All Forum Posts by: Brian Gibbons

Sharon Vornholt great article!

Probate takes specialized knowledge with PRs, intestate, heirs challenging wills, etc. See http://en.wikipedia.org/wiki/Probate#Steps_of_probate

Heirs want their money fast and not complicated seller financing creative ways to sell.

So get a really cheap price (defend your numbers to the heirs) and submit an offer. Can't hurt!

Ditto what John Jackson said. He helps more people with "executory contract" financing nationwide than anyone, at least anyone I am aware of. "Executory" means lease for a while then execute a new origination.

:)

Dan Griffin, welcome! Buying on terms, whether it is a contract for deed, sub2 land trust, or lease purchase - lease option is always a good goal.

The issue here is FHA owner occupied loan rules http://www.fha.com/fha_article.cfm?id=371

"To prevent circumvention of the restrictions on making FHA-insured mortgages to investors, FHA generally will not insure more than one principal residence mortgage for any borrower."

So I would maybe look at sub2, contract for deed or a sandwich lease option.

RE: the house, for easy resale, get a 4 B @B 2 car garage, good school district. Using a Car analogy, Like Buy a Toyota Camry, not a Ford Fiesta or a Chevy Chevette.

And, every state is different. When you ask a question here, at least say where you are going to live. Some people here like John Jackson are experts in Lease Options in TX, with demanding Lease Option Laws.

So, where are you moving to? :)

Hey buddy!

1. GreatSchools.org
2. NeighborhoodScout.com

Ask @Bill Walston too!

Probate makes it not easy to do options, but you can try.

An Equity Split may work:

1. You lease and option with the ability to assign and sublease.
2. You exercise price is $330
3. You give the sellers an option to buy 50% of the equity for 10 dollars. That option is in escrow with the title clouded with a Memorandum.
4. You get $10K from a private lender IRA with a return of 50%, no payments until the property is sold. A lien is placed on the property to protect the private lender.

So you improve it, llease option from seller, and lease option to a strong tenant buyer for top sales price.

Pay the sales costs, and split the balance with the seller.

I think that is the a win win because probate does not care to improve the property for retail resale. Sellers get top sales price with no work. You make half the profits.

What do you think Brandon?

You may want to ask @John Jackson or @Bill Walston.

I still cant do that @ thing!

Hi Shawn,

Getting a $200K house and paying full price but large rent credit might be a way to go.

Give yourself 2 years to get the mortgage and a 50% rent credit subtracted from the future purchase price.

You can tie the purchase price to a future appraisal, as you need a new appraisal to get the mortgage in the future. It is a gamble for both parties, but a good solution if the seller has no equity.

Florida homes may depreciate as some of the other sand states, like CA, NV and AZ.

Offer to pay minor maintenance to entice the seller, but only 1st 100 dollars or so.

Protect yourself and use a 3rd party payee to get your money to the mortgage company, the taxes and the insurance. Anything over the PITI goes to seller. Offer to pay for it, usually under $20 a month.

Do a prelim title search to make sure the sellers are the owners. Don't get scammed.

Get a market rent survey in writing from a property manager co, as this will be required to get the mortgage. Don't pay more than market rent. Mortgage Originators wont like it.

You could pay market rent plus an additional option payment. This will accelerate your ability to get the mortgage. Make sure the payments pay down the mortgage and not directly cash to seller.

Make sure the home has repairs suitable for a FHA loan.

Have your agreement assignable in case you need to sell your interest in the agreement. Life and s@#t happens.

Have an Escrow opened and a Memorandum of Option recorded so the title is clouded, so that the seller cant sell or encumber.

And, PAY YOUR RENT ON TIME!

Have fun in Florida!

Brian

You may want to look at
Land Trusts in TX http://www.lonestarlandlaw.com/Texas-Land.html
Owner Finance in TX http://www.lonestarlandlaw.com/owner_finance.html
Wraps in TX http://www.lonestarlandlaw.com/Wraparound.html

And look up John Jackson here on BiggerPockets!

Texas and seller financing is a mess and the man to talk to is John Jackson on BP.

LOs and CFDs are part of "executory contracts" in which the Texas State Legislature screwed the little REI guy back in July 2005.

See http://www.lonestarlandlaw.com/Executory.html

Here is a portion of a letter that I received from a great TX contract attorney. I asked him to create a lease and "contract for option to purchase" or CFO in Texas, where the option is held in escrow.

Here is his response (name withheld)

START-----

Brian:

The concept of a "contract for option" is very interesting.

To use this concept under Texas law, we will need to carefully prepare an agreement that contains several legitimate "conditions precedent" to the owner's / seller's granting of an option to purchase the property. In other words, we need to carefully and clearly describe several legitimate conditions that the tenant / prospective purchaser must comply with in order to earn or obtain an option from the owner / seller. Some or all of these legitimate conditions might be described as circumstances that must occur, or events that must take place, before the owner / seller will grant an option to purchase the property.

Only after all of the conditions, events, and circumstances have happened will the owner / seller grant an option.

Examples of these conditions or events could be the satisfactory completion of performance under a residential lease contract, or payment of consideration for the owner's / seller's granting of an option in installments over a period of time.

Another way to look at it is, several legitimate things must happen before the prospective purchaser will receive an option. Until those things happen, the tenant / prospective purchaser has no legal privilege or right to compel the owner / seller to sell him the property. Of course, this may be disconcerting to some tenants/ prospective purchasers, but I believe if it is explained and presented properly, they will understand.

The contract for option form you attached to your email might be satisfactory for use in Florida, but I would recommend that we develop a different form that would comply with Texas real estate and contract law, especially cases decided in Texas that discuss conditions precedent to enforcement of a real estate contract.

I would be glad to work with you to prepare a form for use in Texas. I can do an initial draft in the next several days, then email it to you for your comments. We can work through a couple of drafts or sets of revisions until we get it into a final form that we are both comfortable with.

I think another aspect of this would be that when the option is finally granted by the owner / seller, the tenant / prospective purchaser must be ready, willing, and able to accept the option by submitting to the owner / seller a standard Texas purchase and sale agreement with a closing date of less than six months. A purchase and sale agreement (not a lease option) that provides for delivery of a deed in less than six months is not classified as an executory contract under existing Texas law or the new law.

Let me know your further thoughts.

Best regards.

END -------

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I really believe the Lease and Contract For Option in Texas is a great tool for the Texas REI in this credit strangled market.

Brian

PS one of my favorite quotes is Ben Bernake:

http://www.reuters.com/article/2012/05/10/us-usa-fed-bernanke-idUSBRE84911720120510

even worthy borrowers can't get mortgages
"To be sure, a return to pre-crisis lending standards wouldn't be appropriate," Bernanke said. "However, current standards may be limiting or preventing lending to many creditworthy borrowers."

I as a lease option investor am happy about that! :)
You can either
Buy with Cash
or Buy on Terms
Or Rent

I really love you Sandy but...

I use leasing agents for showing tenant buyers, and usually it is half to full months rent.

They are paid to show and lease, that is it. I do the option.

The option fee is my income.

Best Wishes,

Brian

Sorry Melodee, I was talking of a creative play with a seller.

I have no idea if it is good or bad without investigating all the details.

Good luck finding a cash buyer and getting a ref fee!

Brian