Closing Cost
When Talking with Someoneabout L/o Versus Selling out right . How does everyone come up with even close numbers for closing cost,Att fees ,ins etc . Is there a formula for all of this . Hope this dosent sound Like a stupid Question But I am Role Playing My mettings with people and I seem to be looking for answers a lot latley . Thanks guys
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Quick Edit
Think there is some confusion: I have sent out mailing and have put out signs. to find sellers for houses that I can Lease. Then turn Around and lease Optionto T/Bs. I am role playing with family members on How I would go about talking to sellers. I try and include a portion about how much it would cost to list with a realtor or even fsbo and sell conventionally.
Just trying to make best presintation in as few wordsas Possible , But still get the point across.
I am searchin for what I think are percentages of selling amont (Normal selling method)for closing cost an owner would have to pay to sell thus cutting there net amount . hope this helps. tracy
Basic closing costs:
6% Realtor Commission
3% Other Closing Costs (title, attorney, tax prorations, transfer taxes, recording fees, etc.)
Could also have repair credits and other buyer discounts.
I would purchase the properties subject to the existing financing instead of leasing them from the owner. It provides a lot more protection for you.
You can then either sell on contract for deed or lease option.
Good luck.
Sounds good, thanks for the quick answers.
Two more questions:
Regarding your nonexclusive, so you are letting them keep their listing or whatever they want to do while you are trying to find someone for the house? With these type situations are you doing cooperative assignments or Sandwich Lease Options? Either way, how are you approaching the seller and explaining to them what you do and what you offer? Meaning, are you telling them that they have nothing to lose and give you a shot at helping them out type of deal?
Second:
Regarding the option money then, you said not recommended to put the option money towards the final purchase price...why is that and could you explain a little bit more?
Thanks again,
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I have also wondered about the Option Money just going towards the purchase price and how that is not good. Say the selling price is 105k and they gave you 5k option money. So when they go to buy the purchase price is now 100k. But they still have to come up with closing costs down payment, etc. It would be better for the buyer and no different to the seller to keep the selling price at 105k and put the 5k towards the buyers closing cost or down payment. Actually, I guess there is a bit of difference for the seller because now the house has to appraise at 105k instead of 100k.
L/O King, I would love to see your LO contract that discusses the option money and how it is applied towards the purchase of the house.
For $30 bucks, I guess you can:
http://www.thecreativeinvestor.com/residential/Product339-Lease_Option_Contracts.html
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I have found agents are not flexible until the listing is about to expire (especially with nice but older homes that are difficult to show). I try to deal exclusively with FSBOs. But the Seller is welcome to list with an agent after me (open listing). I am excluded from the Agreement.
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LOKing, before I purchase your contracts, I am interested in if your contracts discuss the option money and how it will be applied. also does it discuss appraisals and what happens if the house does not appraise for th epurchase price.
Nate,
Hey, good to hear from you. Have to say that I am not 100% familar with a wrap around mortgage, so fill me in
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I was looking through the post trying to find out some more info. on lease options, and came across this post, and found alot of the information very helpful.
I may have a deal that I might be doing concerning doing a lease option , owner financing, or land contract, and would like to get some more replies on this post/ subject.
Any more replies and info.
Thanks !
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14) Optionee agrees that they will not record anything against the title, of said property, prior to closing and owning this property.
15) As evidence of title, Optionor shall obtain a commitment for a policy of title insurance bearing a date subsequent to the date of acceptance hereof in an amount not less than the purchase price herein and offering to guarantee the title to the premises. The Commitment shall be delivered to Optionee immediately upon issuance thereof.
16) Optionor agrees to pay for title insurance for Optionee at the time of closing. If Optionor can not get title insurance for the home, then Optionor can either return any option fees obtained as full and complete liquidated damages (and call this offer null and void) or the Optionor may remedy the title problem, whichever Optionor chooses or the Optionee may elect to accept the title ‘AS IS’. Optionor shall pay for an owner’s policy of title insurance to be delivered after closing
17) Optionor shall pay documentary stamp on the deed and recording of corrective instruments.
18) Optionee understands that Optionor will not pay any points or costs of obtaining a mortgage or other financing. Optionor will not pay for any lender required repairs on this home if purchaser decides to go with a government type loan or one that would require such repairs.
19) At closing, taxes shall be prorated between the Optionor and Optionee.
20) Optionee shall be responsible for all costs of obtaining a mortgage or other financing including but not limited to documentary stamps and intangible tax on the purchase money mortgage and any mortgage assumed, mortgagee title insurance commitment and related fess, and recording of purchase money mortgage to Optionor, deed and financing statements.
I think what Brenda is saying is that everything can be spelled out in the Option. A separate Purchase and Sale Agreement is not necessary. Once an Option (which is a unilateral agreement) is exercised, it becomes a bilateral agreement. My Option keeps it simple and states that the Optionee must pay all costs associated with the sale.
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It is customary in my area for the seller to deliever proof of good title - so the seller buyers owners title insurance. The buyer pays for the morgagee title insurance that his lender will recquire.
So you got title insurance previously. What if you have a lien or judgement recorded against you since that time. You would no longer have a clear title. A buyer should require a new title insurance policy before he purchases a home. His lender will most definately require it.
rrog:
great explanation!
you sound like you are very qualified to answer that question!
brian