Lease Option On Foreclosure
I am curently working on a lease option deal with a person who is in foreclosure (they just want out). If I lease option this property and do a sandwich lease to a T/B and the lender calls the mortgage due which I can not cover (240K) what action could the T/B bring against me if I can not perform. Should I have my T/B sign a document that in the event this mortgage would become payable before the terms of the lease it would be their responsiblity to perform. Would a T/B sign something like this? It soulds like a long shot but I need protection from this situation. My attorney would also like to take the deed (Do not record) and record a Memorandum of Contract to prevent the owner from obtaining any other financing on the property during the lease terms. Property appraised for $340K. Is their any other way to do this? Thanks in advance...
Unless you record the Deed in your name, other financial problems of the seller could wind up as liens on your house.
[addsig]
1) Get as much non-refundable option money as you can. But as a minimum I believe 5% is standard. Definately get money before letting them move in.
2) Just lower the purchase price by the move in money.
3) How much would the rent be? How much would her mortgage payments be? You do not have to credit any of the rent towards the purchase price. Be sure that you get market rent for yourself, and then anything above that can be credited. It is non-refundable if she does not buy the house.
Make sure that you are not pricing the house above what it will appraise for.
This is my Option To Purchase contract. You would also have a normal lease.
THIS OPTION AGREEMENT made this day of , 20 between,
, Optionor, and
Optionee
For Real Property and Personal Property (collectively “Property”) Located in County, Florida described as:
Street address, city, zip for the Property: ________________________________________________________
Personal Property includes existing range, refrigerator, dishwasher, ceiling fans, light fixtures, window treatments and all attached fixtures.
This Option to Purchase is subject to the following terms and conditions:
1) All Option Consideration shall be non-refundable in the event that the Optionee elects not to exercise this Option to Purchase, or if the Option to Purchase is withdrawn by the Optionor per clause 8 of this contract or Option to Purchase is withdrawn by the Optionor due to Optionee violating any additional clause of this Option Agreement.
2) Optionee has paid Option Consideration of _______________ to Optionor for the exclusive option, right and privilege of purchasing the Property. The Optionor hereby acknowledges the receipt of this Option Consideration.
3) The Optionee agrees to pay a base price of $________________ for the Property. After the ______ month the base price is adjusted at a rate of ______% yearly, compounded monthly. From the base price or adjusted base price shall be subtracted all Option Consideration paid by the Optionee during the term of the attached Agreement for Lease. The net purchase price is to be paid in cash, certified check or cashier’s check.
4) There shall be additional Option Consideration of $__________ per month given to Optionee. The monthly Option Consideration shall be credit toward the purchase price of the property. The credit will only apply to months when the rent amount and any outstanding monies owed, per the attached Agreement of Lease, is paid in full and prior to the 6th of the month.
5) Any payment made to the Optionor over and above the normal monthly rent payment, excluding any payments related to late fees, court costs or reimbursements of expenses paid by the Optionor or per the attached Agreement of Lease, shall be considered additional Option Consideration and shall also be credited to the Optionee.
6) Optionor grants Optionee the right to exercise this option for a period commencing on __________________ and terminating at midnight, __________________. If not exercised, this option shall expire midnight ___________________ and Optionor shall be released from all obligations hereunder, legal or equitable. The obligation shall cease and Optionor shall retain the consideration.
7) Optionee shall deliver to Optionor a written Notice of Election to Purchase. Property closing date shall be no earlier than thirty days and no later than sixty days after the Optionor’s receipt of the notice of election to purchase.
Optionee shall perform all provisions of the attached Agreement of Lease between Optionor and Optionee. Failure to pay rents in full and prior to ______ of the month, or violation of any other covenant, policy or procedure of the attached Lease Agreement by the Optionee shall cancel this Option to Purchase. Option to Purchase may be reinstated at the discretion of the Optionor. Any termination of the Agreement of Lease shall cancel this Option to Purchase. Optionor shall inform Optionee in writing of any cancellation or reinstatement of the Option to Purchase. Optionee understands that Optionor will be required to supply their mortgage company with an accurate record of payment history including all instances of late payments. Optionee understands such information could affect their ability to secure a mortgage
9) Optionee agrees to accept subject property in current “as is” condition. Optionee shall be responsible for all ordinary repairs and maintenance up to a total cost of $500 per item. The Optionor will pay expenses exceeding $500 for any one item. Optionee will not contract for nor make any repairs costing more than $500 without written permission of the Optionor. Optionor will not be responsible for paying for any repairs made without Optionor’s written permission. All materials installed upon the premises become the property of the Optionor, whether installed by the Optionor or by the Optionee. In no case shall Optionee receive any cash payments for labor or materials furnished. Excluded from this clause _____________________________________________
_________________________________________________________________________________________
_________________________________________________________________________________________
10) Optionee agrees to pay for any and all additional assessments incurred during occupancy and prior to ownership (example but not limited to: water, sewer, sidewalks, or road paving). If Optionor pays any assessments during option period the assessment price will be added to the base price of the property prior to closing.
11) This option to purchase shall apply to and bind the heirs, executors, and administrators of the respective parties.
12) Optionor may be doing a 1031 exchange on this property. This shall be at no cost to the Optionee.
13) If Optionee forfeits the Option Consideration or Option to Purchase is canceled for any reason, then the Agreement of Lease will automatically revert to a month to month agreement, so that Optionor may sell or re-lease the property.
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.
21) Every purchaser of any interest in residential real property on which a residential dwelling was built prior to 1978 is notified that such property may present exposure to lead from lead-based paint that may place young children at risk of developing lead poisoning. Lead poisoning in young children may produce permanent neurological damage, including learning disabilities, reduced intelligence quotient, behavioral problems, and impaired memory. Lead poisoning also presents a particular risk to pregnant women. The seller of any interest in residential real property is required to provide the buyer with any information on lead-based paint hazards from risk assessments or inspections in the seller’s possession and notify the buyer of any known lead-based paint hazards. A risk assessment or inspection for possible lead-based paint hazards is recommended before purchase. Tenant/Buyer hereby waives the opportunity to conduct a risk assessment or inspection for the presence of lead-based paint and/or lead-based paint hazards.
22) This Option to Purchase is not, and shall not be construed as, or interpreted as any form of EQUITABLE MORTGAGE. It is hereby declared that it is not the intent of the parties to create a loan of any nature or to create a mortgage of any kind. In the event that the Optionee hereunder should ever raise such an issue in a court of law or otherwise this Option shall terminate immediately.
23) This option is not assignable by Optionee unless Optionor agrees separately and in writing.
24) Optionor has advised the Optionee to seek the advice of a mortgage lender and attorney prior to signing this document.
25) Time is of the essence in this agreement.
In the event that Optionee does not meet the terms and conditions contained in this agreement all Option Consideration paid will be forfeited by the Optionee and will be kept by the Optionor.
The parties have executed this agreement on the date first above written.
Optionor(s): Optionee(s):
Witness:
Witness:
Oh yeah - speak to her mortgage broker and verify that she really can qualify for a mortgage in 6 months.