Here's the deal:
The owner has his home listed and is in default (2 months behind). He is going to lose the home if he doesn't sell, rent or lease option the home. The property is listed with an agent. His listing agreement ends in December.
Question: Can he expire his listing and lease option the property to me with my option period starting Jan 1st 2015? My intention is to do a sandwich lease option, which will be profitable to me and will save him from foreclosure.
Note: This seller came as a referral and I did not learn about him from any efforts of the realtor - in other words the agent was not the procuring cause of my interaction with the seller. I am aware that if it was, I would be responsible to pay the commission under the terms of the listing agreement.
Hi @Jerry Kisasonak you will need to review the agreement between listing agent and owner. As far as I know, in most states the seller can cancel the agreement at any time, however if it sells within that period they will owe listing agent a commission, but this should be outlined within the contract.
Best option is do a 6 month lease agreement with the owner, with deposit to cover the late two months mortgage (and you pay the mortgage company), and include a clause that you have right to first refusal to purchasing the property at specific amount. This way you are not committing to purchase the property and you have a legal binding contract.
Please note, this information is not financial nor legal advice and you should talk to a professionals in these fields.
Good luck, and please remember to VOTE on reply's if you think they have helped.
Hope you have an excellent future!
@Jerry Kisasonak Like David said, take a look at the listing. Some listings don't cover rental of the property at all so you can do a lease option at any time with no issue.
And I just wanted to correct one thing you said... even if the agent was the procuring cause, you would not be responsible for paying the commission. The seller would.
Update: So I reviewed the listing agreement. Here's the highlights.
1. The listing agreement was for one year starting Dec 9,2013.
2. The listing agreement could be cancelled after 180 days with a letter of cancellation sent to the broker via certified mail. The broker then has 10 days to pull the listing.
3. Any OPTION to purchase executed while the listing is in effect will require the commission to be paid at the exercise of that option.
4. Any sale that occurs after the listing is pulled requires that the commission be paid IF:
A. The sale is within 6 months of cancellation AND
B. The owner showed or negotiated THE SALE during the active listing period AND
C. The property was not listed under an "exclusive right to sell contract" with another broker at the time of the sale.
If the seller pulls the listing and waits the 10 days, it appears that we would be able to enter into a lease option agreement without violating any commission/listing contract. If do a lease option with the owner I have not negotiated THE SALE (in capitals above for this reason), therefore I don't believe that the seller would be on the hook for the commission provided that we don't sign the option paperwork until after the 10 days.
We could also do a straight lease with the first right of refusal included in the body of lease as mentioned earlier in the thread. Any other advice? Anything I'm overlooking?
If the agent agrees to it (maybe commission on the backend), sure. They may be able to cancel the listing, but sometimes there are clauses that say if the property is sold right after the listing expires or is canceled, the agent is still owed a commission. At least I've heard of such things. You may want to review the listing agreement if the seller will show it to you.
I have reviewed the listing agreement. That was the first sentence of my last post.
And yes, the agent is owned a commission after the listing is pulled if A, B and C (also above) happen.
Our option will not be exercised for at least 1 year, so no sale will take place within the 6 month window.
@Jerry Kisasonak knowing what is in the contract, I would give the owner your card and tell them to call you back when the time is right. Not sure how much the commission is, and if the owner is willing to pay a commission based on your offer for the property. If you are able to lease the property for more than payments, etc, you could also negotiate a commission based upon the lease option, but some agents will not do this because this is how they feed their family and want the money up front.
Time is money; and there are more fish in the sea, and probably easier than this one deal. If you have nothing else going on, and there is enough money in the deal then maybe pursue it, but it sounds as if you are in a hard place.
Good luck Jerry,
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