This document discusses various forms of seller financing for residential real estate. It describes how seller financing works through purchase money loans, land contracts, mortgages, deeds of trust, and contracts for deed. It also covers why seller financing is used, alternatives like seller seconds and wraparound mortgages, lease options and lease purchases. The responsibilities of real estate agents in arranging seller financed transactions are also outlined.
Dodd frank act impact on seller financing for investorsRichard Roop
In this month’s Ultimate Training Webinar we will be covering “Dodd Frank Acts Impact on Seller Financing for Investors” and when you attend you will learn:
•How the Safe Act and Dodd-Frank will affect seller financing going forward
•Who is the Consumer Financial Protection Bureau (CFPB) and what is the Dodd-Frank Act?
•How to safely grow your business in spite of the new Dodd-Frank Act
•How to properly use the ultimate strategy and be in compliance with the Dodd-Frank Act
•What is the difference between the SAFE Act and the Dodd-Frank Act
•How to Thrive as a Real Estate Investor Under the SAFE Act!
•What you MUST know to use seller carry-back from here on out!
http://turnkeyinvesting.com - This seller-financing/owner-financing presentation was first created in late 2007 during a special 3-hour session of the Investors Roundtable. I also gave an abbreviated version of this presentation in 2009.
The slides were much wordier than I had intended and meant as a reference afterwards.
Dodd frank act impact on seller financing for investorsRichard Roop
In this month’s Ultimate Training Webinar we will be covering “Dodd Frank Acts Impact on Seller Financing for Investors” and when you attend you will learn:
•How the Safe Act and Dodd-Frank will affect seller financing going forward
•Who is the Consumer Financial Protection Bureau (CFPB) and what is the Dodd-Frank Act?
•How to safely grow your business in spite of the new Dodd-Frank Act
•How to properly use the ultimate strategy and be in compliance with the Dodd-Frank Act
•What is the difference between the SAFE Act and the Dodd-Frank Act
•How to Thrive as a Real Estate Investor Under the SAFE Act!
•What you MUST know to use seller carry-back from here on out!
http://turnkeyinvesting.com - This seller-financing/owner-financing presentation was first created in late 2007 during a special 3-hour session of the Investors Roundtable. I also gave an abbreviated version of this presentation in 2009.
The slides were much wordier than I had intended and meant as a reference afterwards.
RE/MAX Results complete buyers guide. Whether you are a first time home buyer or a seasoned veteran in home purchasing...this guide will give you a complete through understanding of the home buying process. If you are in the Greater Kansas City area and are remotely interested in Real Estate...this is a must have!
https://www.slideshare.net/sameeromles1
This PPT is for BMS and Banking student . This presentation explain the following Terms with suitable example.
Mortgage
Pledge
Hypothetication
Lien
Charge(1st and 2nd Charge)
Fixed & floating charge
Pari passu
PlR
Margin money
Buying a home has so many caveats and limitations that it may be hard to find a dream home. It’s especially hard for individuals who aren’t able to pay for a home in cash and don’t qualify for a mortgage loan from a lender. These individuals sometimes can get trapped in home mortgage scams where they lose money and their new home. Landmark outlines three possible mortgage scams and how to avoid them.
click button for infographic scams
three mortgage scams
click button for infographic scams
Lease to Own
A lease to own mortgage is usually something offered by the seller when an interested buyer doesn’t qualify for a loan to pay for the home up front. Instead, the seller becomes a landlord for a time and charges rent to the homeowners, until they can build up their credit and qualify for a mortgage. Often times the seller charges “opt-in” money at the start of a lease to own agreement, which shows the buyers intent to purchase the home after qualifying.
Many times a lease-to-own mortgage seems like a great deal.The buyer pays “rental” payments until they can buy the home outright. However, these rental payments are usually overpriced. Worse than that is when the contract states it’s time for the buyer to purchase the home outright, and they still cannot qualify for a home loan. The seller can then kick them out of the home and keep all of the rental payments and opt-in money.
