Sandwich Leases Options And RE License
I’ve never had a problem in Nevada, but has anybody ever been questioned by any State or local Real Estate Board about doing sandwich lease options for a living and not having a real estate license?
Only by the ones not worthy enough to hold their license (the really dumb ones). My apologies to real estate agents in general who may be offended by my last statement.
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Actually my concern is the opposite. A licensee is considered to have superior knowledge. Technically you can be considered fraudulent for using your license to take advantage of people. Its hard to plead ignorance when your licensed. Realtors have ethics that require them to work in the best interest of the public. Not being licensed is much safer. [ Edited by ChrisSanDiego on Date 06/03/2005 ]
Oh, I agree completely with both comments. I want nothing to do with obtaining a RE license for a lot of reasons, among them dramatically increased liability issues and the loss of significant tax benefits when you are considered a “dealer” by the IRS. My point is that States do occasionally prosecute people that have accepted fees for providing various RE related services w/o a license. I don’t charge fees, of course, but I just wondered if any State would ever consider the spread between my strike price and what my end-buyer pays (my net on the deal) to somehow be characterized as a “fee”
Because of the bankruptcy they may not qualify for a loan within the option period you have granted. I have rented to people with bankruptcy in their past and have had some very good tenants among them. You need to contact their last two landlords or get a record of their mortgage payments if they were property owners. Do not be surprised if they are unable to exercise the option.
You must have a reason for dealing with them rather than find a more qualified buyer.
First consult a good RE Attorney. Get a referral from a friend or a local RE board. Make SURE that attorney is ADEPT in INVESTMENT PROPERTIES- VERY IMPORTANT! There are many ways to accomplish your goals. Lease option being one, land contract being another. Get profesional advice. Spend the $500 or so up front VS. THOUSANDS to get out a bad tenant or rework a bad deal. After you are comfortable with your legal advice, there are numerous financing programs available for individuals like the ones you have described that have gone through a BK.
I doubt if you will find an attorney that will crank out a great lease option agreement. What you need is the right ideas to place in the document. The best, most creative, option agreements that I have seen came from Jack Miller. I understand that he has a book on options that is still being sold. He even has different documents depending on whether you are the optionor or optionee.
One idea that you might try is to have terms in the option that void the option if there are two late lease payments (or other lease violations). You might run this by an attorney to see if this can be enforced.
Another thought is to contact a bankruptcy attorney to see if you may have difficulty collecting rent with the bankruptcy running. My sense is that it may not be a big deal based on my experiece with a tenant I had who filed bankruptcy.
You still did not say why you are so intent on working with this couple.
Regards,
Ed[ Edited by edmeyer on Date 06/04/2005 ]
If he owns the home free and clear you may want to ask him to provide owner financing at a reasonable rate in relation to your credit score. This would transfer title and you would be the owner and he would be the lender.
Ask him to finance the home for three years whereby he has the right to call the balance at the end of the three year term. Make sure he amortizes the payments over thirty years.
This would allow you to show three years worth of timely payments on the mortgage and when you are approaching the end of the three year term you could apply to a lender to refi the home.
Dave
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