Lease Option Question - re: Return of option fees .
Question:
Your lease option book states cases when the Tenant buyer is unable to buy or qualfy for mortgage You return Option Fee plus $500 for the inconvenience and for liquidated damages. I sure would like to avoid that kind of contingency.!!
Answer:
No, I ONLY return if I can't sell due to something out side of MY control. It has ZERO contingency on them getting a mortgage or choosing to buy or not buy. Please read that section again ;-)
Question:
Our declining market may make this worse; property may be biggest problem due to continued down trend and lower values. I'm a long time appraiser, I agree appraisal report values can vary easily 45 up or down from perfect middle. Many California markets are likely to continue Down a lot. Thus your advise is what... focus more on Co-Op deals and not Sandwich deals.....yes, No ??
Answer:
I like that idea to do the cooperative lease option and flip them to an end tenant buyer.I am more likely to do those also in my market with the downward trend.
Question:
House value may decline below the set lease option contract Option-buy price.. in 2 years Then buyer would not want to buy, unless price is Lowered. Any suggestions?? beyond rolling with the market, re-negotiate ......OR______?
Answer:
True they will not want to buy, but they do not have to buy either and you only have to sell for what you agreed to sell for. They do not get their option fee back. Make sure when you buy you have longer then the the 2 years to buy from the seller (if that is what you are giving a buyer). I like to get double from the seller to what I give my buyer. This way I can always put another buyer in and have another 2 years with the property. I also assume you are talking here about a Sandwich lease option where you are still involved.
Remember also you ALWAYS can renegotiate with the seller to get a better price, lower terms, or not purchase at all. It is the beauty and safety of a lease option.
Question:
HOW do you adjust price 2 years down the road; What would you link or track price to??
( ? compare change over time using average price of 3 bedroom property's at start in xxxx Zip code VS at end average at time of exercising the option.
Answer: I use the profitability worksheet in my Selling on Lease Options Course.
I hope that helps..... feedback? comments? Is anyone reading these?
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