Lease Option - Option Fee

3 Replies

Hey BP!! 

I am in the early stages of setting up a lease option on a property that I own. Here is my question In regards to the option fee: I will be using an escrow company to set up and manage the lease option for the duration of the term.  The option fee will be made payable to the escrow company to protect the buyer. Question: Will I receive the option fee when the buyer/tenant moves in? Or, will the option fee be held in escrow until the term is complete? Second question: My understanding is that the option fee will go towards the down payment instead of taking it off of the purchase price. Is one better than the other? 

I think both of these issues should be covered in terms of the contract.

Each condition is negotiable, until contract is presented and accepted.

To answer your first question our option fees are non-refundable therefore we get it when the tenant/buyer moves in...

As far as your second question, our option fee gets applied towards the down payment when the option is exercised, and the down payment will get applied towards the purchase price when they go to close, so it all goes together anyway.

As the mortgage market changes, I try to stay up with the newest info.

I got off the phone this AM with a mortgage pro at BofA, and one other bank after cold calling 3-4 places this seems to be the latest info.

1. Option deposit/Option fee etc/Lease Option

If I Option a property with a lease the option money needs to be put toward the house at closing in cash if you tell the tenants that it credits their account. Same with leasing credits. If you tell them it will county toward the down payment or credit at closing, it has to come in as cash towards the down payment at the end. 

Both parties (from different lending institutions) said almost the same thing. If you wanted to just reduce the contract price, they will still have to come up with some skin in the game from somewhere. 

heads up...

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