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Lto training course modified


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Lease to own

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Lto training course modified

  1. 1. The Community Empower Lease-To-Own Certification Brought to you by Community Empower
  2. 2. About The Courseware <ul><li>This Program Will Help You Understand the Lease-To-Own (LTO) Transaction. It Will Teach You: </li></ul><ul><ul><li>How LTO Works </li></ul></ul><ul><ul><li>How to Use Lease-To-Own (LTO) </li></ul></ul><ul><ul><li>How to Identify an LTO Opportunity </li></ul></ul><ul><ul><li>How to Transact Business With Your Seller and or Buyer </li></ul></ul>
  3. 3. Who is Community Empower?
  4. 4. Community Empower LTO Preparing for Change <ul><li>RMBS Lease-To-Own Program </li></ul><ul><li>Only LTO Program Ever Reviewed by a Rating Agency (Moodys Rating Services 2007) </li></ul><ul><li>$1+ million invested in legal and statutory compliance over 6 years </li></ul><ul><li>Fully production tested </li></ul><ul><li>Fully Vetted </li></ul><ul><ul><li>Kutak Rock, LLC OmaOnlyha (tax and regulatory review) </li></ul></ul><ul><ul><li>Peck Schaeffer, LLC Cincinnati, Atlanta (bond counsel) </li></ul></ul><ul><ul><li>Lloyds of London, UK (insurer) </li></ul></ul><ul><ul><li>Moodys’ Rating Service (Rating Agency) </li></ul></ul><ul><ul><li>Coastal Securities, LLC Houston , TX (Structure firm) </li></ul></ul><ul><ul><li>Mitas, LLC (Servicer) </li></ul></ul><ul><ul><li>State Counsel (Attorneys at State Level) </li></ul></ul><ul><li>Agent model introduced in Summer 2010 </li></ul><ul><li>Currently debuting in 19 states servicing 3,000 zip codes </li></ul><ul><li>500 agent/broker panel with 250 Five Star Certified and growing </li></ul>
  5. 6. What is Community Empower LTO? <ul><li>A Private Transaction Between Buyer and Seller </li></ul><ul><li>A Purchase Agreement With a Temporary Lease (Up to 18 Months) </li></ul><ul><li>An Ordinary Transaction Just Like Any Other </li></ul><ul><ul><li>Title Works the Same </li></ul></ul><ul><ul><li>Lending Works the Same </li></ul></ul><ul><ul><li>Servicing Works the Same </li></ul></ul><ul><ul><li>Realtors Work the Same </li></ul></ul><ul><li>LTO Acts as a Program Guarantor to Protect both the Buyer and Seller in an Organized and Professional Structure </li></ul>
  6. 7. About Your Certification <ul><li>Your Certification Will Provide You With Many Benefits: </li></ul><ul><ul><li>Preferred Relationships With Lead Providers </li></ul></ul><ul><ul><li>State Regulatory Updates </li></ul></ul><ul><ul><li>Help Desk for Transaction Support </li></ul></ul><ul><ul><li>National Support for Program Materials, Inspection Appraisal </li></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><li>1-800-362-6101/480-226-9989 – Linda’s Cell </li></ul></ul><ul><ul><li>[email_address] </li></ul></ul><ul><ul><li>[email_address] </li></ul></ul>
  7. 8. LTO - One of the Most Productive Ways to Buy or Sell a Home <ul><li>Buyer </li></ul><ul><li>Protection </li></ul><ul><li>Plan </li></ul><ul><li>________ </li></ul><ul><li>Locked in Purchase Price </li></ul><ul><li>Rent Credits </li></ul><ul><li>Appreciation </li></ul><ul><li>Financial Counseling </li></ul><ul><li>LT0 Program </li></ul><ul><li>____________________ </li></ul><ul><li>Buyers and Sellers Receive: </li></ul><ul><li>Transaction Flexibility </li></ul><ul><li>Freedom to Move </li></ul><ul><li>Financial Security Surrounding Their Transaction </li></ul><ul><li>No-Hassle