LO in San Jose, CA. Advice Needed from Experienced LO Folks

9 Replies

I'm offering my primary residence as a LO.  I'm in San Jose CA.

My questions for CA LO transactions:

1) Where can I obtain the required documents?

2) What exact documents are required?  (Lease, Option to Purchase, Purchase Agreement?)

3) Is there a usual or standard amount/percentage for the Option Fee, rent credits, and any other fees/charges?

4) Should I involve a RE attorney or are the CA Realtor Assoc Board forms sufficient?

5) Is it ok to have a minimum purchase price with a right to reappraisal at lease expiration to adjust price to current market price?

6) What is the standard period between the lease expiration and the Option to Purchase commitment, if they decide to buy?

7) I'm receiving many emails from my ad.  Is there a tutorial/explanatory video available somewhere and a standard letter I can send to explain how LOs work?

This will be my first transaction, so Any other advice appreciated.  Thank you.

Gary 

Hi Gary,

Great (well thought out) questions! Message me here on BP and I can answer many of your questions, sir. There are several approaches to doing lease options, and consequently, many variables... so it would be prudent to do so to 'maximize' the exposure, pre- screen the largest number of applicants, increase the likelihood of 'closure' (selling the property) with the tenant buyer(s) and structuring the deal, to optimize your ROI. And you won't learn much of that (unassisted) "doing it yourself..." on a singular deal. :-)

Hi, Scott.  Thanks for the reply. I was getting lonely on here.  Ha.  I'll message you. I'd still like to here from CA folks, as the laws might be different.

@ Gary F, 

I actually just left Santa Rosa, California a few months ago... and 'updated' my BP location, more recently. (I will be back and forth between Arizona and Cali (i.e. leave here again prior to next May 1st, before it seriously "heats- up" for six months, until November!) and then still 'network' with people "doing deals" here, and relocate back to the Monterey peninsula, etc., where I MUCH prefer, to BE. I have both local and (pretty much) "national" LO agreements, that one should then have a (local case law, savvy) knowledgeable RE attorney review, prior to having the LO agreement 'signed' and notarized there, like every RE 'terms' deal. And BTW, not that many RE attorneys deal with "creative terms" deals, such as Lease Options... because they are generally more 'conventionalist,' practitioners. But the MAIN discussion should be "how to get more than the 2.5- 5% down, with one or two additional paydays." (That's where the 'consultantancy' and/ or additional marketing and advertising angles, other tactics, buyer pre- screening, etc. can come in very handy... and routinely 2- 3x your LO, ROI. :-)

I have used the documents from the Calif Association of Realtors:  Lease, Lease option agreement and Purchase agreement all used together.   Only use an agent that has done several of these transactions- there are few an far between.

Also, most agents will want the commission when they complete the lease option agreement, not when they compelte the sale. (I, even though I am an agent) dont feel this is right. I feel the payment comes when the home is purchased and not before.  Maybe a portion for the lease part, but not all.

The last one I did was for 1 year, many are for up to 2-3 years. 

The longer the time, the more you should agree on an appraisal (2 if someone is not happy with the results of the 1)  For the 1 year, we agreed to a certain price up front.

Get a non-refundable deposit to be applied to purchase if they do purcahse.  If they back out, they lose deposit. 

REnt credits are negotiated, as are who cares for repairs,  

Best of luck!

Originally posted by @Christine Kankowski :

I have used the documents from the Calif Association of Realtors:  Lease, Lease option agreement and Purchase agreement all used together.   Only use an agent that has done several of these transactions- there are few an far between.

Also, most agents will want the commission when they complete the lease option agreement, not when they compelte the sale. (I, even though I am an agent) dont feel this is right. I feel the payment comes when the home is purchased and not before.  Maybe a portion for the lease part, but not all.

The last one I did was for 1 year, many are for up to 2-3 years. 

The longer the time, the more you should agree on an appraisal (2 if someone is not happy with the results of the 1)  For the 1 year, we agreed to a certain price up front.

Get a non-refundable deposit to be applied to purchase if they do purcahse.  If they back out, they lose deposit. 

REnt credits are negotiated, as are who cares for repairs,  

Best of luck!

 Thanks, Christine.  So, there's no problems with evictions should the Leasee/buyer default?  I've read some say not to to accept rent with "credits" towards the purchase price because the court may say they already had an interest in the house because of the payments.

One RE attorney I talked to said the CA Realtor forms are sufficient too.  I just want to make sure the Leasee/Buyer cannot claim any kind of ownership because of the credits and Option Fee. 

Hi Gary

I would set a purchase price based on today’s figures. We have been hearing that prices are near the top, but we don’t know when prices will start dropping. 

You can set the option to buy in 2 years or in 5 years and the buyer can decide at that point to buy or not at today’s prices. If they don’t buy, they will lose their option payment money and rental credits, so they will most likely buy. 

But if they don’t buy, you keep their payments and put it on the market for another lease option and you are ahead because you will have their option payment as well as rents collected over the 2 or 5 years. 

You will need 2 contracts- one for the lease option and another one for the rent payments and rent credits. 

I can pass along a contact I have for coaching about lease options, if you want. They are in Benicia, so they are familiar with Bay Area prices and CA policies. 

Cheryl

@John Jackson is right.  Keep it simple.  We partner with John for all of our TX people.

Some of our top Associates are in CA doing deals.  We use an attorney for all of our signings, both buying and selling.  However there is no reason to involve a Realtor unless they bring you a buyer or a potential deal.

Shoot me a private message if this piques your interest.  Could direct you to some free stuff to check out that will help you.

Chris Pre