I just discovered and registered into this forum today and I am very pleased with my discovery and wonder if there are other forums like this elsewhere. At this very moment I am breaking away from the preparation of a Lease/Buy Option (to be presented tomorrow evening) and wondering if others here have expertise with the creation of such agreements. If others have such experience where might I find the BEST contract examples to read for referance.

One decision I am trying to make is whether it would be most appropriate to have one all inclusive agreement or perhaps better to actually have 3 stand alone independant agreements (none specifically linked or referanced to another) as noted below:

1-Sales Agreement
2-Lease Agreement
3-Option to buy Agreement

All thought/suggestions will be helpful and definately appreciated.

I would not go with lease to purchase, too complicated.

Viktor,

Thanks very much for responding. It is not my preferance to do a lease purchase but a year of nothing makes this seem like better than nothing option.I have put off presenting an offer for a day in order to continue scrambling around to find the best I might find.

I have bought leases etc.from Stamples and elsewhere but found nothing that seemed to work best until I came upon the following at the website below. It seems that this stand alone lease:

http://www.ilrg.com/forms/lease-res/us/ga

used in conjunction with the following (noted at the bottom of the lease):

http://www.ilrg.com/forms/lease-to-purchase.html

has potential in conjunction with the use of the mentioned "TENANT'S NOTICE TO EXERCISE PURCHASE OPTION:

http://www.ilrg.com/forms/exoption.html

It seems the "LEASE TO PURCHASE OPTION AGREEMENT" would not really be effective until some later date when and only if the Tenant were to sign the "NOTICE TO EXERCISE PURCHASE OPTION". I would hope all of the above would make the transaction much safer and less complicated.

I look forward to any thoughts/suggestions anyone may (the sooner the better) offer and maybe something here will be of benefit to anyone who has done or is considering doing a Lease Option Agreement.

I would advise you to get a reputable real estate attorney in the state the property is located in to write up contracts. I only use contracts that are approved by my state for a reason, to protect my clients and ensure everything is done according to the laws of my state.

Generic contracts might work as long as nothing goes wrong, but with a lease purchase, something very likely may go wrong. Last statistic I heard was these types of transactions only have a 30% chance of being successful.

Here we go again.

Lease purchase- Buyer HAS to purchase by a certain date and security deposit creates a beneficial interest for the buyer in the property unless otherwise noted in the special stipulation section of a contract or handwritten or typed addendum that is attached and made part of the agreement.

Leas option- creates no beneficial interest in the property but the buyer is not required to purchase the property but can if they so choose. The option money is generally spent the next day by the seller and is gone and not held in a typical escrow account like a security deposit is (contracts and agreements vary by state)

The forms at staples will not protect you and have holes you could drive a hummer through.

In reality a lease purchase isn't bad as usually you have another loophole to back out with and security deposit is protected by an escrow account held by and independant third party if you set it up right.

If you do either of these have some of the monthly rent applied toward a downpayment.

Why not wait a few months and save up some money??

Generally these lease purchases and options never work out and it's bad for the buyer. You have NO negotiating leverage. I have known plenty of renters to leave their lease purchase contracts because when they saved up a downpayment they could buy a foreclosure so much cheaper than the price in their lp or option contract.

good luck and no legal advice

I finally cobbled togeather a "Lease" and "Option to Purchase" agreement and presented it to the prospective Tenant for a couples of days to review. I used, as a template, the forms I previously supplied links to as well as statements from Staples agreements and other info provided by 3 RE agents I know. I will know more soon. If the Tenant accepts and eventually exercises the "Option to Purchase Agreement" (they have 16 months to do so) at closing they will have the Secutity Deposit, The Option Fee and $400 of each months rent to use toward the downpayment, closing cost etc.

Renting is not one of my preferences for it is always a lose months of revenue as a result of tight screening and then cross your fingers and hope for the best when you find someone. But, in the current market everything is tough.

Super Realtor, I see you are also in Georgia (is it the Atlanta area) so you know what things are like around here. How are you doing?

Yes I do all of Atlanta area about 15 plus counties with my business partner.

We mainly focus on commercial sales and land development but also investment property,reo's etc.

Deals are still happening but overpriced junk which is about 80 percent of mls is not moving.

