How Do I Protect Myself From...
Hello everyone, it's been awhile and it's good to be back. A question just hit me and it probably has a very simple answer, but I can't quite figure this one out.
Let's say you have a lease/option agreement for two years after which you have the option to purchase a home for "X" amount. You faithfully make all of your payments on time but the value of the house has appreciated unexpectedly more than the seller had anticipated? What prevents him from not cashing your last rent check or two and saying that you didn't keep up your end of the bargain, therefore screwing you out of your house? I can only think of using a Loan Servicing Co. but this would be an added expense and I really only have heard of using this type of service when people are talking of buying sub. to. Are LSC's necessary in most situations, including contract for deed and others? Thanx for any help.
Tom
i'd say just don't buy via lease option to start with - too much shaky ground there.
but if you did, send your checks certified mail and make them sign for it, if not into using an LSC. this way, your receipt would at least show that you sent the money if you had to prove it in court. other thing would be to exercise the option before the 2 years come to an end. if you see the market moving, jump on it!
Thanks jackman, I knew that there had to be a common sense answer to this one. One (two, sorry) more newbie question(s) though.
1. When you send something certified mail, how do you prove what was in it? As far as I know, you just sign for it so the sender knows it was delivered. (that one hurt to ask as I am ****Must Reach Freshman Investor status before posting URL's***. and probably know about certified mail)
2. I have a good job, make decent money, but have bad credit due to living on mostly cash in my twenties, didn't pay my student loan, forgot to tell landlord I was moving,etc. The l/o my friend told me about I thought stated that I would have to fulfill the terms of the whole two years before I could buy and I thought that this was the way most worked. Am i thinking of something else? Thanks again.
Tom
correction, that last post should have read:
... as I am 31 years old and probably should know something about certified mail.
Didn't even try to post a url. ???
Tom
Most L/O are written so that you can excercise your lease option at any time prior to the end of the option period. I have bought on this basis and had no trouble. My ex landlord did not wish to perform but I merely met with his attorney, displayed the copy of the document. Informed him if he did not comply I would merely file an action to compel. After some loud screaming he entered the escrow and I bought the property. Yes I did overpay. I just did not wish to move. I sold the property some six months latter and took my lose.
Lucius
Tom
You should have a contact that spells out the price that you will buy the property for at the end of the lease then there is no question as to what you are going to pay. The current owner can't back out then.
Terry
Easier and cheaper than that would be to directly deposit the funds into his bank account each month.
Tom -
There's no way I would enter into a L/O unless that seller spells out your option price, this should all be documented in your purchase option agreement. The option is your option to purchase, not his option, it should require that he sell in 24 months if you excercise the option. If the price appreciates above what he calculates, then good for you, win-win, he still gets his anticipated profit, but you get instant equity as well. If he has anything else in that contract, I would run, not walk away. It frustrates me to hear about people that are so penny pinching they would try to hurt their tenant buyer by leaving the purchase price open, and worrying about the "what-if" of higher appreciation. While I haven't bought on a L/O, I am selling to buyers with these, and I think it should benefit both of us. No reason I can't make a good profit while helping someone own their own home.
P.S. - I provide a receipt for the rent each month to my tenant buyer. Documenting the rent payments is what helps them get refinanced into the property at the end of the lease.
Hey thanx everyone,
I know better than to agree to option something that the price is not spelled out some way in the contract, but (this is probably a really stupid question), what if I send a check certified mail, assuming that my option is only valid after satisfying the terms of the lease, for the last months rent and he says it was a Christmas card instead of a rent check, therefore disqualifing me from buying the house and forfieting my deposit?
I cant get a mortgage right now and am considering leasing to own. Most will let me put up a deposit, and if I pay the rent for two years, then I can get financed. That's why I ask.
Thanks,
Tom[ Edited by tomisino on Date 03/19/2004 ]
Take some steps to minimize your risk, maybe asking him to use a Lease Servicing Company, a company that collects the rent. Get a receipt for every month's rent, or use certified funds. If he is local, deliver it in person and get that receipt when you drop off the rent. But, I suppose there are always ways to screw someone, and you can over analyze anything, so trust your gut, your dealings with this seller should tell you if they are trustworthy. If you doubt it, find another house to Lease option, they come up all the time, or make some calls to motivated sellers, and get yourself a great deal.