Sticky Lease End Option Situation...
I posted this in the lease forum too, but thought this question might be better suited here...
My lessee (who I have become friends with) has come to the end of his lease and wants to exercise his right to buy the home....sort of.
He would like me to execute a P&S to his sister, who is the actual buyer, for $30,000 above the price which he & I set forth 16 months ago. (not a problem with me)
However, he is suggesting we draft a contractors agreement of some sort showing he did approx. $30,000 in work, which of course is not true, so that he gets $30,000 cash at closing, I get what is due to me and his sister gets a nice home at a fair price.
I know I am not legally obligated to sell to his sister, but am trying to do this transaction as simple, as legal and as cost effective as possible. (ie trying not to have a double closing)
Is this legal?
Will I have higher taxes, doc fees, etc because of the higher sales price?
What, if any, liability or exposure do I have?
Thanks in advance for your help,
Erik
Your friend will be making license plates and you will too if you go along with him.
[addsig]
Hey erika, you can sell it to his sister and give him back 30k, if you want. Its not illegal to give some sort of repair/work escrow. People buy fixer uppers all the time for a quick flip.
However, your problem will be ensuring that the home appraises for that amount and finding a lender who will give that much back. Usually they consider a home uninsurable, but this is different. His sister will also be paying a lot more in property taxes, insurance and closing costs for that privelege.
The simpliest way would be to sell the house for the amount you agreed to. Then make sure that your appraisal comes in at market value, not purchase price. Surely, you will find a lender who will do a cash out closing. But they charge 1% extra.
The transaction itself is borderline. Not sure I would do it but that being said, IF you do it then you will have to pay taxes on the extra 30k personally so make sure that you deduct your taxes from the part you are considering giving as a credit of some sort.
Again, the transaction is borderline.
Goodluck
let him use a double close with his sister unless you want to pay that extra tax.