Legal Action In Sandwich Lease
This is the only property I purchased on LO; I leased a TH form seller at $1700/m and put a Lease-Option buyer in it for $3000 down and $1450/m (prop had some equity). It has been a nightmare! The buyers have been bad on payments but I always paid the seller ($1700/m) on time. The buyers are over $9000 behind and I finally filed eviction (atr will goto court 10/4); I was trying to work with them on payment plans etc.
Since I was late (due by 15th) sending the check at times (but always send before 30th) the seller filed a complaint at the BBB ! He has always been threatening with legal action. I could only send him $800 for Sep (paying all this money from my pocket,borrowing from cc etc).
I will try to get another LO buyer as soon the the home is vacant this week.
Realistically what legal action can he take?
Now, I cannot pay him on a vacant home.
It sounds like the seller had asked you to get the work done and you did not. Is this true? If you do not perform the work to keep the house in good condition, then the seller is probaby within his rights to get the work done and bill you.
Think of it this way. You could not have purchased the house with wood rot. No mortgage company will loan on a house with obvious wood rot.
Ask the seller for a copy of the home owners insurance invoice and for the handyman receipts and invoice. They are probably your responsiblity to pay, but just verify the numbers.
I would think that you are not resonsible for the lawyer fee. Ask the seller where in your L/O contract are lawyer fees mentioned.
Quote:
On 2007-10-02 19:54, fdi wrote:
Does the L/O specify that you maintain the property in a certain manner, such as repair the rot, or perform other maintenance?
No It only states in the contract that I inform them If theres any major repairs to be made.
Poor structure + 1 hurricane + 2 hurricanes + 3 hurricanes (assuming these did not all occur on the same day then you have your time ingredient) = wood rot.
This sounds more like a Land Contract than a Lease Option.
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It was an Old Fixer upper.
A few weeks after the storms we found that the roof was damaged and water ran into the home so the roof was spot patched lol, and the wood damage was clumsily replaced or buddyed up.
( I made the mistake of saysing is was rot when is was infact Water damage.)
You can assign a Contract, but you can never assign away your liability or obligations to perform should the Tenant fail to do so. Even if both Seller and Buyer sign a waiver of liability with you, if your name is on the Contracts at all, you will be named party to any suit.
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"A deal is only as good as the quality of your Contracts." --Me[ Edited by LeaseOptionKing on Date 10/19/2007 ]
Does your agreement with the owner of the property state you will pay him every month, or just when you get paid?
It probably says you will pay every month....So, you should pay.
Its the right thing to do.
Good luck, Brian
I used my contracts (separate for Lease and Option). Being the right thing to do, I did pay him on time all these months but don’t want to do it any more unless I get some money from the buyer. Ideally I would like to get out of the situation.
In a sandwich lease does the seller evict the investor (who is not living there)? I can ask the buyers to leave (may not have to evict them) and find another LO buyer but that will leave some vacancy period.
So the worst is him evicting me? He cannot force me to exercise the option?
He was acting smart/ nasty on the phone; wife being a lawyer; said she was very upset over the process. He starts calling me 1st of every month for the rent which he eventually gets by 10th. So I left him a message saying that they have no reason to be upset but should be thankful I pay them out of my pocket.
[ Edited by SKrei on Date 03/14/2007 ][ Edited by SKrei on Date 03/14/2007 ]
It sounds like you may have used the Contracts that you are supposed to use with your T/B. The appropriate Contract is combined. An Option is a right not an obligation, so no the Seller cannot force you to exercise.
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You should have long evicted the Tenants. What did they pay you in consideration? What did you pay the Seller?
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My option with seller has $10 consideration; not much equity. Buyer paid be $3000. I did not evict them bec they were really trying (unlike some dead beat tenants) - loan, cash advance from job, wife just got job, tax refund coming etc. (and am worried about paying on a vacant home)
Well, the seller called back (after being nasty earlier) saying that he wants to work it out and would push my due date to 30th (from 15th) so he can still get the money to pay mortgage.
I was just thinking the worst case.
One investor LO a prop from seller; was unsuccessful in getting a buyer for 4-5 mts and then returned the home to seller; can the seller force you to keep paying until the term ends?
In theory, yes. In practice, a judge will probably require the Landlord to make a good faith effort to try to recoup his losses. If you had a better Contract (one Contract), the Seller would be glad to get the property back without a foreclosure.
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Good post...
I am doing a lease option similar to this one except I am not losing any money and my contracts are air tight. My tenants were having a hard time coughing up the rest of their option consideration by the asigned deadline, so I changed the deadline to avoid encouraging them to give up, not pay rent, smash the house, or whatever is worse. They now have until the end of the term to pay the rest owed.
Thanks,
I was wondering what to do in the worse possible situation.
In the worst scenario, pay them to leave. A thousand will do it if you couple it with a speech about what will happen if you evict and get a judgment, etc. But I feel you should always collect the full amount before allowing the T/B to move in.
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What mcole said. You totally did this business wrong. You probably should take your lumps on this one and not attempt another Lease Option in the future.
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Its a good idea to ask for a huge down upfront but its tough to get that. And the rent/ lease payments dont go up with the price of home/your mtg payment. Most of my properties have a neg cash flow; I wait for the chunk at refi.
e.g. I buy a 3bd/1ba/2car SFH Sub2; mtg=1700/m; mtg bal=215K; value=235K. So the seller is OK and I take over the payments. I could never get 1700/m for it but I could sell it on 1 yr LO for $240K-245K at 4000 down & 1400/m
Please advice.
I am having a tough time getting a LO for $4000DN and $1400/m but do have a few interested renters. So my shortfall will be $300/m (since the mortgage is $1700/m). Initially I had asked the seller to pay 1 extra month mtg (buying Sub2).
So if I rent it i will get $1400 deposit + $1400 first months rent (seller pays mtg for this month)
Or I may sell LO at $2000 DN (since they already have $1400 deposit) and 41400-$1500/m
The deposit or down will cover the monthly loss
Any suggestions?
Quote:On 2007-10-22 17:31, chilln2music wrote:
How do you get above market rents without dumping any money into the house?By not treating it as a glorified rental like most investors do. I treat RTO like financing, so buyers respect it and are willing to pay what they would pay to buy the place.
Sounds like a bad idea to me. Espeacially if you want to make long term partners with the investor.
Only 40-50% of TB actually stay their entire term, and the percentage is even lower for those that stay and purchase the property.
As an investor what is my incentive to go with your program? What guarantees do I have that I will not be stuck with the property and have to find a tenant myself?
On a deal like that I would not go for it unless everyone involved got their money on the backend.
Why should I take the risks of being stuck while you walk away with your 4% and no risks?
What if after you go through the process of buying the house for the tenant buyer they back out of the deal? Do you have a way to at least make them think twice before doing backing out?