Assigning lease option

13 Replies

Okay so I understand the “sandwich lease option” but I’m confused on how to assign the lease option to the seller. If seller asking for 100k and you market it for 110k do you just get the 10k as a down payment up front from the tenant buyer and assign it back to seller? Am I using the same contact lease option agreement and purchase agreement?

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Originally posted by @Alvonta Flemings:

@Brad Baker okay when I collect that option fee how do I go about assigning it back over to the seller?

 I think we're thinking about option fees differently here. To my knowledge option fees are not assignable. If you negotiated an option fee with your seller then that needs to come out of your pocket. If you negotiated receiving an option fee with a buyer that will go into your pocket. For example I negotiated an option on a property where I gave the seller a $2,000 option fee. I am paying for that. I have a least option buyer lined up that will give me a $6,000 option fee. I pocket the $4,000 difference. 

Originally posted by @Alvonta Flemings:

@Brad Baker okay when I collect that option fee how do I go about assigning it back over to the seller?

 I think I see the problem here...at least the one regarding the option fee.  You're confusing the option fee with some type of down payment...which it isn't.  The option fee is what it costs (100% of the cost) to buy the option agreement.  The option agreement isn't part of the purchase...it just gives the owner of the option agreement the exclusive right to purchase, during the term indicated in the option agreement.  It isn't a down payment, it isn't a part of a down payment, and it isn't in anyway transferable, assignable or credited toward the down payment.

Option 'fees' are the 'option consideration'. The owner of the property if impairing their right to sell in the future by agreeing on an option with the party who wants to start an option. There needs to be an exchange of value. The property owner sells an option for consideration. If there is no consideration, then the agreement is not legally valid.

Option consideration can be paid in 1 go or it can include an element of future payments. 

Credit for some or all of the option consideration can be written into the option contract. For example, If I buy the property, the option consideration I have already paid will come off the price if that is what was agreed. The law does not require or prevent credit from being agreed. The option might be documented by reference to the sales contract. Details in that contract set out other conditions of the sale (clear title or not, how escrow might be handled, etc).

When you sell your option you hold on a property, you are selling the rights you have under the option contract. Nothing more, nothing less. You are selling your asset, the option contract, rather than selling the property.

Originally posted by @Joe Villeneuve:
Originally posted by @John Corey:

For a fee, Joe will teach you.

 For free, I will (and have been) answering questions as well as "teaching them" more than you realize.  Be careful commenting on what you don't know.

What is it that you think I do not know or do not realize? Happy for you to educate me. 

@Alvonta Flemings  You're making the transaction more difficult than it needs to be.  Are you doing a sandwich lease or a cooperative assignment?  The process is different  with these two strategies as is the paperwork used.  And why assign the deal back to the seller rather than the buyer?

Originally posted by @John Corey:
Originally posted by @Joe Villeneuve:
Originally posted by @John Corey:

For a fee, Joe will teach you.

 For free, I will (and have been) answering questions as well as "teaching them" more than you realize.  Be careful commenting on what you don't know.

What is it that you think I do not know or do not realize? Happy for you to educate me. 

 Your comment makes it seem as if the only info I provide is "for a fee".   Not true.

Hello all. I'm an investor in Florida. Learning a lot about lease options & assigning LO. I'm almost ready to start making offers & assigning.  I read that the 2 agreements should be separate for reasons of eviction on the lease. But the LO or purchase option language refers to defaulting on the option by defaulting on the lease. I would assume neither document should reference the other. W/O that language couldn't a renter technically exercise the option after eviction.

ALSO the LO assignment contract. I have not seen one yet. Is it similar to assignment contract for a wholesale

Thanks

Mark

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First, there's a difference between a lease purchase and a lease option.

Second, it's two contracts.  One is the lease and the other is the Option to buy.

Third, IF the Option is exercised, the 3rd contract, the Purchase agreement, comes into play.

They are three different contracts, and should not be commingled in anyway.  Think of it as three different people you are dealing with:

1 - The Tenant (lease)

2 - The "potential" buyer (option)

3 - The "actual" buyer" (the Purchase Agreement)

...even though they may all have the same social security number.