Seller Requiring Credit Check For L/O, Reply ASAP
The seller that I am working with right now on a lease option is asking for a credit check, I am getting the property for no money down, the buyer(I am having a friend sign the L/O in his name becasue I am only 17 years old) has good credit, but would prefer it not being checked. Is there a technique that I might use to get the seller to not check the credit, maybe provide sufficent references?
Thanks and please respond quickly,
Jorgan Cattin[ Edited by jcattin on Date 04/28/2004 ]
Jorgan
Why not ask the seller?
Mike
If I were to ask the seller I think that it might imply that my buyer might nave not so good credit, which is not the fact.
I kind of hinted that my buyer has good credit, but I didnt just come out and say it, we will see what he says in the morning.
Thanks,
Jorgan Cattin
You know where you went wrong kid? You work with the seller. Never good. Oh yeah, work with them up to a point, but once your name is on that master lease screw um. You really don't have to talk to them. If they try and back out of the deal toss the contract up in their face and be all "Hold on there buddy. We got an agreement. Now either shut up or (try to) evict me." Yeah, so now you go to court, they can't provide a good reason to evict you and you still get the house. Not that you'd want it anyway after all is said and done.
The way I see it and the way I do business is this. When I sign a lease with the seller they are dealing with me and me only. After that is done they have now given me permission to sublease the property. I don't have to talk to them at all about what tenant I put in there. The reason is I'm responsible for any damages that might occure to the property, making the payments, paying the insurance and taxes, blah blah blah. I then find a buyer, collect the money, pay the SOBs to get out, take the keys and hand them to the new tenants. If the seller doesn't want to play ball I drop the deal and wait a month. Call them back after they've made another payment they can't afford and ask them if they still want to sell. It's worked so far. Some people say I'm a jerk. Not really. I'm only one to those that try and screw me around like that. I actually try and help both the seller and the buyer as much as possible but once they start demanding credit reports from my buyers (which they have to have permission from the buyers explicitly. You just can't look at someones report without their permission) then I stop playing the game. When they are ready to sell, then I'll take over the payments. Stupid crap like that irritates the hell out of me.
Peace,
Mitchell
Hey,
does not want their credit pulled.
The way I read your question is: you are in the process of signing a L/P (but not in your name) and the seller wants to pull a credit report. You are NOT at the stage were you are sub-leasing the property. The person signing the L/P ( "the buyer"
As long as they have good credit, you can have the buyer use one of the cheap credit report off the web and show that to the seller. You can say that every time a credit report is pulled by someone, it can hurt the credit rating and this is why you are doing it this way.
If the buyers credit is bad, go find another house.
Secondly, you NEED the seller to understand what you are doing (you will sub-lease the property). You will need a specific clause that allows you to sub-lease (all of my rental contracts specifically say you can NOT sub-lease). You need the seller on your side, not your whipping boy.
If you try to do business like KINGMONKEY is recommending you are going down a very bumpy and hard road.[ Edited by Bruce on Date 04/28/2004 ]
Actually I'm on your sellers side here (Assuming with Bruce that you've not actually signed the lease/option yet). The seller has a legitimate concern that he is encumbering his title to a person he doesn't know. He's asking for some reassurance that this person is, in fact, honorable and credible. I'm afraid your youth here does work against you (relax it also works for you in lots of ways). When you are old and gray people will ask this question much less frequently, especially if you've developed a reputation in the biz for honest dealing.
So, are there other methods of looking honorable and credible? Sure, credit references are one. Pulling the credit report yourself and handing it over is another. Quite frankly I don't get your buyers objection. You have to get credit-checked a lot for it to affect your rating.
If your friend is squeamish about having his credit checked, then you need to find a new partner.
As a landlord, I pull credit reports on all my potential tenants. It is just a good business practice. Remember, a lease option seller is a landlord until you exercise your option.
I question your approach about having your friend sign the contracts. Does this mean your name is not on the contracts, anywhere? Is your friend willing to be liable under these contracts for your actions?
Quote:
On 2004-04-28 08:36, DaveT wrote:
I question your approach about having your friend sign the contracts. Does this mean your name is not on the contracts, anywhere? Is your friend willing to be liable under these contracts for your actions?
The answer to your questions is both yes.
What recourse do you have, then, if your friend hijacks your deal and decides to keep all the money for himself?
I think you should have your name on the contracts, with your friend as a guarantor. Your attorney should be able to write an enforceable contract for you under these circumstances.
My friend dosnt know anything about REI, it is really unlikely that he would go behind my back, and if he does, he can figure our REI all by himself, and if he does more power to him.
Thanks for your concern,
Jorgan
Here should have been your reply from the get go.
" Mr. Seller, I am a real estate investor and I buy upto 5-10 houses a month just like yours. If I were to have my credit pulled each time I bought a house this way my score would be in the toilet and I wouldn't be able to refi your house if some unforeseen incident occurred and the need arises. I am just trying to protect my credit score so I can help protect you."
I don't know if at this stage in the game if this approach will work, but it hasn't failed me yet.
You also could have your friend pull a copy of their credit on their own to show your sellers as you are allowed one personal pull a year with no effect on your score.
boyd4444,
jcattin is not a buyer, he is a renter (with an option to buy). He will be a renter until he exercises his option to buy, but until then the property owner is the landlord and Jorgan will be the tenant.
