There are so many ways to close your lease option. They all have pros and cons. Please tell us the way you have done it that worked for you.
Thank you…
Wow, there are many ways.
And all these years, I’ve only seen one. T/B gets loan, T/B closes escrow, T/B becomes homeowner.
Pros: As seller, you get $$$ in hand in a big lump sum (hopefully).
Cons: No more monthly rent checks coming in (and no more tracking down T/B to get rent check, either) wait, is that a pro or con?
Raj
Hi Raj,
What you are saying is the general idea of the sandwich lease. However, investors have close these sandwich deals in many ways.
For example, some investors use a CA agreement, some use quit claim deed or an option release agreement to release the memorandum, some just assign the deal to other investor or the T/B, I have even heard of a double closing on these deals.
Personally I have not done one, but I’d love to hear how you done your deals. If you have done any or all the techniques I listed above.
No Gent, there is still only ONE way to “close” a deal, and that is to sell the property.
I wasn’t talking about sandwich l/o’s. Don’t believe in them. They are disasters waiting to happen. More so in today’s RE market.
If you own a property (or control if you prefer to do sandwich l/o’s), for you to “close” the deal, the t/b HAS to get a loan and purchase the property from you, period.
Never heard of a CA agreement. Quit claim gives the property to the t/b, but doesn’t close the deal. Assigning and double closes may be doable in a sandwich l/o, but if that’s the case, read above.
Maybe I’m just not following the question.
Raj
I see where you’re coming from Gentillionaire. The only l/o deal I have going is sandwich (which like Roger said is all but impossible to double-close as-is these days, primarily due to title seasoning).
In my case, my attorney suggested that when the t/b is ready to close I simply draw up a contract directly between buyer and seller and put my “fee” on the HUD for how much I’ll be netting. I’m not worried about getting screwed out of the deal because I recorded an affadavit & memorandum which clouds the title. AND the seller signed it (which wasn’t even necessary from what I understand). Should close smoothly if and when my t/b gets qualified, as far as I can tell.
Fee for WHAT exactly?
Raj
The “fee” for the difference between what I agreed to buy the house for and what I agreed to sell it for. It comes out of the seller’s proceeds.
As far as what the fee will be called on the HUD I’m gonna leave that to my attorney.
Therein lies the problem with that idea.
Unless you know exactly what your intentions are from the start, what you are basically doing, at least in the legal sense, is acting as a real estate agent without a license. Your “fee” would be considered commission in your scenerio. That’s bad, big time.
Raj
I think what nus1997 is saying is by recording the memorandum, he will have to release it for the property to be sold to the T/B. When he release it using either a quit claim or option release a consideration has to be paid and that’s what is referring to as his “fee”.
Is that the case Nsu1997 ?
Raj, do you take title from the owner so you can sell directly to T/B?
what are your steps?
No, what he said was that he was told to draw up a contract between the end buyer and the homeowner. If you are not a principle in the transaction, then you are an agent. If you don’t have a RE license, then that it bad, with is why HOW you choose to do things is most important in this business. You need to know WHY you have to do it a certain way. While I’m sure that giving out potentially bad advice may hurt the attorney’s business if it gets out, it still ain’t the stiff fines that YOU’LL get if you get caught doing it.
Yes, you ALWAYS get title. Personally, I buy them and resell, either conventionally (more or less) or with a lease/option.
Raj
Gentillionaire that is the plan, but be very mindful that I absolutely would not have bought it this way if I knew what Raj knows when I bought it. Essentially, sandwich lease options are obsolete. There’s not a conventional lender this side of the moon that will simultaneous-close these, primarily because of title seasoning. They want to see the current owner on title for a certain amount of time, usually 12-24 months. If I double close I’ll be on title for only 5 minutes. I’ll be considering myself very lucky if I get out of this thing clean on the other side.
Roger, that’s a good point. Luckily I’m a principle in the deal because I have equitable interest in the property. But because I wasn’t properly trained I really could have screwed this up big time. I did this deal based on what I learned from a 15 year old tape set. Just flat out obsolete info. Luckily I have an attorney who’s closed these before so he’s got me covered (so he says lol).
I totally agree, the cleanest way to do L/Os is definitely to get the deed first. No question.
Yes, you’re a principle in the transaction NOW. However, if you draw up new papers between the owner and the end buyer, you cease being a principle and start being an agent (that is, if you plan to get paid).
Hopefully, your attorney has something better in mind. Good luck.
Raj
What if you have a lease option with the owner and your T/b tells you he plan on exercising the option in 90-100days.
Knowing that, wouldn’t it be a good idea to take the property sub-2 using a land trust?
or Would you just use a warranty deed to take title?
WOW, Roger you are absolutely right! :shocked Didn’t even think of that. All of my agreements with both the buyer and seller will be null once the buyer buys directly from the seller. MAN!
How about this: I had to do a bit of work on the property (minor repairs, cleanup, etc). Would you suggest I file a mechanics lien, then just have the lien released at closing for a fee equal to my spread? I’m thinking this would perhaps be considered equitable interest.
Or how about this. Since I already recorded an Affadavit and Memorandum of Lease Option on the house maybe I can charge an “affadavit release” fee or something to that effect?
So glad you told me that dude. I really could have been the odd man out. From now on I get the deed or I say NEXT!
How about taking title into a warranty deed to trustee? Regardless of how soon the t/b plans to exercise. That puts the property directly into the land trust. As a matter of fact it’s part of the trust itself.
Don’t know exactly what you have going on or the spread that you are trying to collect.
Filing a mechanic’s lien may work IF the seller agrees to it (or you have a contract with him authorizing the repairs) AND the lien reflects the cost associated with the repairs. For example, you’d be hard-pressed to explain a $10K lien for $1500 in repair, should you have to in court.
Same with a release fee. It has to be in line with reality.
The easiest way to handle this and still get paid is to a simple option assignment, assuming that the contracts allow such and the end buyer’s lender will work with it.
Raj