Many times a lease-to-own mortgage seems like a great deal. The buyer pays “rental” payments until they can buy the home outright. However, these rental payments are usually overpriced. Worse than that is when the contract states it’s time for the buyer to purchase the home outright, and they still cannot qualify for a home loan. The seller can then kick them out of the home and keep all of the rental payments and opt-in money.¬¬
If you don’t qualify for a mortgage, talk to your local Approved Housing Counseling Agencies. Some can find mortgages for low credit or low-income individuals. With this lower rate, homeowners can purchase home warranty insurance and save money by protecting their systems and appliances. Home warranty insurance could also be included in a home sale.
Wraparound Mortgages
For individuals who cannot qualify for a home loan, a scamming seller will provide a mortgage instead of a traditional lender. This “mortgage” wraps around the mortgage the seller has on the home already. When the buyer pays money to the seller, the seller pays it on their mortgage to the bank.
Some sellers in this situation scam the buyer. If the seller doesn’t make payments to the bank, the home will be foreclosed and the buyer is kicked out. Or, if the seller wants to make money, they’ll charge more from the buyer on the mortgage payment, pay their minimum to the bank, and pocket the rest.
The best way to combat this mortgage scam is to make sure there is a written contract between the seller and the buyer of t
RE/MAX Results complete buyers guide. Whether you are a first time home buyer or a seasoned veteran in home purchasing...this guide will give you a complete through understanding of the home buying process. If you are in the Greater Kansas City area and are remotely interested in Real Estate...this is a must have!
https://www.slideshare.net/sameeromles1
This PPT is for BMS and Banking student . This presentation explain the following Terms with suitable example.
Mortgage
Pledge
Hypothetication
Lien
Charge(1st and 2nd Charge)
Fixed & floating charge
Pari passu
PlR
Margin money
Buying a home has so many caveats and limitations that it may be hard to find a dream home. It’s especially hard for individuals who aren’t able to pay for a home in cash and don’t qualify for a mortgage loan from a lender. These individuals sometimes can get trapped in home mortgage scams where they lose money and their new home. Landmark outlines three possible mortgage scams and how to avoid them.
click button for infographic scams
three mortgage scams
click button for infographic scams
Lease to Own
A lease to own mortgage is usually something offered by the seller when an interested buyer doesn’t qualify for a loan to pay for the home up front. Instead, the seller becomes a landlord for a time and charges rent to the homeowners, until they can build up their credit and qualify for a mortgage. Often times the seller charges “opt-in” money at the start of a lease to own agreement, which shows the buyers intent to purchase the home after qualifying.
Many times a lease-to-own mortgage seems like a great deal.The buyer pays “rental” payments until they can buy the home outright. However, these rental payments are usually overpriced. Worse than that is when the contract states it’s time for the buyer to purchase the home outright, and they still cannot qualify for a home loan. The seller can then kick them out of the home and keep all of the rental payments and opt-in money.
Many times a lease-to-own mortgage seems like a great deal. The buyer pays “rental” payments until they can buy the home outright. However, these rental payments are usually overpriced. Worse than that is when the contract states it’s time for the buyer to purchase the home outright, and they still cannot qualify for a home loan. The seller can then kick them out of the home and keep all of the rental payments and opt-in money.¬¬
If you don’t qualify for a mortgage, talk to your local Approved Housing Counseling Agencies. Some can find mortgages for low credit or low-income individuals. With this lower rate, homeowners can purchase home warranty insurance and save money by protecting their systems and appliances. Home warranty insurance could also be included in a home sale.
Wraparound Mortgages
For individuals who cannot qualify for a home loan, a scamming seller will provide a mortgage instead of a traditional lender. This “mortgage” wraps around the mortgage the seller has on the home already. When the buyer pays money to the seller, the seller pays it on their mortgage to the bank.
