Today, options to purchase, lease options and lease purchase agreements are three different financing documents. The variances are state specific and not all states have identical laws. Before entering into an agreement with a seller, buyers should obtain the advice of a real estate lawyer or a knowledgeable real estate agent/broker. The information below is an overview and is not meant to be construed as legal advice.

Basics of an Option

•·                        Buyer pays the seller option money for the right to later purchase the property. This option money may be substantial or as little as $1.

•·                        Buyer and seller may agree to a purchase price now or the buyer may agree to pay market value at the time the option is exercised. It is negotiable. However, most buyers want to lock in the future purchase price upon inception of the option.

•·                        The term of the option agreement is negotiable, but the common length is generally from one year to three years.

•·                        Option money is rarely refundable.

•·                        Nobody else can buy the property during the option period.

•·                        The buyer can sell the option to somebody else.

•·                        If the buyer does not exercise the option and purchase the property at the end of the option, the option expires.

•·                        The buyer is not obligated to buy the property.

Basics of a Lease Option

•·                        Buyer pays the seller option money for the right to later purchase the property. The lease option money may be substantial.

•·                        Buyer and seller may agree to a purchase price now or the buyer may agree to pay market value at the time the option is exercised. It is negotiable. However, most buyers want to lock in the future purchase price upon inception of the lease option.

• During the term of the lease option, the buyer agrees to lease the property from the seller for a predetermined rental amount.
• The term of the lease option agreement is negotiable, but the common length is generally from one year to three years.
• The option money generally does not apply toward the down payment.
• A portion of the monthly rental payment typically applies toward the purchase price.
• Option money is rarely refundable.
• Nobody else can buy the property during the lease option period.
• The buyer generally cannot assign the lease option without seller approval.
• If the buyer does not exercise the lease option and purchase the property at the end of the lease option, the option expires.
• The buyer is not obligated to buy the property.

Basics of a Lease Purchase

• Buyer pays the seller option money for the right to later purchase the property. This option money may be substantial.
• Buyer and seller agree on a purchase price, often at or a bit higher than market value.
• During the term of the option, the buyer agrees to lease the property from the seller for a predetermined rental amount.

The term of the lease purchase agreement is negotiable, but the common length is:

• generally from one year to three years, at which time the buyer applies for bank financing and pays the seller in full.
• The option money generally does not apply toward the down payment.
• A portion of the monthly lease payment typically applies toward the purchase price.
• Option money is nonrefundable.
• Nobody else can buy the property unless the buyer defaults.
• The buyer typically cannot assign the lease purchase agreement without seller approval.
• Buyers are often responsible for maintaining the property and paying all expenses associated with its upkeep, including taxes and insurance.

The buyer is obligated to buy the property

All Manufactured Home financing is going away for at least the foreseeable future.  If you have a deal in progress and it's a manufactured home, please call your loan agent.  It might not be able to be closed as of this week

New Anti "Spinning" Rule will stop any non owner purchase if the property was previously purchased by an investor in the last 90 days.  Many lenders are extending the rule to 180 days.  This started last week and is not going away anytime soon. 

The U.S. Department of Justice has obtained a record $2.725 million settlement against Los Angeles apartment owners for alleged rental discrimination.  In a lawsuit brought in August 2006, the Justice Department claimed that Donald T. Sterling and others engaged in discriminatory practices, such as refusing to rent to African-Americans, Hispanics, and families with children, refusing to rent to non-Koreans in Koreatown buildings, misrepresenting the availability of rental units, and preparing internal reports of tenants' racial profiles.

Under the name of Beverly Hills Properties, the defendants in this lawsuit own and manage about 119 apartment buildings containing over 5,000 apartment units in Los Angeles County.  Their agreement to pay $2.725 million is the largest monetary settlement the Justice Department has ever obtained for rental housing discrimination.  The bulk of the money will be placed in a fund to pay tenants harmed by the defendants' discriminatory practices.  The defendants must also take certain measures to ensure non-discriminatory practices, such as obtain fair housing training and monitor their employees' compliance with fair housing laws over the next three years.  

A free foreclosure prevention seminar will be held on 11/10/2009 @ 5PM in Descanso. Please contact the number below for insturction on how to locate this branch of the public library.

Housing Opportunities Collaborative, a non-profit housing advocacy organization is holding a free HOME workshop, providing homeowners with information from experts like housing counselors, mortgage counselors and real estate and bankruptcy attorneys.

Library: Descanso
Contact: Branch Staff
Contact Number: 619-445-5279

•§         Cover your nose and mouth with a tissue when you cough or sneeze. Throw the tissue in the trash after you use it.

•§         Wash your hands often with soap and water, especially after you cough or sneeze. Alcohol-based hand cleaners are also effective.

•§         Avoid touching your eyes, nose or mouth. Germs spread this way.

•§         Try to avoid close contact with sick people.

•§         Stay home if you are sick until at least 24 hours after you no longer have a fever (100°F or  37.8   C) or signs of a fever (without the use of a fever-reducing medicine, such as Tylenol® Aspirin or ?)..

•§         Follow public health advice regarding school closures, avoiding crowds and other social distancing measures.

