Lease Option Assignment-- When and how do I get my fee?

7 Replies

Dear BP,

Thanks to you, I've got my first deal in the making. The seller and I have signed contracts for a 1 year lease option, and I will be assigning the deal to a tenant buyer. The non-refundable option payment will be my assignment fee.

But when and how exactly do I obtain this fee? Do I wait until move-in day, and assign the contracts then? Does the tenant/buyer just hand me over a money order or cashiers check in person? Or are there better/smoother ways to go about it?

Thanks in advance for the help.

What kind of fee are you charging the tenant buyer? Do you have the funds to pay the seller if the tenant buyer defaults on monthly payments?

Joe Gore

Congratulations!

Now I was not in the room with you and the seller in the conversation here.

You may want to look here for docs.

http://www.biggerpockets.com/files/user/REISkills

the way I do it is:

Lease and separate option and a letter of intent.

have the seller go down to my lawyers office and sign the docs.

now I have equitable interest to market for the tenant buyer.

Get on postlets.com and show pics or a video on you tube of the walk through.

Put a HUGE sign on the yard and Rent to Own bandit signs.

Have an open house on Thurs eve 4 7 pm, everyone fills out an application and an app fee non refundable to pull credit and a refundable deposit, about $1000.

If they get approved they have 48 hours to get the balance of 1st, last and balance of option fee.

Money goes through lawyers account and they do a 1003 mortg app with a mortgage broker, hopefully a RMLO.

When all the funds are collected, the lawyer create a new lease and a new option contract for the seller and the buyer to sign, and both the seller and buyer sign my option release document.

Brian Gibbons

@Joe Gore

3% of the purchase price is my fee ($6500 in this case). I use the method John Jackson describes in of his posts where he essentially raises the price of the property by his fee, and upon assignment gives the seller $1000.

I have a Right to Cancel clause in my contracts. I will cancel if I can't find a tenant buyer. And upon assignment, I am released from the Lease and the Option... so I will never have to cover payments.

@Brian Gibbons

My contracts are as follows:

Lease Contract

Option to Purchase Contract

Addendum to Lease and Option Contracts: This is what states that I can assign the deal, my fee, and the right to cancel.

I also have an "Assignment" contract that I intend to use for me and the seller.

All of these contracts were approved by my attorney, but we never actually discussed the gory details of the transaction. Do you always recommend actually assigning the docs at the attorney's office? Is it not legal for the tenant/buyer to just "hand me a cashiers check"? I understand that it would make it feel "more official" doing it through an attorney, but is there a simpler way?

If not, I will contact my attorney and see what he has to say, but I didn't think that his assistance was needed any longer for this deal to happen. Please let me know if I'm wrong.

Most people do not use their attorney other than to review the initial contracts they will be using. I think some people feel safer doing it at an office, but there is no legal reason to do so.

Originally posted by @Misty Weaver:
Most people do not use their attorney other than to review the initial contracts they will be using. I think some people feel safer doing it at an office, but there is no legal reason to do so.

Misty it is for logistics and money tracking.

Seller signs at an office and feels like it is done professionally.

Buyer cuts a check to a lawyer or a title co, feels secure that no reckless RE Investor has access to money (sometimes its alot of money, like $5K to $15K)

Chain of money is clear when the buyer applys for a mortgage, not through the REI.

Brian Gibbons

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