Avoid the pitfalls of a lease option arrangement
What can go wrong?
Plenty!
Long term lease options or lease purchases are very dangerous!
Yes, they can be very, very dangerous. What can go wrong?
Owner does not make the mortgage payment, a judgment is placed,
owner goes into bankruptcy, etc.
When you create a lease option, you have violated your
mortgage contract. The bank can and has accelerated
the loan for this violation.
If the tenant quits paying and the owner tries to evict,
the tenant can tie this up in court for a long time forcing
you to do a foreclosure process.
The owner can collect the lease money from the tenant
and yet never pay the mortgage. One day the tenant
finds a foreclosure notice on the door.
The tenant has faithfully made the payments for the term
of the Lease Option contract and now tries to purchase,
only to find out new judgments or leans have been placed
on the home, making it nearly impossible to complete the
purchase.
An shrewd attorney may discover the Option to Purchase
contract in a legal battle involving the tenant and get
a lean on the owner's property.
The owner could file bankruptcy, forcing the sale of
the property to satisfy the court. The tenant may
end up out of a home and the option fee.
How can you protect yourself?
By using a process called "The Equity
Holding Trust Transfer Method". The Equity Holding
Trust Transfer Method is simply this; the property will
be held in an escrow type account until the tenant buyer
fulfills his obligations.
What make this process perfect is it simply resolves the issues above.
While the tenant is given first right to buy, it is not
an option in the eyes of the bank, no mortgage contract
violation!
Tenant leases property from trust and as a beneficiary
of that trust has already agreed to eviction if tenant stops
paying. If tenant stops paying it is a simple eviction in
the eyes of the court.
The trust uses a third party collection company to collect
the lease payment. It then makes the mortgage payment.
The owner cannot collect the lease and not make the mortgage
payment.
The property while in the trust is protected from judgments
and leans, they can only be attached to the beneficiary's
interest. No surprises at the end of the contract!
Since the tenant is not given an Option to Purchase,
but simply the first right of refusal in purchasing the
property at the end of the agreement, a shrewd attorney
cannot get a lean on the property. It is protected
by the trust.
If the owner files bankruptcy, the bankruptcy can only attach to the beneficial interest.
For the tenant, when you enter into any creative financing
solution, you need to be sure you have your credit up to
par. Below the form is the best company we know that
can do this for you.
Suggested solutions:
Owners, protect your owner carry home
Buyers, before you enter into a seller carry agreement, get protected!
Better than a lease to purchase
Get the benefits of home ownership without the bank hassles
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If you are going to be the tenant buyer in a lease option
type arrangement, you need to have your credit in order:
Credit Assistance Network
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