Hi,
I have the the lease option process down. However, I have one big question before I start up with these. What happens if the seller can’t deliver clean title when the buyer decides to exercise their option to buy?
I you were in a sandwich lease, if the buyer was still interested, you could offer to find them a different house and apply their option fee and any rent credits to the new house. If they simply wanted out, you would have to refund their option fee under those circumstances? The contract would have to state somewhere that the refund of the option fee ( and possibly any rent credits) would be the the limit of the damages? :help :beer
We check the Optionor/Seller’s credit and verify the marketability of his title before we initiate the Lease/Option.
If we haven’t done this, and just expect the Optionor to deliver the title to us, after giving him a wad of cash, then we can call ourselves, “Dumb Butts.”
Meantime, our professionalism sucks if we haven’t covered this in our lease/option agreement. The Optionor not only needs to deliver a marketable title, but in the meantime, must close all open lines of credit secured against the property …as a condition of the lease/option agreement.
After that, if the title becomes defective, then the Optionee has a right to recourse, which may include return of the option money plus all rents paid during the option period, plus legal fees, and maybe punitive damages the court may deem appropriate.
And then we can haggle in court for at least five years and come out of pocket about $25,000 in legal fees and court costs, and then hope for a judgement in our favor. Then if all goes well, we’ll have a $50,000 or $60,000 judgment against the Optionor. Then what?
The Optionor will likely file BK on us. Why?
Because the Optionor had no equity, or money to pay for a conventional sale then, and now has even less money. So, now what?
We’ve got a piece of paper that is worth the same as a used roll of Charmin.
Meantime, we’re out the $25,000 in legal fees, the rents, and the option consideration. Why?
Because we’re “Dumb Butts.”
:beer
javipa tell it like it is. A day without javipa is like a day without sunshine. :beer
Hey Java,
I’ve only done 6 L/O purchases but I gave the seller nothing in option money. They just wanted out and wouldn’t do a sub-to. I don’t think I’ll ever give a option consideration to buy. If they want to sell the they sell my way or they can keep the thing. Not worth the trouble. But as for providing clear title, it is a crap roll in my opinion as you said the contract is as good as a roll of S*&t paper when the seller want to file BK.
HEY if this was easy we wouldn’t lawyers huh? They would all be real estate investors… :biggrin
JLondon,
When you do a L/O it is a 2 way street. Now when you get the property and you are ready to do a L/O they could tell you it is their way or the highway just like you told the seller you got it from. Only new wholesalers would act like that.
What?
All I am saying is treat the seller with respect. A lot of sellers read this board and when you do assignment or sub2 the chances the seller will do assignment or sub2 with more then one person at the same time because you are not giving the seller anything to look forward to. Bottom line.
Act like a true and honest person when you do a deal not like my way or the highway.
JLondon,
I totally agree with you. BTW, how come it’s so hard for people to believe we can buy with no money down?
On the title issue, I’ve locked up properties that I had no idea regarding the marketability of the title. However, I’ve had to walk away from deals I thought were so juicy my pants were wet… all to find out there was a whopping, deal-screwing second mortgage on the property. :banghead :banghead :banghead
I think the more money I spend looking, the more sellers I can find that will walk with nada. FWIW