What Do You Do Now?
You've lease optioned your home (one in which you hold a mortgage).
You do a 3 year l/o, after 3 yrs the lessee's fail to qualify so you bump the option price and rent 5-10% and give another 1 year option. Lessee's makes every single payment on time for a total 4 years. But still is unable to obtain mortgage financing.
For personal reasons, you decide you want them out because you want to sell home outright.
I mean after all, the lessee's failed to fulfill terms of Lease Agreement and it's Purchase Option right? How hard would it be to evict for non-performance? How would a court look at this situation? Sympathy?
I mean after all they weren't able to clean up their credit and/or save a down payment...right? Not your problem right?.
hmmmm?
Yikes. Problem is you have great renters. If I was on the jury, I'd be on their side, big bad investor taking these poor people's money. <IMG SRC="images/forum/smilies/icon_rolleyes.gif">
Have you intervened to help get them qualified? Do you have a good alternative lending broker you can work with?
I'm in mortgages and there are programs to 100% LTV (and some even to 103%) that go well into the 500's on credit scores. My advice is go to your REI club, find someone who specializes in refi'ing L/O's (because the requirements are lower) and get it done![ Edited by lassitermarketing on Date 03/08/2004 ]
I don't see where they failed to meet the terms of their lease agreement or purchase option. They haven't failed to pay their lease and an option is just that: an option.
If they are current on their payment and still have time left on their lease, you can't legally evict them. A better idea would be to sell the home with them in it. If you have rents set correctly, it should be an attractive deal for an investor since it comes with tenants.
-Chris
p.s. Some people are just flat out bad with money and never have two cents to rub together. That's why there is a rental market
[addsig]
I would second lassiters comments, find a good broker that specializes in refi's for L/O's. I don't know how bad their credit is, but with an option payment, rent credits, apprciation, and on time payment history, they should be able to get refi'd fairly easy? Good luck, hope you can get it worked out to everyone's benefit.
How did you structure the deal? Did you keep the lease and option separate. If they do not exercise the option and the lease is up, I don't see what the problem is. The lease is over! If you were careful in structuring the deal (and hopefully used an attorney), then asking them to leave or selling the home to someone else shouldn't be a big deal. There's an excellent article in this forum that I read a while back to keep the tenants from screaming I HAVE EQUITABLE TITLE! If you find it then read it,
I can only give an example. I like good renters and yes there are some that will never climb the long long road to home ownership. They keep paying for their childrens education. and helping out every time somebody gets ill in the family and on it goes. I luv them and here is how I handle it.
End of L/O. They feel they cannot handle a refinance cause their credit report is in the 500 or oh my god less. I then do a refinance of the property and get the maximum loan possible without mortgage insurance. I then increase the price of the dwelling and take this full amount back in the form of a second trust deed. I write it for five years with an option to extend another five years. I now close the escrow and pick up the money on the refinance and whatever sum they could come up with in cash and yes it was once $500. I then sell the second at a discount, or I may merely borrow on it for a set number of payments. After all they will be paying the mortgages. I always give a full recourse to the lender who buys or lends on the second. Why, cause I get a better deal, they pay more money for the paper. Now I have sold the property, but wait, we are not done yet. As time passes, I watch the market and if it goes up again why I will try and refinance them again and I will charge a point or so for my skillfull help in handling the on going deal. I have in my time gone up to over seven years until finaly I was totaly out. It actualy is a rather good source of income and playing with paper is fun.
As I say you never want to waste a good paying renter. It can go on and on and on.
This is called the Gradualists Approach
and it pays well.
Cheers Lucius
I see your problem everyday all day long in my area. Our percentage for people actually getting a loan on a land contract is less than 25%.
I actually had someone qualified for a mortgage in SEPT 2003, I called her (because the owner asked me to) and she said she didn't feel like buying the property. I told the owner and now he is trying to get her out.
Pgh is in financial crisis, I would rather take 90% of the apprasied value of the house and pay the closing costs for the buyer.
Some areas are hard.
Well good luck I can understand what you are going through
Lori
[addsig]