If any of you can shine some light on it for me, it would be great. I'm looking at a property from a third party. Here is what I was told of. The owner purchase it as a REO, with 90 days no resell. He purchase it with hard money around 10-12%. He some how want's back out of it, so he's selling it with a lease to own contract. I have never made a lease to own purchase before. Do the down payment need to be paid at the lease, or is it a option to be able to purchase at end of 3 month?
This is relatively common in my experience and the terms can vary significantly. You could negotiate any terms that work for you. You could get away with paying no money down, but typically they have higher "lease" payments where a certain amount of the monthly goes towards your eventual down payment. I would prefer a recorded lease option though.
I just recieved the contract for the option. Can you all take a look for me? does the contract fee goes to the total payment?
"No Credits. There is NO credit applied to the purchase price for improvements or
additions to the property. There is NO credit applied to the purchase price for any of the
rental amount paid during the term of the lease. There will be no payment for or
reimbursement issued for any repairs, improvements or additions to the property.
7. Contract Payment.
a. The fee for this Contract is $ 18,000.00, and is for the right to be granted an Option to
Purchase at the end of 1 year or in the time frame allowed herein. This fee is
NON-REFUNDABLE for any reason whatsoever unless the Seller is not able to deliver
marketable title to the Buyer at time of closing. ______________ Lessee’s initials
b. At the Time the Option is exercised, full credit will be given for the amount of this
contract fee payment on the lessees account on the HUD-1 form.
c. This Contract Payment is NOT A SECURITY DEPOSIT. _____________ Lessee’s Initial."
I would read this as the $18,000 option fee, not a credit towards your purchase price. You're paying $18k for the right to purchase the property in 1 year, regardless of what happens to the market. It would need to be a pretty good deal for me to agree to that.
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