How Do You Put A 2nd On A Lease-option?

Comments(5)

• 
  BAMZ25th November, 2003

  Hi Chris,
  
  I'm not sure I understand what you are asking. If you are selling on L/O, why is the owner still in place? Is this how you are planning to sell back to the owner in default via a L/O?
  
  BAMZ

• 
  SolutionsKid25th November, 2003

  No, in doing a sanwich lease option "allandinger" had stated in this post that:
  
  http://www.thecreativeinvestor.com/ViewTopic16787-25-2.html
  
  Record a mortgage. Typically a mortgage is recorded to secure payments on a promissory note. A mortgage can be recorded to secure performance of any agreement, even a purchase option. You as optionee (buyer) will now be a lien holder, in the same position as a secured lender. If the seller refuses to sell the property, you foreclose. Now the SELLER has to go to court to protect himself, rather than the other way around.
  
  And my question is since I have never done anything like that, how do you exactly go about doing that?
  [addsig]

• 
  BAMZ26th November, 2003

  Hey Chris,
  
  Honestly, a sanwhich lease option isnt my forte, and I would hate to lead you in the wrong direction.
  
  Wouldn't you be more interested in taking it sub-2 and getting ownership right away? Is there something with the seller that would prevent you from doing that?
  
  BAMZ

• 
  DaveREI26th November, 2003

  If I am understanding you correctly... You are wanting to know how to protect yourself in a lease option as the buyer... record the lease option, this will "create a cloud" on the title of the property, you must have this contract notorized at time of signing or the court house will not accept it into records.
  
  is this what you are referring to?

• 
  DaveT27th November, 2003

  One problem that you may encounter with a sandwich lease option is the tenant-buyer's lender. The lender sees that the landlord seller is the titled owner of the property, but the tenant-buyer's purchase agreement is with the master renter. They ask how you can sell a property you don't own.
  
  Your counterargument is that you have an option to purchase from the landlord-seller and your tenant-buyer has an option to purchase from you. You will exercise your option at the same time your tenant-buyer exercises his option. You want to make all this happen in a double closing.
  
  Lender says. "OK, I understand your role as a principle in the deal, but we have these title seasoning rules. Your tenant-buyer has marginal resources but can still qualify for an FHA first-time buyer loan program. Unfortunately, our underwriting guidelines will not permit the loan unless the owner has been on title at least 90 days, and the buyer and titled owner are the principles in the deal. This makes your double closing request impossible to accomplish.
  
  You ask, "OK, how can I structure the deal to make the lender happy?". Lender replies, "Just write a new contract between the tenant-buyer and the landlord-seller at the same price you had negotiated with your tenant buyer. Then, we just do a single closing, a single title transfer, and all our underwriting guidelines are satisfied."
  
  Now, you are in a quandry. If a new contract is written at a higher price, and you are now cut out of the middle of the deal, how do you guarantee that you get paid?
  
  Two ways come to mind. First, just sell your option to your tenant-buyer for the difference between your option price and your buyer's option price. But wait, we already said the tenant-buyer has limited resources and can't bring very much money to the table.
  
  Your second solution is the performance mortgage. Your landlord-seller gives you a performance mortgage on the property for the difference between your purchase price and the new contract price. Now, write a new contract between the landlord-seller and the tenant-buyer at the higher sales price. At settlement, the settlement attorney cashes you out and you give the seller a release of lien on the property.