Some sellers in this situation scam the buyer. If the seller doesn’t make payments to the bank, the home will be foreclosed and the buyer is kicked out. Or, if the seller wants to make money, they’ll charge more from the buyer on the mortgage payment, pay their minimum to the bank, and pocket the rest.
The best way to combat this mortgage scam is to make sure there is a written contract between the seller and the buyer of t
In real estate, a short sale is when a bank or mortgage lender agrees to discount a loan balance due to an economic hardship on the part of the mortgagor.
Chapter 54 Conventional financing on a sale, and the buyer’s .docxrobertad6
Chapter 54: Conventional financing on a sale, and the buyer’s agent 359
After reading this chapter, you will be able to:
• undertake the duties of a transaction agent (TA) to police all facets
of their buyer’s mortgage process;
• understand the adversarial relationship between a lender and
buyer; and
• advise buyers of the financial advantage gained by submitting
mortgage applications to multiple lenders.
Learning
Objectives
Conventional financing
on a sale, and the
buyer’s agent
Chapter
54
The ability of a buyer or an owner to obtain financing is an integral
component of most real estate transactions.
The submission of a mortgage application to a private or institutional
lender is the catalyst which sets the machinery of the mortgage industry in
motion.
The buyer’s agent owes their buyer the duty to ensure their buyer negotiates
the best financial advantage available among mortgage lenders. As viewed
and identified by lenders, the buyer’s agent is called a transaction agent
(TA).
Role of the
transaction
agent (TA)
transaction agent
(TA)
The term lenders
use to identify the
buyer’s agent in a
sales transaction, its
closing contingent on
the buyer obtaining a
mortgage to fund the
purchase price.
Loan Estimate
mortgage shopping
worksheet
transaction agent (TA)
Uniform Residential Loan
Application
For a further study of this discussion, see Chapter 37 of Real Estate
Finance.
Key Terms
360 Real Estate Principles, Second Edition
The TA neither arranges nor makes a mortgage. Further, they are barred from
receiving any compensation for referring the buyer to service providers or
policing lender activity. Events related to the transaction serviced by the TA
are covered solely by the broker fee negotiated on the sales transaction.
The duties imposed by agency law on the TA include:
• helping the buyer locate the most advantageous mortgage terms
available in the market;
• oversight of the mortgage application submission; and
• policing the lender’s mortgage packaging process and funding
conditions.
These TA activities ensure all documents needed to comply with the lender’s
requests and closing instructions are in order. If not, funding cannot take
place and closing the sales escrow is jeopardized.
A lender’s objectives and goals are diametrically opposed to those of the
buyer – a debtor versus creditor relationship.
On the advice from their agents, buyers need to understand that the lender’s
product – money – is always unpriced until the closing has taken place. This
truth exists in spite of the Loan Estimate and interest rate disclosures that
are given to the buyer within three business days following the lender’s
receipt of the mortgage application. [See RPI Form 204-5]
The TA’s
duties
Diametrically
opposed
interests
When applying for a conventional mortgage, a buyer has several types of lenders to
choose from, including:
• portfolio lenders, such as ba.
Seller Financed Note for a Lucrative Investment Opportunity.pptxMp Notebuyer
Discover the benefits of seller financed note for real estate transactions. Explore how sellers become lenders, offering financing options to buyers. Learn about the advantages and considerations of seller financing in property deals. For more details visit our website.
https://mpnotebuyer.com/
Students, digital devices and success - Andreas Schleicher - 27 May 2024..pptxEduSkills OECD
Andreas Schleicher presents at the OECD webinar ‘Digital devices in schools: detrimental distraction or secret to success?’ on 27 May 2024. The presentation was based on findings from PISA 2022 results and the webinar helped launch the PISA in Focus ‘Managing screen time: How to protect and equip students against distraction’ https://www.oecd-ilibrary.org/education/managing-screen-time_7c225af4-en and the OECD Education Policy Perspective ‘Students, digital devices and success’ can be found here - https://oe.cd/il/5yV
Operation “Blue Star” is the only event in the history of Independent India where the state went into war with its own people. Even after about 40 years it is not clear if it was culmination of states anger over people of the region, a political game of power or start of dictatorial chapter in the democratic setup.
