Leae Option With Simultaneous Close
Just wanted to hear some feedback on avoiding problems with selling a property I have on lease option. I.e. how to avoid buyer lender issues? Should I disclose the fact to the buyer? What type of credit buyers are easier to work with in this process?
Plan your exit strategy before you begin. Discuss this with a mortgage broker to make sure seasoning won't be a problem in your area. Lenders will look at the comparables very closely, so don't be too greedy in the price increase. If only 5 percent above the comps, it should pass.
[addsig]
Thanks for the response. Actually in particular I have a potential investment in a single family on a lease option because the sellers moved, can't find a buyer, and can not afford two payments anyomore. The house needs 30-40K in cosmetic updates to put it in top sales range. The realtor will not take a commission right now if I list with him when we sell. I know him and comfortable with this arrangement. I have figured on selling it 5% below market comparables for a quick sale, even at 10% below market I will make money. So I am really only concerned about lender issues with concern on title seasoning. The house will be priced in the 450-470K range so I will probably get alot of A credit buyers. Does this pose more or less of a problem with lender title seasoning issues, even f I can prove the repairs that have been made.
Tbarber
Many lenders care about chain of title issues. Most of the time the lenders concerns can be satisfied with proof of the repair dollars. Before, during, and after photos along with contractor bills or receipts work best.
Is the property with a realtor now? Do you have to bring cash or a new loan to the table?
If you can assume the existing financing, you can put the property into a trust. Simply assign the beneficial interest over to you or your company. This solves the chain of title issues.
I had a similar situation. I had a lease option that I had been marketing as a 'rent to own'. A realtor asked if she could show it and her clients made an offer on it. I wanted to sell this property and this seemed to be an opportunity to do so. How do I sell a house that I took possesion of with a lease option? I tried to set up a simultaneous closing and got a LOT of resistance. Should I buy it? If I bought the house from the original owners then I would have a 'chain of title' issue, and the new owner's mortgage company might object. Did I want to 'rent to own ' it? Not really. I called my attorney. He suggested I place a 'note' on the property signed by the owner and then I would be paid ,at closing , because I would be a 'line expense' and become part of the closing items. I contacted the owners, sweetened the original deal I made with them and they signed the note. The note was simple. It said that the mortgage would be paid, all closing costs would be paid by me (the sweetener), and the owner would get the money he and I agreed upon. The ballance of the money was mine. It worked . Another attorney did the closing, and everything went without a hitch.
I'm not saying that this is the best way to close, just another way to get it done.
Joe