Option Fee As Downpayment?
when using an option to buy a property, does the bank consider the option fee as part of the down payment when it comes time to excercise the option?
when using an option to buy a property, does the bank consider the option fee as part of the down payment when it comes time to excercise the option?
Hello Gino,
In most lease option contracts the optionee provides the optionor with an agreed upon amount of monies as a consideration for the option to buy for a set amount at a later date.
Most of the time the contract is written to state that if the optionee exercises his/her option to buy, and is in good standing and not late on lease payments, then the option consideration given when the contact was initiated is considered as a downpayment toward the purchase price.
My contracts state that should the optionee ever default in his/her obligation to pay his/her monthly lease payments on time he/she forfeits his/her option rights. (You may or may not choose to enforce this clause at your discretion). Good Luck.
Dave
[addsig]
It is standard practice by lenders to do so; of course, this is barring any contrary language in your Agreement. You will most likely have to prove that you actually received that money. The neat thing about using lenders that consider it a refi is that down payments are not as important (and also can be gifted). They will just loan based upon the appraised value (or sale price, if that is lower). [ Edited by LeaseOptionKing on Date 07/28/2004 ]