The people of Punjab felt alienated from main stream due to denial of their just demands during a long democratic struggle since independence. As it happen all over the word, it led to militant struggle with great loss of lives of military, police and civilian personnel. Killing of Indira Gandhi and massacre of innocent Sikhs in Delhi and other India cities was also associated with this movement.
Instructions for Submissions thorugh G- Classroom.pptxJheel Barad
This presentation provides a briefing on how to upload submissions and documents in Google Classroom. It was prepared as part of an orientation for new Sainik School in-service teacher trainees. As a training officer, my goal is to ensure that you are comfortable and proficient with this essential tool for managing assignments and fostering student engagement.
The French Revolution, which began in 1789, was a period of radical social and political upheaval in France. It marked the decline of absolute monarchies, the rise of secular and democratic republics, and the eventual rise of Napoleon Bonaparte. This revolutionary period is crucial in understanding the transition from feudalism to modernity in Europe.
For more information, visit-www.vavaclasses.com
Welcome to TechSoup New Member Orientation and Q&A (May 2024).pdfTechSoup
In this webinar you will learn how your organization can access TechSoup's wide variety of product discount and donation programs. From hardware to software, we'll give you a tour of the tools available to help your nonprofit with productivity, collaboration, financial management, donor tracking, security, and more.
The Roman Empire A Historical Colossus.pdfkaushalkr1407
The Roman Empire, a vast and enduring power, stands as one of history's most remarkable civilizations, leaving an indelible imprint on the world. It emerged from the Roman Republic, transitioning into an imperial powerhouse under the leadership of Augustus Caesar in 27 BCE. This transformation marked the beginning of an era defined by unprecedented territorial expansion, architectural marvels, and profound cultural influence.
The empire's roots lie in the city of Rome, founded, according to legend, by Romulus in 753 BCE. Over centuries, Rome evolved from a small settlement to a formidable republic, characterized by a complex political system with elected officials and checks on power. However, internal strife, class conflicts, and military ambitions paved the way for the end of the Republic. Julius Caesar’s dictatorship and subsequent assassination in 44 BCE created a power vacuum, leading to a civil war. Octavian, later Augustus, emerged victorious, heralding the Roman Empire’s birth.
Under Augustus, the empire experienced the Pax Romana, a 200-year period of relative peace and stability. Augustus reformed the military, established efficient administrative systems, and initiated grand construction projects. The empire's borders expanded, encompassing territories from Britain to Egypt and from Spain to the Euphrates. Roman legions, renowned for their discipline and engineering prowess, secured and maintained these vast territories, building roads, fortifications, and cities that facilitated control and integration.
The Roman Empire’s society was hierarchical, with a rigid class system. At the top were the patricians, wealthy elites who held significant political power. Below them were the plebeians, free citizens with limited political influence, and the vast numbers of slaves who formed the backbone of the economy. The family unit was central, governed by the paterfamilias, the male head who held absolute authority.
Culturally, the Romans were eclectic, absorbing and adapting elements from the civilizations they encountered, particularly the Greeks. Roman art, literature, and philosophy reflected this synthesis, creating a rich cultural tapestry. Latin, the Roman language, became the lingua franca of the Western world, influencing numerous modern languages.
Roman architecture and engineering achievements were monumental. They perfected the arch, vault, and dome, constructing enduring structures like the Colosseum, Pantheon, and aqueducts. These engineering marvels not only showcased Roman ingenuity but also served practical purposes, from public entertainment to water supply.
Palestine last event orientationfvgnh .pptxRaedMohamed3
An EFL lesson about the current events in Palestine. It is intended to be for intermediate students who wish to increase their listening skills through a short lesson in power point.
