Are Lease Options still the way to go in Michigan? My concern is that if a tenant buyer loses his job after a few mos. into the contract and if I can’t find a replacement I’m left with the lease payments. Is there a way around this? Also because of the falling market what LTV do I have to have to protect myself from future declines?
Thats part of the RISK, you need to deside if you want to take it.
herbster
The risk is only if you are doing a sandwich lease option. Avoid that risk by either doing an assignment or Cooperative Assignment, and by having paperwork that limits your liability and exposure in the event something unexpected occurs, such as you described above.
AJ290 what happens when the seller isn’t financially sound and the home is going into foreclosure or may he sells it out from under you?Of course you should have done your due diligence and clouded the title. What if property taxes are delinquent and possibly multiple liens on the home? OK I answered half of it.
herbster
Herb, again, the risks you are talking about are specific to a sandwich lease. If you assign the deal, of course, that doesn’t affect you.
But assuming you do a sandwich lease, there are certain measures you can take to reduce the risk greatly. You already alluded to clouding the title. This can be accomplished via a Memo of Option or with a Performance Mortgage.
But before you even get that far, it would be prudent to run a title search to see exactly what liens are on a property before signing on the dotted line.
Finally, once that is squared away, you make your payments direct to the lender, or to a third party escrow company so you can be assured the money is going where it’s supposed to go.
AJ, I agree with you whole heartedly except for the part specific to sandwich leases only. No matter though the original post sounded like a sandwich anyway. herbster