Service from Qualified Realtor Professionals </li></ul><ul><li>Seller </li></ul><ul><li>Protection </li></ul><ul><li>Plan </li></ul><ul><li>______________ </li></ul><ul><li>Less Days On Market </li></ul><ul><li>Rent Guarantee </li></ul><ul><li>Property Mgmt </li></ul><ul><li>Qualified Tenant </li></ul><ul><li>Full Price Offer </li></ul><ul><li>Home Warranty </li></ul><ul><li>Benefits </li></ul><ul><li>___________ </li></ul><ul><li>Flexibility </li></ul><ul><li>Earn Ownership </li></ul><ul><li>Move-in Now </li></ul><ul><li>Build Wealth Through Home Ownership </li></ul><ul><li>Benefits </li></ul><ul><li>______________ </li></ul><ul><li>Flexibility </li></ul><ul><li>Financial Security </li></ul><ul><li>Asset Protection </li></ul><ul><li>Screened Tenant </li></ul><ul><li>Full Price Offer </li></ul><ul><li>Fully Managed Process </li></ul>
  8. 9. LTO Lifecycle Buyer Qualification Local Agent Finds Home Temporary Lease Agreement Purchase Agreement Credit Counseling Property Management Permanent Financing Signage Broker Support Property Qualification Full Doc Qualification Transaction Support 6 – 18 Months Lease Period <ul><li>Customer Applies for LTO Program </li></ul><ul><ul><li>Customer Evaluated Against Underwriting Standards </li></ul></ul><ul><ul><li>Customer Undergoes Comprehensive Credit Risk Evaluation </li></ul></ul><ul><ul><li>Customer Agrees to Participate in the Continuing Counseling Program </li></ul></ul><ul><li>Full Doc Underwriting </li></ul><ul><li>Customer Selects Property from Real Estate Agent </li></ul><ul><li>Lease Period Begins with Client Under Credit Management </li></ul><ul><li>Lessee Improves Score and Qualifies for Permanent Financing within 18 Months </li></ul>
  9. 10. Program Structure <ul><li>Structures the Transaction </li></ul><ul><li>Guarantees the Rental Income During the Lease Period </li></ul><ul><ul><ul><li>Rent </li></ul></ul></ul><ul><ul><ul><li>Taxes </li></ul></ul></ul><ul><ul><ul><li>Insurance </li></ul></ul></ul><ul><ul><ul><li>Property Management Fees </li></ul></ul></ul><ul><ul><li>Insures the Property from Peril </li></ul></ul><ul><ul><li>Insures the Property with a Home Warranty Covering Mechanicals and Other Typical Repair Scenarios </li></ul></ul><ul><ul><li>Provides Transaction Support and Program Providers </li></ul></ul>
  10. 11. Monthly Flow of Funds During Lease Period Lease Payments Lease Servicer Principal Interest Taxes Insurance Credit Counseling Property Oversight Servicing Fee $35/mo Purchase price x 30 year amortization at prevailing rate plus Actual Taxes, Insurance, $135 for Credit Counseling and Property Oversight Lease Payment Stripped & Distributed Collected Via ACH Reserve Pool Seller Carrier Program Administrator Due 1 st of Month Late After 5 th Late Fees go to the Servicer Funded by Buyer’s Program Fee 1 1/2 % of Purchase Price of Home Pays if Renter Defaults Re-Insurer Backs Reserve Pool
  11. 12. Transaction Administration <ul><li>Program Administrator Manages the Transaction </li></ul><ul><ul><ul><li>Manages the Flow of Funds </li></ul></ul></ul><ul><ul><ul><ul><li>Lease Servicer (3 rd Party) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Default Servicing (Collection & Eviction) </li></ul></ul></ul></ul><ul><ul><ul><li>Manages the Reserve and Escrows funds </li></ul></ul></ul><ul><ul><ul><li>Manages the Asset </li></ul></ul></ul><ul><ul><ul><li>Manages the Tenant </li></ul></ul></ul><ul><ul><ul><li>Manages Reporting </li></ul></ul></ul><ul><ul><ul><li>Manages the Insurance Policies </li></ul></ul></ul>
