Hi BP Community.
I am selling a house in central Florida and was contacted by an investor with the following Lease/Option agreement. This guy apparently finds potential tenants/buyers that want to live in a house for 3 years and then buy at a set price. The “agreement” he sent me is below (identifying details redacted):
RESIDENTIAL LEASE and OPTION TO PURCHASE AGREEMENT
BUYER/TENANT: XXX Holdings, LLC
PROPERTY ADDRESS: XXXXXX
1) Rent: $2,500 per month
2) Lease Term: 36 months, beginning March 16, 2018 and ending March 16, 2021.
3) Maintenance: Buyer/Tenant will be responsible for maintenance and repairs of
the property, not to exceed $500 per incident.
4) Sub-Lease: Buyer/Tenant has the right to sub-lease this property with written
consent by the Seller / Landlord, and this shall not be unreasonably withheld.
OPTION to PURCHASE
1) Purchase Price: $ 345,000
2) Option Period: 36 months, beginning March 16, 2018 and ending March 16,
3) Option Consideration: $100 - All Option Consideration will be credited in full
toward the purchase of the property.
4) Rent Credit: Buyer/Tenant will be credited $ 0 per month toward the purchase.
5) Closing Costs: Purchaser will pay all allowable closing costs.
6) Expiration: This offer shall expire on March 16, 2021.
7) Inspection: This offer is contingent upon physical inspection of property and
subsequent completion of a more formal and signed Residential Lease with Option
to Purchase Agreement.
8) Non-Exclusive – This agreement is non-exclusive and can be canceled anytime
by either party.
9) Assignable – This Agreement is assignable with written consent by the Seller /
Landlord, and this shall not be unreasonably withheld.
X_____________________________ X ________________________________
Seller/Landlord Date Buyer/Tenant Date
I have a few questions:
- Is this legit?
- Should I hire an attorney to make sure our agreement is solid?
- Does the state of Florida have boilerplate agreements for this sort of arrangement, like they do for purchase agreements and rental agreements?
- The current market rent and price is in the agreement above… Does one typically go higher or lower than the market rent/price on these sorts of agreements?
- What questions should I be asking this investor when I call him back?
- What provisions should I ensure are included in the lease/purchase option agreement?
If you want the house SOLD forget this "investor". Look for a legitimate cash buyer. Also, it sounds as though the agreement might be illegal and their intent is to broker the house. If not licensed, they are probably violating FL state laws. They want to put up $100? That is probably their life savings.
Standard option consideration is more like 3% of the purchase/strike price. So, more like $10,000.
His dates are off. This is an option for 3 years and 1 day. Going over 3 years is significant - easier to say this is a disguised sale. You will then have to foreclose when the tenant buyer doesn't pay you.
Why would anybody relinquish control of a $345,000 asset for $100?
Glad you asked. I wouldn't do this as the Optionor in a million years @Warren Blevins . Your $345,000 house will be worth $200k by the time the unknown tenant buyers get done with it and you've had to foreclose on whomever he's assigned it to.
I have done lease option type deals and they worked out well. There is no reason for you to hand the place over to someone else to do this. You can do it yourself and reap the profit. It isn't hard.
In other words, I would not take this offer. If you want to do a lease option do it yourself, or just sell the place in the conventional way.
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