L/O Vs Owner Finance - What's The Difference?
What's the difference between the 2? In either case, you get money up front as either a down payment or option money. You both may negotiate the monthly payments. Seems you can have a quit-claim deed filled out with the tenant or buyer from the start to prevent a lengthy foreclosure process in case the t/b or purchaser defaults on payment, right?. You can finance or l/o for 1-2 years and require either a purchase or ballon payment or l/o renewal at the end. Are both basically the same, but with different terminology?
Sorry, I'm still new at this and searching for answers, so I know I'm missing something. Can someone straighten me out here?
No they are not the same....
Owner finance .... look at it like the owner is the bank..... this means you must foreclose in default or agree to the deed in lieu of foreclosure....
Lease Option... if done properly is a lease with an additional agreement for non-refundable deposit to buy the option right to purchase
Owner finance - he immediately becomes the legal owner of the property and he owes you money. As the lender you can try to take it back if he does not pay.
Lease option - you remain legal owner of the property but you have agreed to sell to him under specified terms. He may or may not later decide he wants to own the property.
I agree. What puzzles me is what happens if the buyer in the owner finance scenario defaults -- are you to then go through a lengthy foreclosure process? I've read in 2 different courses by some really hot gurus that if you have a quit-claim deed filled out in the beginning, the foreclosure process (owner finance scenario) becomes a non-issue. That was a real eye-opener, but there are a few that say that doing that is worthless. I'll ask my attorney tomorrow and see what he says, but I've realized that in the area of real estate, you can get varying answers from attorneys as well... <IMG SRC="images/forum/smilies/icon_rolleyes.gif"> [ Edited by KenB on Date 10/25/2003 ]
Quote:
On 2003-10-25 10:22, KenB wrote:
What's the difference between the 2? In either case, you get money up front as either a down payment or option money. You both may negotiate the monthly payments. Seems you can have a quit-claim deed filled out with the tenant or buyer from the start to prevent a lengthy foreclosure process in case the t/b or purchaser defaults on payment, right?. You can finance or l/o for 1-2 years and require either a purchase or ballon payment or l/o renewal at the end. Are both basically the same, but with different terminology?
Sorry, I'm still new at this and searching for answers, so I know I'm missing something. Can someone straighten me out here?
In PA, you could have a situation where the seller agrees to give you financing but property title may not pass to you until some future date. Also, seller may be in a second position, meaning that another lender is providing financing and seller is providing financing on the balance of the purchase price. With a lease/option in PA, all depends on wording of the contract. It could be a straight option to buy where you lease the property and have no obligation to buy it. It could be a situation where you sign a purchase contract with provision to lease, have an extended settlement date, and occupy the property prior to settlement.