2. Introduction
This lesson will cover:
how seller financing works
why seller financing is used
forms of seller financing
alternatives to seller financing
agent’s responsibilities in seller-financed
transactions
3. How Seller Financing Works
Two ways for seller to finance buyer’s
purchase:
purchase money loan
land contract
4. How Seller Financing Works
Mortgage or deed of trust
Seller is extending credit to buyer, not
providing loan funds.
Buyer makes installment payments to
seller.
Seller is mortgagee or beneficiary, with
right to foreclose in case of default.
5. How Seller Financing Works
Contract for Deed
Buyer (vendee) takes possession of property,
but seller (vendor) retains title until contract
price paid in full.
Alternative to a lien.
Seller extends credit to buyer.
6. How Seller Financing Works
Seller financing may be:
primary financing
seller is buyer’s main or only source of
financing for purchase
secondary financing (seller second)
supplements primary loan from
institutional lender
covers part of downpayment or closing
costs required for primary loan
7. How Seller Financing Works
Choosing finance instrument
Seller generally decides which type of finance
instrument
Real estate lawyer should
prepare/review.
Deed of trust: trustee must be appointed.
8. Why Seller Financing is Used
Seller financing can:
attract buyers when interest rates are
high
help buyer qualify for institutional loan
enable seller to charge higher price
provide tax benefits to seller
9. Why Seller Financing is Used
Seller financing:
seller isn’t bound by institutional policies
regarding yields, loan-to-value ratios, or
qualifying standards
not an option for seller who needs to be
cashed out quickly
10. Seller Seconds
Seller second:
buyer paying most of purchase price with
institutional loan
seller accepts second mortgage for
remainder
11. Seller Seconds
Supplementing a new loan
Seller second supplementing new
institutional loan must meet institutional
lender’s standards.
Combined loan to value (CLTV)
Credit
Income and debt ratios
Assets (including reserves)
Terms
12. Supplementing New Loan
Buyer’s situation
Factors in buyer’s financial situation may
shape design of seller second:
funds available for down payment
buyer’s qualifying for total monthly
payment
interest rate
balloon payment
13. Supplementing New Loan
Buyer’s situation
May be easy to refinance seller second with
balloon payment if:
property has appreciated substantially
interest rates are low
But if interest rates are high or property has
lost value, refinancing could be difficult.
14. Supplementing New Loan
Seller’s situation
Seller’s evaluation of second:
cash at closing
monthly income
timing of payoff (balloon payment)
yield on investment
tax consequences
lien priority
15. Seller Seconds
Supplementing an assumption
Seller second can supplement buyer’s
assumption of seller’s existing mortgage.
Buyer makes payments on seller second
to seller.
Buyer takes over monthly payments on
seller’s existing mortgage.
16. Seller Seconds
Supplementing an assumption
Assumption only possible if:
existing mortgage doesn’t have due-onsale clause, or
lender agrees to assumption.
Needed to release seller from liability.
Usual underwriting standards to
evaluate buyer assuming loan.
17. Seller Financing as Primary Loan
Unencumbered property
Seller financing is most flexible when seller
has clear title to property.
Buyer and seller negotiate price and
terms
Buyer may need less cash
May not have discount points or
origination fees
Lower closing costs
18. Unencumbered Property
Protecting seller’s security
First lien position if finance instruments are
recorded.
Seller should still be concerned with:
property taxes
special assessment liens
hazard insurance
19. Unencumbered Property
Protecting seller’s security
Failure to pay taxes or insure property should
be grounds for default under the finance
instrument.
Seller can require impound account.
If not, seller should require proof be sent
to him.
20. Unencumbered Property
Institutional second
Buyer might want to supplement seller
financing with secondary financing from lender.
Seller should investigate terms of
proposed second loan before agreeing to
transaction.
Can buyer afford monthly payments on
both loans?
Does second have provisions that
make default likely?
21. Unencumbered Property
Contract for deed
Seller may choose to use a contract for deed
instead of mortgage or deed of trust. Also
known as:
land contract
bond for deed
conditional sales contract
installment sales contract
installment land contract
real estate contract
22. Contract for deed
How contract for deed works
Seller (vendor) keeps title to property until
buyer (vendee) pays off entire purchase price
in installments.
