3/1 Columbus OH with buyer in place - $36k gets you $68k

5 Replies

I just went over 57 pages of my mortgage docs and found out I can't even lease-option the property, let-alone wrap the mortgage. I'm creative with strategy, so here's what I've got:

239 N. ******* Ave, Columbus, OH 43204
with the buyer in place and terms already negotiated.

Buyer Info:

Credit Score 745
Background - Spotless since 2009

Agreement:

Purchase Price: $51,891.96 (Includes Appliances)
Down Payment: $5,895.98 ($1,000 goes towards 50% of the appliances)
Note for: $45,995.98
8 year term - 96 months
8% interest
Payments: $650.23 per month for 96 months

Total $62,422.08 monthly payment
Total $68,318.06 with down payment

I was thinking $36,000 packaged and ready to go. When you get the down payment, you are only out of pocket (or out a private loan of) $30,104.04.

With the purchase, I would pay off my previous mortgage, youI just went over 57 pages of my mortgage docs and found out I can't even lease-option the property. I'm creative so that everyone can get what they want.


I was wondering if you would want to buy:

239 N. Oakley Ave, Columbus, OH 43204
with the buyer in place and terms already negotiated.

Buyer Info:

Credit Score 745
Background - 2 offenses in 2009 with reasonable explanation (They are no big deal)

Agreement:

Purchase Price: $51,891.96 (Includes Appliances)
Down Payment: $5,895.98 ($1,000 goes towards 50% of the appliances)
Note for: $45,995.98
8 year term - 96 months
8% interest
Payments: $650.23 per month for 96 months

Total $62,422.08 monthly payment
Total $68,318.06 with down payment

I was thinking $36,000 packaged and ready to go. When you get the down payment, you are only out $30,104.04.

With the purchase, I would pay off my previous mortgage, you would own the property free & clear, which you would convert to the note with the above terms.

Can you cite the mortgage language that prohibits optioning the property for sale? A lease of 3 years or less does not violate DOS. An option to purchase, depending on time frame, is not that much different that listing the property for sale. I suspect combining the terms lease option (which no one should ever do) may be the issue. Indeed, any thing set-up to look and smell like a sale is in violation of DOS and the terms of most mortgage docs. I thought everyone already knew this? :)

Hi K. Marie,

ISSUES NO.1

“Mortgage, Assignment of Rents, Security Agreement and Fixture Filing” in its entirety. On page 10, sub paragraph e., which is part of the overall paragraph entitled “Assignment of Lease; Leases Affecting the Property’, it states that “All Leases for residential dwelling units shall be on forms approved by Lender, shall be for initial terms of at least 6 months and not more than 2 years, AND SHALL NOT INCLUDE OPTIONS TO PURCHASE.”

ISSUE #2

On page 20, sub paragraph a., which is part of the overall paragraph entitled “Transfer of the Property or Interests in Borrower”, it states that in the first part of the sentence “The occurrence of any of the following Transfers shall constitute an Event of Default under this instrument: (i) a Transfer of all or any part of the Property or any interest in the Property;”

ISSUE #3

there is the agreement entitled “Borrower Agreement.” On page 7, sub paragraph b, Negative Covenants., which is part of the overall paragraph entitled “Covenants”, it states that in the first sentence “Borrower shall not sell, transfer, mortgage, assign, pledge, LEASE, grant a security interest in, encumber, or permit any encumbrances of the Property.

Originally posted by Kristine Marie Poe:

Can you cite the mortgage language that prohibits optioning the property for sale? A lease of 3 years or less does not violate DOS. An option to purchase, depending on time frame, is not that much different that listing the property for sale. I suspect combining the terms lease option (which no one should ever do) may be the issue. Indeed, any thing set-up to look and smell like a sale is in violation of DOS and the terms of most mortgage docs. I thought everyone already knew this? :)

To keep the iRS from considering a disqualified lease option

1. The rent should be at or near fair rental value. Breece Veneer & Panel Co., 232 F .2d 319. Get a written opinion of the rental value from a qualified real estate professional.

2. Keep rent credits toward the option price to a minimum. Generally, 20% or less is considered reasonable.

3. The option price should be at or near fair market value. Get a written opinion of the market value from a qualified real estate professional. Breece Veneer & Panel Co., Ibid.

4. Try not to tie-in substantial lessee improvements with the option exercise.

5. Do not pass legal (or equitable) title to the optionee\lessee\buyer.

6. Demonstrate that you intend to do a lease-option and that you believe the rent and option price to be reasonable. See Benton, 197 F.2d, 745; Lester, 32 TC, 711. Use arm's length lease-option documents along with the counsel of qualified professionals.

Tell us more about the loan product.  Is it for owner occupants?  First time homebuyers? Offered by a special program?  I've never seen the clause that says you can't mortgage or encumber the property.  It's got to be a special purchase or loan program.  You're not thinking of renting property where the loan requirement is owner occupied, right?

The loan product is strictly for non-owner occupants.  It's hard money.  I used it 2 years ago when I bought the house because I got a great deal on the house and I didn't want to mess with my cash-on-hand.  When I talked to them about re-drafting the document, they said that they can always addend it later.

So I get a potential buyer.  I email the lender to let them know that I am planning on wrapping the mortgage or leasing the property and selling the whole thing when it's seasoned.  I try to do things as above board as possible.

While I'm qualifying the buyer, I send an email to the lender stating that I need the loan mod.  They refinance the property for me, (For a few thousand dollars) just extending the term of the loan.  I insist on the strategy that I'm doing again when I send the doc back.  I asked if they could provide an addenda to allow me to start getting the property sold.   It was a week of 'back-and-forth' to find out that their 'investor' on the loan (Which is a subsidiary owned by them) won't allow the loan terms to be amended...    

Needless to say this is the first and last loan that I will be doing with them.


My hope is to eliminate the liability of the mortgage and utilities, in order to free up additional cash flow.  I've already paid 12 months of insurance premiums and the taxes for the year.  I can eliminate these liabilities by refinancing, selling the entire opportunity, or selling the house.

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