It is a routine practice for landlords to run a credit check on a tenant applying to rent their property.
Couple this seller's sophistication about real estate with an individual presenting himself as a principle in the deal but his name is nowhere on the documents. If it is apparent that this principle is a minor and unlikely to have an established and seasoned credit history, wouldn't you be a little cautious here too?
You got to be upfront with them. If they feel you are trying to pull a fast one some how it may stop the deal, and you don't want your name associated with that. Doing the deal straight forward will build your credibility. You may run into this person again or be involved with a deal where they know the seller. Keep it clean and you'll get it
Dear Jorgin,
Go get a form 1003 and have your friend fill it in completely. Then go forward and have your Seller sign all of his documentation and hand him the 1003. The 1003 was designed many many years ago for the purpose of bringing to view full information on a Buyer so that a bank loan officer can properly evaluate the risks involved. It is of course much more complete as to the personal worth of the person.
I use this because it gives all of the required information and allows the person who views to correctly evaluate.
Stop there. Take your signed document from the Seller wish him good day and leave. Do not pass go do not collect $200. Proceed on your lawful occasions
If the seller wishes to obtain a full three agency report. Just tell him to turn the form in. The Results, I have no idea I have yet to get any response. You have complied. .
Lucius
DaveT,
Obviously, you don't deal with controlling properties on l/o very much. Jorgan is NOT the tenant. He will NOT be moving in. His T/B will be the one occupying the property and making the payments. The only time he will have to put any money out is if his T/B is not making the payments. So, I submit all he should have to show is that he has a source of cash reserves in case of this event.
As to far as he is not "buying" the property, he just has the option.........
Won't he eventually be the buyer???? Yes, he just has an "option to buy" but at the time he exercises the "option" is he not the buyer?? So, yes he is "buying" the property eventually he is just buying creatively. Isn't that what "creative" real estate investing is all about.
If it's the term Lease with Option that is getting to you, let me give you a few others to try instead.
He is "Renting to OWN"
Or as Wendy Patton calls it "Lease Purchasing"
As far as his age, I'd rather sell to a 17 year old with a good head for money than someone twice his age with a dead-end job and supposably good credit who probably has his credit cards maxed and is one paycheck away from bankruptcy.
Applause to him for having the b**ls to fight the system.
Jorgan- Don't let ageism get in the way of becoming rich. I'll send you my credit report if I have to and you can shove it in their face. (No, I am not trying to solicit a partnership, just trying to make a point.)
Your case hits home with me because I'm 30 and still get carded for cigarettes and baby boomers discount me when they first meet me because I look young.
Older is not wiser....just old.
Hi Boyd4444,
You might want to take some time and re-read about L/O (L/P, Rent to Own, etc) because you are going to get yourself in to serious trouble.
One--Whoever signs the FIRST lease (forget about the whole Option part for now) is a tenant. It does not make any difference if they live there or not. If they SUBLEASE to someone else, that in NO WAY relieves them of the obligations under the original lease, nor does it change their legal characteristics (poistion).
Two--No one is a buyer until the Option is executed. This is NOT an exercise in semantics; it is a critical understanding of how Options work. If you start addressing the Tenant as Buyer, you will create a Relationship where the tenant now as legal standing as a BUYER. That means you could NOT evict them from the property.
Tread lightly...
In your future deals create a two page summary of what's required when selecting tenants. It should cover your requirements of possible tenants like a minimum FICO of X or a minimum of 12 mos prior rental stability and always give it to the seller. This will build trust upfront to get around problems like that in the future.[ Edited by waterfront on Date 05/08/2004 ]
he said his friend will be signing the l/o because he is not of age. the seller has every right to see their credit report. i would stress to your friend that in order to make this happen a credit report will be needed and that its not going to hurt his credit score.
I'm a little new to the l/o game but from what I'm reading on it I don't understand why the seller would allow you to come in with no money down....what would be the benefit for them, why not just sell the property?
I thought the deposit was money in the bank in case the tenant/buyer doesn't exercise the option.
Why would any seller agree to a l/o where the buyer isn't paying for the option up front?
Of course this is an old thread, but feel compelled to offer a possible solution to Jorgan's situation. First, let me say thay I admire the hell our of his initiative and enterprise at 17 years old(when others his age are out listening to punk rock and blowing weed).
One way to provide confidence to the seller(as to payments) would be to inform him that you would set up a management agreement with a disinterested third party(ie real estate property management co) with terms that state all tennants would be informed to pay monthly rentals to said managment company...who would in turn disburse appropriate payment to seller and remainder to Jorgan. A bookkeeper could also be appointed to handle such a task.[ Edited by buddy on Date 05/21/2004 ]
in GA, can a 17 YO enter a contract?
Anyone who has not reached the age of consent, can go before a judge and request to have his disabilities removed.At that point he can be legally treated the same as a 21 year old.
You could have your friend pull his own report and keep a current copy (no longer than three months old) to show. Pulling your own doesn't count as an inquiry. You can avoid the credit question in the future by incorporating. Sellers don't tend to ask when talking to employees of a corporation. In GA, you have to be 18 to sign a Contract. You can't legally sign a Lease; nor can you be an officer in a corporation.