Lease w/ Option 2 Buy gone WRONG!!

OP

Louisville, KY · Member since 2015 · 26 posts · 75 votes

6y

Correct. We do have a "Lease w/ Option to Purchase" contract. We both signed it. He has a copy I have a copy. He is just now claiming a misunderstanding / misinterpretation of the deal.

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

6y

Originally posted by @Leon F.:

Correct. We do have a "Lease w/ Option to Purchase" contract. We both signed it. He has a copy I have a copy. He is just now claiming a misunderstanding / misinterpretation of the deal.

well if its in writing and legal binding contract then i dont think there is much to worry about.. I take it there was no credit towards the purchase price in his rent payemnts ?

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Greg M.

Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes

6y

Originally posted by @Leon F.:

Correct. We do have a "Lease w/ Option to Purchase" contract. We both signed it. He has a copy I have a copy. He is just now claiming a misunderstanding / misinterpretation of the deal.

Well that is unfortunate for him. He had time to review the contract and seek outside council. If he didn't, that is on him.

It actually sounds like he is either mentally retarded or playing you.

The only way I could see this working out bad for you is if the $550 rent is significantly above what the place would rent for and a reasonable person could have thought that this higher payments were for purchasing the place.

At this point I'd just sign him to a $550 a month lease and let him pay that as long as he lives there.

7 Reply

Season Price

Flipper/Rehabber · MD · Member since 2008 · 89 posts · 34 votes

6y

@Leon F. I agree with the above. You already have a contract, and you own the house. If you haven't already, I would proactively talk to a/your lawyer to see what you could be in store for ahead, just in case. It sounds like he won't go easily, whether he's playing you or not.

Moises R Cosme

Flipper/Rehabber · Leominster, MA · Member since 2020 · 667 posts · 384 votes

6y

You have the Contract and you are the Owner; if I were in your shoes I would let him know that if he fails to pay, you will start eviction proceedings. I would send him a copy of the contract with a simple explanation and I would send everything certified so that he has to sign for the mail when he receives it. The contract started your paper trail, continue the paper trail by figuring out the forms & times necessary in your town that way IF you have to evict him you have everything in order. Fundamentals are on your side.

On a personal level I feel for you - it sucks when people try to take advantage.

5 Reply

OP

Louisville, KY · Member since 2015 · 26 posts · 75 votes

6y

@Jay Hinrichs

No. No credit towards the rent. The $550 is the rent only and is seperate from the $15,000 price. I only took the $550 first month rent and didn't ask for extra because he said it was a struggle to come up with that.

OP

Louisville, KY · Member since 2015 · 26 posts · 75 votes

6y

@Greg M.

The rent is average/slightly below for the area. I could probably get $600-$700 if I fixed if up, but since he already was living there and I didnt need to do anything I figured that would be cheap rent while he figures out how to come up with the purchase price.

OP

Louisville, KY · Member since 2015 · 26 posts · 75 votes

6y

@Season Price

You're right. The signs were there in the beginning that he might be difficult, but he paid his rent on time and was low-maintenance so I guess I ignored the signs.

Joe VilleneuvePro Member

Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes

6y

As long as there is no reference to the Option agreement from the lease agreement (you did sign two separate agreements...right), and there are two separate agreements...that means two sets of signatures, then you don't have to "give" him the property...which is what he is saying is happening. Once his 2 yr option period expires, you don't have to sell him the property either...and based on his track record, before and after you became the owner, I wouldn't sell him this property under ANY conditions, or any situation.

OP

Louisville, KY · Member since 2015 · 26 posts · 75 votes

6y

There was only one agreement/contract signed.

it had all the details and that's what we used.

You are suggesting I should have a 2 seperate contracts? A lease contract and then a totally seperate purchase contract? That we should have made?

this is what we signed. Page 1 & page 2.

A simple ( that's what I thought anyway🤷‍♀️🤷‍♀️🤷‍♀️) lease w/ option to buy contract.

Joe S.Pro Member

Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes

6y

Originally posted by @Leon F.:

So I bought a property in 2018 from the foreclosure auction in Louisville at the courthouse.

The house was still occupied by the original owner. When I went to talk to him he didnt believe I had bought it and thought there was a mistake and didnt know his house was being auctioned etc.

Long story short. We came to a Lease w/Option to Buy (Rent to Own) agreeement in July 2018.

His Rent would be $550 for 2 years and within that 2 years he has the Option to Purchase for $15,000.

He pays his $550 rent on time the entire time, but makes no extra/additional payments. When I've picked up the rent I've asked if he talked to any banks about loans, etc. And it's always no.

Here we are in July 2020. And he tells me he's ready to make his last Payment and he thought the $550 was ALL PAYMENTS towards the $15k and that he owns the house now etc.

What should I do now?

Anyone else experienced any lease/option misunderstandings?

The guy is playing dumb!

Kathy Argento

Lender · All, Nationwide · Member since 2015 · 144 posts · 46 votes

6y

@Leon F.@Moises R Cosme

Yeah, I wouldn't worry about it, and like Moises said, just start the eviction proceedings. He did not buy the home for the $15,000 as stated in the contract.