Legal title: vendor’s title during contract
term.
Equitable title: right of vendee to possess
and enjoy property.
23. Contract for deed
How contract for deed works
Contract:
not accompanied by promissory note
states all terms of sale and financing
arrangement between vendor and
vendee
should always be recorded
24. Contract for deed
Remedies for breach of contract
Forfeiture: penalty if vendee breaches
contract.
Vendee’s rights in property are
terminated.
Payments may be kept by vendor as
liquidated damages.
Vendor may retake possession of
property immediately.
25. Contract for deed
Remedies for breach of contract
In Texas, repossession not allowed
40% of the amount owed OR
has made 48 monthly payments
Trustee must be used to sell property
instead
26. Contract for deed
Remedies for breach of contract
Vendee refusing to leave means legal action
to clear title and remove vendee from
property.
Drawback for vendor: may take months.
27. Contract for deed
Remedies for breach of contract
Judge may:
enforce contract as written
give vendee time to pay off contract
balance
allow vendee to reinstate contract by
paying delinquent payments plus interest
order sheriff’s sale of property
28. Contract for deed
Advantages and disadvantages
Advantages for vendor:
legal owner until contract paid in full
may reacquire property in event of
default
29. Contract for deed
Advantages and disadvantages
Disadvantages for vendor:
delay and expense of court proceedings
uncertainty of trial results
31. Contract for deed
Advantages and disadvantages
Disadvantages for vendee:
vendor remains legal owner
judgments against vendor might cloud
interest
uncertainty of court decision
32. Contract for deed
Using a contract for deed
Lenders generally don’t permit financing to
vendees due to the nature of the ownership
Two possible solutions:
Vendor agrees to have property stand as
security for institutional loan.
Vendee could mortgage his equitable
interest in property.
33. Contract for deed
Using a contract for deed
Vendor agrees to have property stand as
security for institutional loan.
Vendor doesn’t assume personal
responsibility for repayment.
Lender can foreclose on property but
can’t sue vendor for deficiency.
34. Seller Financing as Primary Loan
Encumbered property
Seller of encumbered property can’t afford to
pay off existing mortgage at closing.
Seller second was one alternative.
Wraparound financing is another
alternative.
35. Encumbered Property
Wraparound financing
Wraparound financing:
property remains subject to underlying
loan
buyer does not assume underlying loan
seller remains responsible for payments
buyer makes monthly payments to seller
seller uses part of buyer’s payment to
make payment on underlying loan
36. Wraparound Financing
Choice of finance instrument
For wraparound, seller can use:
mortgage
deed of trust
contract for deed
Deed of trust used for wrap: all-inclusive trust
deed.
37. Wraparound Financing
Underlying loan: no due-on-sale clause
Wraparound financing is only proper if
underlying loan doesn’t have due-on-sale
clause and lender approves of it.
Silent wrap: without lender’s consent.
38. Wraparound Financing
Compared with assumption + second
If seller’s existing loan has no due-on-sale
clause, parties can choose between:
assumption plus seller second
buyer gets benefit of existing loan with
below-market interest rate
wraparound
may give buyer below-market rate and
seller above-market yield
39. Wraparound Financing
Seller’s yield
Seller’s yield depends on:
amount of credit extended to buyer, and
difference between interest rate on wrap
and rate on underlying loan.
Credit extended is:
difference between wrap amount and
balance on underlying loan
not full amount of wrap
40. Wraparound Financing
Seller’s yield
Example:
Sales price: $200,000 Downpayment: $20,000
Underlying loan: $150,000, balance at 6%
interest
Wraparound: $180,000 at 7.5% interest
$180,000 Wrap financing for buyer
– 150,000 Seller’s underlying loan balance
$30,000 Credit extended to buyer
41. Wraparound Financing
Seller’s yield
Example, cont.
