We are in a lease option to purchase agreement with the owner since July 07. We suggested this option (upcoming investors learning the business). We moved in without any downpayment (but presented to the owner 1st month rent) and secured the lease option agreement for 3 years with a locked in price. The owner is very flexible. We pay $2100 (includes association fee and escrow $300). We want to work towards owning the townhome, but at the same time work towards paying off bills to build our credit to purchase the home.
Well, we had a job change in the family and we are unable to to meet the $2100 this past month (and pay bills off and month utilities at the same time). We suggested we opt out of the escrow $300 until we can have a better income cash flow coming in, but the owner feels she will not profit from anything (especially since we came in without a downpayment) and we will not have anything to work towards to.
How can we make this work for the both the owner and us. We are looking to present an addendum to the contract so both parties are satisfied.
The owner is also willing to help in our purchase with the property with helping in closing cost and addtl $5000 towards settlement. But with our credit we can not get approved for a mortgage.
Does anyone, anyone have a creative financing strategy so there is a Win/Win in the end? How can we make this work without any lost, but a gain?
This is a real situation we are in now. Email: dkmaaron@aol.com.
You can’t afford the house, so move, and assign the contract to a T/B who can afford it. You’ll get the monkey off your back, pocket several thousand dollars, and the seller will have money coming in again.
You can’t affrd the house, so move out and give it back to the seller.
There is no way for it to be a win win for the seller if you aren’t paying any money.
It’s gong to be a lose-lose for you if the seller evicts you and you get an eviction on your credit report. That will severly damage your credit and make your life very difficult for years to come.
So the final is there is no creative strategy in the mix. Even if I still pay the $2100 a month. Is there a way to split the amount into two payments during the month. Pay the mortgage+assoc fee on one date and the escrow on a later date of the month.
This sounds like a cash flow problem. Can you afford $2,100 per month either in a single payment or in two bi-weekly payments? If bi-weekly would work for your cash flow situation then ask the seller/owner if you can amend the contract to a bi-weekly payment. If on the other hand $2,100 per month is too much then you need to move on.
Yes, it is definitely a cash flow issue. And our income comes in different dates of the month sometime the same week. I glad there is a positive solution. We did have this issue before with the cash flow. Thank you for the option. Feel free to give another suggestion.
Just to follow up on Doug’s comment. It sounds like your arrangement gives you an equitable interest in the property. If you can’t get financing, you may have a case for a full refund of all your escrow payments if your purchase agreement has a financing contingency.
Consult your attorney if you are not able to exercise your option.
I agree that you can’t afford the house. Use a lease option to sell the property to someone else. Collect a down payment as option consideration, collect $2,200+ per month payment, and sell the property for a higher price as the option exercise price.
You’ll turn a deal where you would lose the $300 escrow you paid for several months into a deal that could make you several thousand dollars and $100+ positive monthly cash flow.
This is a win for you, a win for the property owner and a win for the person who purchases the property through the lease option. Everyone wins!