  12. 13. When to Use the Program With Buyers <ul><li>Use LTO When Buyers Have: </li></ul><ul><ul><li>Less than Perfect Credit </li></ul></ul><ul><ul><li>Good to Excellent Credit With Little to No Down Payment </li></ul></ul><ul><ul><li>Good Credit With Clients Who Want to Use Their Cash for Something Other Than a Down Payment </li></ul></ul><ul><li>LTO is NOT a Program for Risky Borrowers </li></ul>
  13. 14. Tenant Qualification <ul><li>Tenant Will be Fully Screened and Documented for Income, Credit and Debt </li></ul><ul><li>Seller Can be Comfortable because </li></ul><ul><ul><li>Rent will be Paid </li></ul></ul><ul><ul><li>Property will be Insured and Protected </li></ul></ul><ul><li>LTO Tenants Want to be Home Owners and Consider Themselves Buyers, Not Renters. </li></ul>
  14. 15. Tenants Earn Rent Credits <ul><li>Rent Credits = Rent Paid Minus Fair Market Rent </li></ul><ul><li>Fair Market Rent is Average Rental Rate in Area / HUD Estimated Rate Guidelines Established by Appraiser at Time of Purchase Contract </li></ul><ul><li>Rent Credits are Applied as Down Payment Credit, then to Closing Costs (As May be Allowable by FHA/Fannie/Freddie Underwriting Guidelines) </li></ul>
  15. 16. Rent Calculation <ul><li>The Rental Payment Consists of the following: </li></ul><ul><ul><li>Principal & Interest – is the Purchase Price Calculated at 6% Interest Amortized Over 30 years. </li></ul></ul><ul><ul><li>Taxes – Actual Taxes </li></ul></ul><ul><ul><li>HOA – Actual </li></ul></ul><ul><ul><li>Insurance – Calculated at $1.09 per thousand </li></ul></ul><ul><ul><li>Property Management and Credit Counseling - $135.00 per Month. </li></ul></ul><ul><ul><li>Example $100,000 Purchase Price </li></ul></ul><ul><ul><li>P & I = $599 per Month ($100,000 x 6% Interest, Amortized for 30 Years) </li></ul></ul><ul><ul><li>Taxes = $100 per Month ($1,200 per year) or Actual Property Tax </li></ul></ul><ul><ul><li>HOA = $50 per Month or Actual HOA fees, if Any </li></ul></ul><ul><ul><li>Insurance = $91.00 per Month / $1.09 x 1,000 = $1090/12 </li></ul></ul><ul><ul><li>CC & PM = $135.00 per Month – Actual Cost </li></ul></ul><ul><ul><li>Total Rent= $975.00 per Month </li></ul></ul>
  16. 17. How to Calculate Fair Market Rent <ul><li>Obtain Rental Comparables in Subject Subdivision </li></ul><ul><li>Evaluate the Average Rent Payment for That Specific Property Type with Similar Features </li></ul><ul><li>Once Rent Comps are Established You Will Calculate: </li></ul><ul><li>Rent – FMR = Above Fair Market Rent </li></ul><ul><li>Example: $975 Rent - $775 FMR = $200 AFMR </li></ul><ul><li>A Surplus of $200 per Month (per UW Guidelines) Can be Credited from the Seller Can be Applied Toward the Buyers Down Payment. </li></ul><ul><li>So - $200 per Month for 18 Months = $3,600 Credit. </li></ul><ul><li>FHA Requires 3.5% Down Payment. So on a $100,000 Purchase the DP is $3,500. The AFMR of $3,600 Completely Covers the Buyers Down Payment. </li></ul><ul><li>The Seller Can Still Pay up to 6% of Buyers Closing Costs and or Pre-Paids </li></ul>
  17. 18. Tenant Credit Counseling <ul><li>Every Buyer/Rent Must Participate in Monthly Credit Counseling Which May Include: </li></ul><ul><ul><li>Structured Bill Payment </li></ul></ul><ul><ul><li>Continual Credit Score Simulation Estimating Take-Out Date </li></ul></ul><ul><ul><li>ACH (Auto-Draft) from Buyer/Renter’s Bank Account </li></ul></ul><ul><li>Proprietary Credit Counseling Technology Monitors Buyer/Renter Monthly With Automated Oversight </li></ul>