Getting a flu shot can be helpful, so be on the look out for locations that may offer than for free or for a minimal fee.

Get ready to get your food served to you by carhops on skates at the new Sonic Drive-In Opening on 11-2-2009 in Vista.. This is the second Sonic to open the other is located in Santee, Ca. Sonic is know for its Lineade, Tots, and Extra Long Chili Cheese Coney's.

Sonic customers drive into a stall and push a red button on the menu board to place orders from their car. Carhops on skates deliver orders to customers in their cars or sitting on the patio.

The restaurant opens at 5:30AM and will close at 12 midnight. Located at 101 Main Street, Vista, Ca.  

Some consumers with exceptional credit reports and high FICO scores are being denied mortgages by Fannie Mae's automated underwriting system because there is a notation in the credit report that the consumer has disputed an item.

 Under the Fair Credit Reporting Act, consumers are guaranteed the right to dispute inaccurate information on any account in their credit files.  Once a consumer disputes an item in their credit report, a notation to this effect is made in the file.  Until the notation is removed, most credit-scoring system generally will not factor the disputed item into the computation of the consumer's score.

However, with the recent surge in companies claiming to "clean up" and "erase" blemishes on consumers' credit reports, some lenders are finding that these credit companies are disputing accurate, but negative items, hoping the consumer will qualify for a loan before the dispute is resolved.

Applications that are denied through Fannie Mae's automated underwriting system, which is used by virtually all lenders doing business with Fannie Mae, are sent back to the lender for manual underwriting.  It is then up to the lender to determine and document whether the disputed information is accurate and underwrite the borrower's credit accordingly.

Again we must ask ourselves what was the bank thinking ---- this home which is not listed with an agent is on the banks website. This bank wants $740,000 for a home that currently is only worth $435,000 to 450,000. Yes, the comps in the area do not support the price that this bank is asking. 

The home has a history of a repaired crack slab, plus it has several other problems, that do not support the price that this bank is hoping to get. I am amazed at the fact that this bank has not one but at least six properties that are not price at the current fair market value sitting in there inventory for over two years.

The Making Home Affordable program is being managed by Treasury and Fannie Mae.  It covers more than 85% of mortgage loans, including loans owned or guaranteed by Fannie Mae or Freddie Mac, FHA loans, and loans managed by about 50 of the major servicers.  For these loans, the new MHA policies and processes are mandatory.   

Good news and bad news
There's good news and there's bad news associated with the MHA changes.  The good news is that it is actually an attempt to simplify and standardize the short sale process, rules and paperwork.  The bad news is that there are tens of thousands of loss mitigators out there who have to be trained before the new program will be implemented in a consistent way. So right now, implementation is patchy at best.

Making sure it is implemented
To speed up the implementation, Freddie Mac has been tapped to audit servicers' files and fine servicers who aren't using the new MHA process.  With this "big stick" and some financial incentives, the program should pick up speed.

It's mandatory
Realtors who want to close short sales will need to learn the new MHA guidelines and use the new standard  forms.  And, yikes!  Things are really different under Making Home Affordable.  There are some small differences based on whose loan it is, but in general, here are just three key changes:

Some of the changes in how you'll do business
Change #1:  There are clearly defined steps which the servicer's loss mitigator must follow in sequence when a loan is in default (or imminent default ).  If attempted refinancing or a loan modification do not work -- then and only then --  will a loss mitigator consider the possibility of a short sale. This is the only time during the loss mitigation process when a short sale will be a possibility.  The loss mitigator will use a specific net present value formula to determine if the lender/investor will net more from a short sale than from a foreclosure.  The decision is strictly a financial one.  This means the short sale attempt will be approved in advance if it is financially to the lender's advantage. 

Change #2:  You will continue to list with the seller, but the loss mitigator sets the price and the listing term.  The listing term can range from as few as 90 days to as long as 365 days.  The servicer/lender still must accept the contract which your seller has approved.

Change #3:  Good news!  Fannie Mae's Servicing Guide Announcement #09-03 clearly says there is to be no negotiation of short sale commissions.  "..closing of pre-foreclosure sales may not be conditioned upon a reduction of the total commission to be paid to real estate agents to the level below what was negotiated by the listing agent with the borrower, unless the fee exceeds 6% of the sales price of the property in aggregate."  In other words, if you've negotiated a listing fee with the seller, the servicer/lender may not ask you to reduce that fee.  

Important work -- helping homeowners in distress
This should give you a quick idea of how significant the changes are for the short sale process.  In short sales there is a lot more to know, so if you are helping homeowners in financial distress avoid foreclosure, you'll want to learn all you can about the Making Home Affordable program.   This is important work and I'd encourage you to -- Get Involved.  Get Trained.  Get to Work.  America's homeowners need you.

With Halloween just around the corner, and the excitement that is mounting with the coming of trick or treating, I thought it would be interesting to find out what your favorite Halloween memory might be?

 My fondest memory was when I was working for a new home builder in Carlsbad, California and we were in the final phase of selling out and the builder decided to throw a Halloween celebration, we decorated the sales center, and invited all the homeowners, children, and future homeowners.  We had a crowd ---I dressed up as my favorite Disney character and a good time was had by all.

Feel like sharing?