another 200.

I am confident in my assesment for I have actually went to a house down the block that just sold for 225 that was not even as nice or as much land, I have also checked the comps on the county website and… 240ish is pretty solid.

so, I am trying to find the best way for me to finance this house… banks and brokers act like they never heard of refi on a lease option…though that seems “so common” around this type of biz…

so now I am faced with… how can I put tenate/buyers into a house and tell them they can build equity with rent credits and sweat equity when I myself can not seem to get this to work.

this is where I need nice people like you to help a noob like me. :biggrin

thanks much.

Thanks for the get back Mr C,
Maybe a little of the cart before the horse but you are on the right track.
I too have found that refiing a sub 2 just means you are getting a new loan to pay off the existing note. So I am afraid it is going to be as if you are “just purchasing a home” even if you lease op for your self.
If you are not able to currently get financing the conventional route I would go with the lease op as she may not take the sub 2… It appears to be back of market as far as the price so there is an up side there. Do not take a one year lease unless you are 100% sure of getting your financing within 6-8 month’s. Minimum two years on the lease and I would write in tenent buyer has the right to extend the lease for one year two times.
I would convince her to take the sub2 by setting up your payments thru a 3rd party servicing company. ie: This way you pay note servicing co., they make payments to her mort co. You won’t have to wonder if she is making payments to her mort co. And she can check with noteworld any time to see if you are current. She doesn’t have to track you down in Bermuda while golfing to see if you are current. It costs you about $185 to set up during escrow and 8 bucks a month . At the end, meaning when you do get new financing using your new track record from a reputable servicing co, oh yeahhh. They will also supply loan pay off figures,interest statements and keep your seller informed of your good behavior.

You could also offer her a signed quit claim deed held at noteworld deeding the property back to her if you go 30 days late on any payment. There by she does not have to go thru expensive foreclosure if you default, just a couple of certified letters to you and then a call to noteworld instructing them to follow the terms of your note with her which they have on file at inception of purchase.

It is a win win. Be a good salesman and sell her on this and get sub 2 take title and it might be possible to get a HELOC down the road. I’m hoping to find someone online here who may shed some light on that subject.

It appears you have all the ingredients that you are looking for ACCEPT the amount of the mort payment. Nothing you can do to refi that at this point. You could ask the seller to pay part of it. You could ask how much of the monthly she is willing to make being as the current mort payment is above current rent rates. She may make 2-300 of it just to unload it. Be sure to have her send it to noteworld as you will be sending the difference.

Your thoughts ?Darin

Thank You Darin, I am sure that I will be able to finance within the year for a standard purchase… though as you mentioned, I would like to make the most and capture some equity to do some improvements.
I think I could swing the buyer into putting the deed along side a quitclaim into escrow… being new w/o experience… I am not sure how to handle the due-on-sale clause. I’m not sure if I could deal with me causing the trigger and not able to pay get the loan within 30 days … then again, I am not even sure if that is to worry about.

As far as the terms, they are set, I can’t go back and request her to put money into it when she is willing to sell the house at loan balance plus give me credit in the full amount of principle I pay each month before I finance.

I am just trying to see if there is a more SAVVY way that I may not be aware of.

Thanks for being here. :beer


It would be nice to get a equity line but I don’t know how on sub 2,
I wouldn’t put the deed along side the quitCD in escrow , have it filed at the county in your name on day one or else there is no point in the QCD.
You also said some thing interesting…she will credit full amount of principle each month.
So if it is lease op then she will credit you say 128 a month approx towards down ? not bad.

This really could be a good sub2 as you would also get the interest deduct from the loan as you would be paying it. You are going to pay it any way! Might as well get the write off.
The bank doesn’t want to call the loan due,yes they could but why would they. They are in the biz to collect the interest, if it is a performing asset for them they don’t want it due. There are no bank police looking for title changes on their loans. Ever try to buy a house from the bank ? If you do It will take them weeks and months just to find a caculator. They will never find you and if they do they will have to go back and find the Calculator !
Get a loan statement from her, front and back, change the mailing address to you or note world.
Here’s to your family’s new home, D