  18. 19. Buyer Protection Plan <ul><li>Lock-in Purchase Price </li></ul><ul><ul><li>Based on Market Value and Established by Appraisal </li></ul></ul><ul><li>Rent Credits </li></ul><ul><li>Paid-in Principal Credits </li></ul><ul><li>Appreciation </li></ul><ul><li>Credit Counseling Assistance </li></ul><ul><li>Home Warranty </li></ul><ul><li>Buyer Support from Qualified Realtors </li></ul>
  19. 20. Property Appreciation / Devaluation <ul><li>If Price of Home Increases, Buyer Gets the Advantage of the Increase </li></ul><ul><ul><li>Purchase Agreement Established Price </li></ul></ul><ul><ul><li>Avoids Misunderstanding </li></ul></ul><ul><ul><li>Encourages Buyer </li></ul></ul><ul><li>If Price of Home Decreases, Buyer/Seller Can: </li></ul><ul><ul><li>Void Transaction </li></ul></ul><ul><ul><li>Mutually Re-Negotiate Price or Terms </li></ul></ul><ul><ul><li>Re-Establish Home at New Appraised Value </li></ul></ul>
  20. 21. Maintaining The Property <ul><ul><li>Driven by the Lease Agreement </li></ul></ul><ul><li>Generally, Tenant is Responsible for: </li></ul><ul><ul><li>Regular Maintenance of the Home </li></ul></ul><ul><ul><li>Maintaining the Home During the Lease Period </li></ul></ul><ul><ul><li>Notifying the Administrator With Serious Issues </li></ul></ul><ul><ul><li>Notifying the Home Warranty Company for Routine Issues </li></ul></ul><ul><li>This Includes Paying All Utilities, Telephone and Cable Charges, Mowing etc. </li></ul>
  21. 22. Program Fees for the Tenant <ul><li>The Tenant Program Fee is 1 ½% of the Purchase Price of the Property </li></ul><ul><ul><li>Due at Lease Signing With 1 st Month’s Rent </li></ul></ul><ul><ul><li>Can Come from Any Source </li></ul></ul><ul><li>Tenant Also Pays the Inspection Fee ($200) </li></ul><ul><li>No Deposit Required because Program Insures Loss-of-Rents and Damages </li></ul><ul><li>Seller Can Ask for Pet Deposit (Optional) </li></ul>
  22. 23. Reserve Pool <ul><li>One-Percent of the 1 ½% Tenant Program Fee is Applied to a Reserve Pool and is Held by the Lease Servicer (Mitas Specialty Servicing) on Behalf of the Program as a Condition of our Llyod’s of London Policy. </li></ul><ul><ul><li>It is Utilized to Protect the Seller’s Cash Flow from Default by the Tenant During the Lease Period. </li></ul></ul>
  23. 24. Buyer Support From Realtors <ul><li>Realtors Have a New Group of Transaction-Ready Buyers </li></ul><ul><li>Realtors Develop a Long-Term Relationship with the Buyers Encouraging </li></ul><ul><ul><li>Life Time Customers </li></ul></ul><ul><ul><li>Referrals </li></ul></ul><ul><li>Realtors Have New Ways to Assist the Home Buyer </li></ul>
  24. 25. When to Use the Program with Sellers <ul><li>Sellers with Flexible Terms </li></ul><ul><li>Sellers with Slow Moving Properties </li></ul><ul><li>Sellers Who Want or Need Income with a Defined Take-Out </li></ul><ul><li>Move-on Sellers with Less than 30% Equity Who Can’t Obtain New Financing Until They Sell Their Home </li></ul><ul><li>Investment Properties </li></ul><ul><ul><li>Investors Desiring a Managed Process with an Exit </li></ul></ul><ul><ul><li>Investors Who Want Guaranteed Higher Returns with Less Risk </li></ul></ul>
  25. 26. Loss of Rents <ul><li>If for Any Reason the Tenant Does Mot Make Their Monthly Rent Payment, or Otherwise Defaults, the Program Administrator Will Pay the Seller its Customary Rent Under the Lease </li></ul><ul><li>The Lease Servicer is Responsible to Collect from the Tenant </li></ul><ul><li>The Lease Servicer Earns Late Fees if the Tenant Defaults </li></ul><ul><li>The Lease Servicer is Responsible for Eviction at the Seller’s Expense </li></ul>