Tread carefully here. Lending guidelines are tight and it will probably be a while before they loosen. The last time we experienced a declining market, a lot of owners entered into this type of agreement. When the buyer goes to the get the loan, the lender will only accept the amount between market rent and paid rent. In other words, if the market rent is $900 and the buyer/lessee is paying $1,000, the lender will only accept $100 per month toward the down payment/closing costs, not $400. You may want to check with lenders regarding their guidelines.

In any event, I agree with Super; not a sure deal in this type of market. IMO, your best bet is to find a good, reliable long-term tenant. Good luck.

Hello Alexandra and thanks for pointing out something I definitely had not considered. The folks I am doing the *Lease Option* with have 16 months to exercise the option. Hopefully the lending situation will change by then and these folks will get their credit repaired. I expect the worst but one thing I can do if necessary is to extend the lease. I do not think they are movers (been where they are for 6 years) or can save to buy elsewhere any time soon.

One thing I wonder is how the lender determines the fair market rent. In my area, at the moment, even the rents are depressed because there are so many homes on the market and builders, owners etc. are accepting just about anyone and letting them move in. The buyers actual out of pocket rent payment, not considering credit back for down payment etc., is in that $700/mo depressed rental range. The competition is brutal with signage such as “First Month Free”, “No Credit Check”, and “Bad Credit OK”. So far I have avoided these –take me I am easy-approaches. I have seen a few homes where people have moved in and a few months later they are gone.

One hope, based upon your mention, is that a lender would accept, as a fair market rent, what a current mortgage payment would be if my home was a current sale. Based upon current interest rates the P&I would be in the $700/mo. range.

If either of the above were true perhaps I will be OK. I am renting at $1175 and applying $400 back toward the down payment, CC etc. so the renters actual out of pocket is $775/mo. Does it seem as though my numbers can work? Should I talk to a few lenders and see what they may say for now? Until your post my major concern was getting the agreement in reasonably good order, the buyer qualifying later or at worst not ruining this new home. Real Estate has so many hurdles.

I have now heard more about the possibility of a lender not accepting over $100 above the fair market rent toward a down payment.

What thoughts does anyone have about the following?

I set up a separate account for the buyer, with myself controlling the account, and deposit $400 of each months rental payment to the account as payment toward their down payment. If necessary I could include their name on the account (with or without their knowledge) but would need some way of preventing withdrawal by anyone other than myself. At closing I would not be giving them the money for the down payment but would be transferring their money to them for use as the down payment and nothing more. My thought is that I am merely saving the money for them (I am their savings account) to be used for no purpose other than the purchase of my home. If they do not close then I withdraw the money, close the account and keep the money.

I now have signed agreements with a potential home buyer. Does anyone have any other thoughts or suggestions regarding lease option that I should now cosider.

If anyone is interested maybe there is a way here for me to upload my agreements for review/refinement and perhaps use by others.

There are still some concerns I have regarding rentals and mortgages. Would it be better to move such discussions to the "Rental Properties" and " Mortgage Lending" part of the forum?

I have now had an in depth discussion with a senior loan officer at Wells Fargo regarding the question of the amount that could be applied toward the down payment in a Lease-Option To Buy Agreement. He stated that neither the amount applied each month (in my case $400) nor the market rent was critical. What he indicated as extremely important was that the agreement must very clearly define the amounts to be applied toward the down payment and good monthly documentation must be maintained to verify that, and when, payments were made. I ask if perhaps an escrow account,for the down payment portion, should be established but he did not feel that was necessary and that Wells Fargo had done permanent loans based upon Lease-Option To Buy Agreements.

Does anyone have any experience with using Lease-Option To Buy Agreements that eventually became Permanent Loans?

I understand Blair, but if you go with lease to purchase option better hire an real estate attorney. But I really do not like this option. Do not relay on lending situation to change, it may worst, who knows. Good luck!

Thanks for the reply Viktor. Lease w/option seems to be the best I can do for now with a new home sitting for over a year and I hope I get through it. It seems that no way is a good way. Waited until move in to set a condenser and it was stolen a week later. $1200-poooooff!! The tenants better pay as agreed upon or close to avoid a long hot summer.

Talking to other lenders about current and anticipated lending policies knowing full well that everything can change in a day.

Better than nothing for owner. Lots of moving parts...more that can blow up. Best of luck.