In first year:
Seller collects $13,500 in interest from
buyer.
Seller pays $9,000 in interest on underlying
loan.
Net interest to seller: $4,500.
Net Interest ÷ Credit Extended = Seller’s Yield
$4,500 ÷ $30,000 = 15%
42. Wraparound Financing
Protecting wraparound buyer
To ensure seller makes payments on
underlying loan:
provision in finance instrument requiring
seller to make timely payments, and
allowing buyer to pay lender directly if
seller defaults
“Request for Notice of Delinquency”
escrow account managed by third party
43. Alternatives to Seller Financing
Seller can help with:
buydown
contribution to closing costs
equity exchange
lease/option
lease/purchase
44. Alternatives to Seller Financing
Buydowns
Buydown: seller pays to reduce buyer’s
interest rate on loan.
Seller proceeds are reduced by amount of
buydown.
Buyer more easily affords lower payment
and/or qualifies easier with lower DTI
45. Alternatives to Seller Financing
Contributions to closing costs
Seller sometimes willing to make up shortfall
when buyer doesn’t have enough money for
closing costs.
Lenders impose limits on amounts.
46. Alternatives to Seller Financing
Equity exchanges
Seller may be willing to accept other assets
from buyer and reduce cash sales price.
Equity in vacant land or personal
property.
47. Alternatives to Seller Financing
Lease arrangements
Sometimes buyer wants to lease home before
actually buying it.
Time to get cash for closing or
downpayment.
Cannot currently qualify for loan.
48. Alternatives to Seller Financing
Lease arrangements
Seller can lease property to prospective buyer
in one of two ways:
lease/option arrangement
lease/purchase arrangement
49. Lease Arrangements
Lease/options
Lease/Option: lease agreement includes
option to purchase.
Seller leases property to buyer for term.
Buyer granted option to purchase
property at certain price during lease
term.
Seller = Landlord/Optionor
Buyer = Tenant/Optionee
51. Lease/Options
How lease/option works
Lease/option:
buyer pays seller option money to make
option binding on seller
option money not refundable
option money may be applied to
purchase price if buyer exercises option
rental payments may be applied to
purchase (rent credit)
52. Lease/Options
Rental payments
Rent charged on lease/option is often higher
than rent under ordinary lease.
Gives optionee incentive to exercise
option quickly.
Provides compensation to optionor for
uncertainty of outcome.
Permits a lender at the exercise of the
option to credit excess toward down
payment.
53. Lease/Options
Rent credit
Three ways rent credit can be applied to
purchase:
applied to down payment
deducted from sales price
applied toward closing costs/prepaids
54. Lease/Options
Provisions of lease/option agreement
Lease/option should:
include all terms of lease
include all terms of potential purchase
contract
state that option money is not security deposit
state that option rights are forfeited if tenant
defaults on lease
state that option money is forfeited if
purchase is not consummated by buyer
55. Lease Arrangements
Lease/purchase
Lease/Purchase: purchase contract allows
buyer to lease property for extended period
before closing.
Parties sign purchase agreement (not
option) along with lease.
Tenant/buyer provides good faith deposit
instead of option money.
Closing date set quite far off; buyer rents
property in meantime.
56. Lease Arrangements
Lease/purchase
If tenant/buyer decides not to buy property,
good faith deposit is forfeited.
Tenant/buyer probably more committed
with lease/purchase contract than with
lease/option.
Eventual sale more likely.
57. Agent Responsibilities
Real estate agent should:
make sure both parties understand seller
financing arrangement
encourage both to consult lawyers or
CPAs
never prepare seller financing documents
58. Agent Responsibilities
Disclosures
Seller financing disclosure:
required in some states when agent
helps arrange seller financing
discloses all financing terms
informs seller of buyer’s financial
situation
59. Agent Responsibilities
Disclosures
Good idea to use disclosure statement even if
not required by state law.
Provides information to parties.
Protects agent by documenting that
certain information was provided.