How to structure this deal- Lease Option

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I am in contract to purchase my “dream home” . Unfortunately, the seller is claiming he might declare BK and stay in the house if we don’t restructure the deal.  He has a 1st of about a $650k and a 2nd of about $300k. He wants to walk with $100k. I am willing to give him $100k and take over both loans (at least the 2nd needs to be made current). My question is, is a lease option the best way to do this? How do I protect myself in this situation? How do we deal with the due on sale clause? What is the best source for getting all the information I need to make this work?

Originally posted by @Kevin Boyd :

I am in contract to purchase my “dream home” . Unfortunately, the seller is claiming he might declare BK and stay in the house if we don’t restructure the deal.  He has a 1st of about a $650k and a 2nd of about $300k. He wants to walk with $100k. I am willing to give him $100k and take over both loans (at least the 2nd needs to be made current). My question is, is a lease option the best way to do this? How do I protect myself in this situation? How do we deal with the due on sale clause? What is the best source for getting all the information I need to make this work?

 In a Lease Option, Title doesn't change hands so there is no due on sale. The danger is that if he files bankruptcy later on, you have to defend your Option in bankruptcy court. If you do a Subject To and the Deed is recorded, and then he files bk you will receive notice of the filing but will have a recorded interest. Either way, if you do the deal as a Lease Option or as a Subject To, and he files bankruptcy sometime in the future, even a year form now, both banks will be notified of the filing and the house becomes part of the estate until things get sorted out. Once the banks realize the house has been sold, they then can enforce the due on sale clause. Don't let a "dream home" destroy your future. If things are that uncertain, they will certainly fail. Caveat emptor.

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