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Previous posts 
RECENT BLOG POSTS 

February 10, 2010
Safe Mortgage Licensing Act Will Virtually Eliminate Seller Financing
The goverment namely HUD intends to eliminate seller financing as an option to sell your property on February 16th unless the seller lives in the home or becomes a licensed loan originator. The goverment is yet again bent on restricting the rights of private property owners.

January 28, 2010 
As with many things in life, moderation is often best. This also applies to the length of loan terms. A moderate loan term that amortizes the loan, meaning the borrower is regularly and consistently paying down the principal balance is best

January 22, 2010
Lease options and why we don't buy them
Lease Options may look like a solution at the time but more often than not they turn into huge disasters.

January 19, 2010
Note Structuring Part Two: Qualifying potenial borrowers
In this segment we will be concentrating on qualifying potential borrowers using common sense, time tested guidelines.

January 8, 2010
Note structuring: Establishing property value and sale price  

Well let's get started with the basics of loan structuring

January 5, 2010
WHO TOOK MY CHEESE?
Have you lost your job? Did your business nose dive with the economic bust? Don't be ashamed if any of these things have happened to you. What is truly important is how you react to these significant changes.
December 27, 2009
BUYER, BROKER, INVESTOR. SIMPLE BEGINNINGS...
I started out as a real estate investor in 1965...
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National Mortgage Note Buyers Blog 
Friday, 22 January 2010

          I get at least six to eight calls a week offering to sell me a lease option.  First of all I buy real estate secured notes not pie in the sky hoped for deals.  That may sound harsh but a lease option is NOT a real estate secured note, mortgage or contract.

 

          Lease Options may look like a solution for everyone at the time but more often than not they turn into huge disasters.  They sound simple enough but in fact a lease option is much more complex than a straight purchase.  In addition to the sales price other factors must be negotiated including but not limited to: rent credits, repairs, taxes, option consideration, closing costs, future depreciation/appreciation, terms, option extensions, appraised value, just to name a few potential flies in the ointment.

 

          Sellers and even real estate agents have almost no understanding of the mechanics of writing an effective lease option.  I can't imagine any third party, such as myself, wanting to step into the potential nightmare that most lease options are guaranteed to cause. 

 

          Real estate agents often will as a last ditch effort recommend a lease option, if all other typical sale methods have failed.  The agent knows that he will be able to pocket something with a lease option transaction versus NO money if he ends up with an expired listing. 

 

          Buyers that are interested in Lease Options are interested in such transactions because they can't get a loan due to no money and/or bad credit.  Not exactly the type of buyer prospect that a seller should be looking for and certainly not the type of buyer that an investor is looking for.  What happens in a year, or two the buyers still can't get financing and they still have lousy credit and no savings.  In such cases these buyers will then press the seller to lower the price, carry financing or extend the option.  None of these things make sense to me to even consider becoming involved in.

 

          Lastly, MOST sellers who proceed with Lease Option agreements know that their property is overpriced.  Furthermore such sellers know that such transactions will rarely close. As a matter of fact most count on it and relish the idea of taking the property back keeping the lease option money and moving on to the next "buyer". The only real benefit to the lease option is to the seller/landlord in that it is a good way for the landlord to find tenants who will take better than average care of a property and will usually pay the rent on time in the hopes that their circumstances will get better and that the house might become their property.

 

          So, in the end what do we have?  Well unfortunately for most concerned we have a deal that falls through.  The buyer is unqualified and the property is overpriced, a recipe for heartbreak. 

 

          I suggest that if you have a chance to buy a house on lease option that you walk the other way.  The truth of the matter is that lease options rarely make sense to investors, sellers or buyers.

 

Until next time

 

Darlene

POSTED BY: Darlene AT 09:01 am   |  Permalink   |  E-mail this
December 14, 2009 
EXPLORING A NEW MEDIUM...
Hello and welcome to my first ever blog entry.
December 27, 2009 
BUYER, BROKER, INVESTOR. SIMPLE BEGINNINGS...
I started out as a real estate investor in 1965...
January 5, 2010 
WHO TOOK MY CHEESE?
Have you lost your job? Did your business nose dive with the economic bust? Don't be ashamed if any of these things have happened to you. What is truly important is how you react to these significant changes.
January 8, 2010 

Note structuring: Establishing property value and sale price  

Well let's get started with the basics of loan structuring

January 19, 2010 

Note Structuring Part Two: Qualifying potenial borrowers
In this segment we will be concentrating on qualifying potential borrowers using common sense, time tested guidelines.

January 22, 2010 
Lease options and why we don't buy them
Lease Options may look like a solution at the time but more often than not they turn into huge disasters.
January 28, 2010 
As with many things in life, moderation is often best. This also applies to the length of loan terms. A moderate loan term that amortizes the loan, meaning the borrower is regularly and consistently paying down the principal balance is best.
February 10, 2010 

Safe Mortgage Licensing Act Will Virtually Eliminate Seller Financing
The goverment namely HUD intends to eliminate seller financing as an option to sell your property on February 16th unless the seller lives in the home or becomes a licensed loan originator. The goverment is yet again bent on restricting the rights of private property owners.

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