  26. 27. Property Peril Protection <ul><li>Peril Protection is Provided by Lloyds of London </li></ul><ul><li>It is Mandatory </li></ul><ul><li>If you Have an Existing Policy it is Not Necessary to Have Two Policies </li></ul><ul><li>The Peril Policy and Binders will be Provided to the Seller by Lloyds of London </li></ul><ul><li>The Annual Premium is Pre-Paid at the Beginning of the Lease Period by the LTO Program </li></ul>
  27. 28. Seller Protection Plan <ul><li>Tenant Qualification </li></ul><ul><li>Peril Protection </li></ul><ul><li>Reserve Pool </li></ul><ul><li>Loss of Rents </li></ul><ul><li>Home Warranty </li></ul><ul><li>No Property Management </li></ul>
  28. 29. Seller fees Q: Does the Seller Pay Any Program Fees to LTO? A: Yes. 2 ½% of the Listing Price is Due When the Tenant Becomes the Owner of the Property (At the end of the Lease). Traditional Real Estate Commissions/Fees Still Apply. Seller Also is Responsible for an Appraisal Fee and Title Search. Remember! Seller Receives a FULL PRICE OFFER Seller Receives Guaranteed Rent Cash flows are Insured Against Loss Seller Earns More Net Seller Proceeds Realtors Earn More Money
  29. 30. Commissions and Referral Fees <ul><li>Agents Earn Revenue in Three Ways: </li></ul><ul><li>Lease Commission </li></ul><ul><li>$500 - $900 </li></ul><ul><li>Property Oversight </li></ul><ul><li>$900 </li></ul><ul><li>Purchase Commission </li></ul>
  30. 31. Program Marketing Support <ul><li>Centralized Call Center Support </li></ul><ul><li>Lead Support </li></ul><ul><li>Collateral Materials </li></ul><ul><ul><li>Signage </li></ul></ul><ul><ul><li>Brochures (Seller & Buyer) </li></ul></ul><ul><ul><li>Newsletters </li></ul></ul><ul><li>Quarterly Legislative Updates </li></ul>
  31. 32. Sign Riders Newsletters Tenant and Seller Pamphlets Payment Calculator & Spreadsheet Models
  32. 33. Getting Started <ul><li>Complete LTO Certification </li></ul><ul><li>Sign the Broker Agreement </li></ul><ul><li>Order Marketing Materials </li></ul><ul><li>Establish Territory with Program Administer </li></ul><ul><li>Post Your Listings with Program Administrator </li></ul><ul><ul><li>Email or Fax PDF of Listing Information </li></ul></ul><ul><li>Commissions and Referral Fees </li></ul>
  33. 34. Broker Agreement <ul><li>Broker Agreement Establishes the Relationship Between the Broker and the Program </li></ul><ul><li>Specifies: </li></ul><ul><ul><li>Duties Performed by Parties </li></ul></ul><ul><ul><li>Confidentially </li></ul></ul><ul><ul><li>Price for Service </li></ul></ul><ul><ul><li>Commission Structure </li></ul></ul>Broker Agreement between Program and Broker
  34. 35. Checklist for Lease-to-Own (most states ) <ul><li>Buyer’s Temporary Residential Lease (AAR Lease Agreement) </li></ul><ul><li>Residential Purchase Contract (AAR Contract) </li></ul><ul><li>Addendum to Purchase Agreement </li></ul><ul><li>Addendum to the Lease </li></ul><ul><li>Exhibit “1” </li></ul><ul><li>Any Appropriate Disclosures for Each Property </li></ul><ul><li>Easy </li></ul><ul><li>No New Process to Learn </li></ul><ul><li>Customary Documents </li></ul><ul><li>Any Single-Family (1-4 Units) Property </li></ul><ul><li>We Fully Support You During the Entire Process </li></ul>
  35. 36. Lease-to-Own Documents Add Lease Addendum Add Purchase Addendum Exhibit 1 Exhibit 1 Ties Agreements Together Lease Purchase Contract