Account Closed

San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes

6y

It's not your job to turn him into a smart or honest person. Move ahead with whatever you need to do and tell him he needs to contact a lawyer if he doesn't understand any legal proceedings, then don't interract with him again personally - leave it to the lawyers.

5 Reply

Jack B.

Rental Property Investor · Seattle, WA · Member since 2014 · 1k+ posts · 1k+ votes

6y

Originally posted by @Leon F.:

There was only one agreement/contract signed.

it had all the details and that's what we used.

You are suggesting I should have a 2 seperate contracts? A lease contract and then a totally seperate purchase contract? That we should have made?

this is what we signed. Page 1 & page 2.

A simple ( that's what I thought anyway🤷‍♀️🤷‍♀️🤷‍♀️) lease w/ option to buy contract.

Your contract says the guy has the option to purchase the house for $15,000.....

I think you meant he can buy it at the market price you guys agreed to and a 15K deposit. You can't buy a house in LV Kentucky for 15K can you?

If he was smart, he'd hold you to buying it for 15K that your contract states. It's poorly worded.

Your contract also allows him to request extensions....

While he is playing dumb and I didn't see anything in your contract that said the rent goes toward the 15K, your contract states that he can buy it for 15K, not a 15K down payment.

$550 a month for 24 months isn't even 15K, it's 13.2K, the guy is either an idiot or play dumb. My guess is both. If it was me I'd take your property for 15K that you agreed to...

Marian Smith

Real Estate Investor · Williamson County, TX · Member since 2011 · 1k+ posts · 961 votes

6y

@Leon Foree Looks like your document states "lease" and "option" right up top. Everyone knows what a lease is. (My sister bought a vehicle on the "smart-buy" plan and about fell over when I told her that was a lease.) If he doesn't want to buy maybe someone else does and you can rid yourself of the situation.

Jack B.

Rental Property Investor · Seattle, WA · Member since 2014 · 1k+ posts · 1k+ votes

6y

I don't do lease options, but if I did, I would have boxes they have to check:

-I understand that rent paid does not go toward the down payment amount of X.

-I understand that the 15K deposit to exercise the option to buy will be forfeited if I don't exercise the option.

The point of a lease option is to collect money up front as a DP or charge a higher rent, part of which goes toward the down payment if they don't have the dp right now. Not like this. You literally gave him discounted rent and he can choose not to exercise the option. You have no money in hand, and he will have to be taken to court for the money which could cost you more than the 15K. On top of that, you still don't have money from him even if you get a judgement, and you've further thrown money away.

I don't think you really thought this through very well. This is pretty obvious stuff. Evict him and stop doing this until you know what you are doing with lease options.

3 Reply

Osazee J Osagie

Investor · Potomac Maryland · Member since 2020 · 81 posts · 46 votes

6y

Talk is usually cheaper so give him a phone call and be very gentle and very nice and nicely explain to him to move out and if he declines your attorney fees will be billed to him for the eviction proceedings. Warning only talk to him once and do not do this yourself, lawyer up and start eviction proceedings. Be sure your lawyer is aggressive and will ask for any damages due.

Joe VilleneuvePro Member

Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes

6y

Originally posted by @Leon F.:

There was only one agreement/contract signed.

it had all the details and that's what we used.

You are suggesting I should have a 2 seperate contracts? A lease contract and then a totally seperate purchase contract? That we should have made?

this is what we signed. Page 1 & page 2.

A simple ( that's what I thought anyway🤷‍♀️🤷‍♀️🤷‍♀️) lease w/ option to buy contract.

Always use separate contracts, and NEVER refer to the other contract in either contract.

I'm not a lawyer, but I've seen what I considered really bad lawyers win in these cases. If nothing else, they tie up the process long enough to cost you money and allow them to live there long after they should have been gone.

When their lease is up...don't renew it.

OP

Louisville, KY · Member since 2015 · 26 posts · 75 votes

6y

@Jack B.

He CAN BUY it from me for 15k$. That IS the agreement.

The way you interpreted is exactly what the deal was. It's not a 15k deposit, it's the purchase price.

I was trying to help the guy out!

He has the option to BUY It (get a loan or come up with the money some way).

But now He thinks 100% of rent was going directly to the purchase amount!

3 Reply

OP

Louisville, KY · Member since 2015 · 26 posts · 75 votes

6y

Live and learn.

I don't plan on doing anything like this again!

Joe VilleneuvePro Member

Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes

6y

Originally posted by @Leon F.:

Live and learn.

I don't plan on doing anything like this again!

Actually, if you learn to do them correctly, LO and mainly sandwich LO can be great ways to do REI.

Jonathan R McLaughlin

Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes

6y

@Leon F. I don't think he's that dumb....he is still in a house that was foreclosed on him two years ago, and I bet the rent he was paying you is less than his PITI. Agreed the contract could have been constructed better, but he knows what he's doing and the ignorance is just an act. He'll play the victim in court and drag this out nicely, and/or try and reset the clock with you somehow.