Leasing with option to buy

jaden3292002 · Joined: 30 Jun 2008 Posts: 12 7.48 Dollars($)

We have just found someone interested in leasing our now going through a foreclosure store. In order to stop the foreclosure we need to charge a $25,000 down payment in this deal. Is this normal? The purchase price would be 199,000 so after a deposit it would be like 175,000 how do you go about making sure that thier payment to you covers your mortgages and matches to the end? Any info on leasing with option to buy would be greatly appreciated. I need to get back to this person soon!

jheard · Posted: Tue Jul 15, 2008 8:48 am Post subject:

Normally a lease option is like a normal lease, ie no down payment and monthly payments. With an option to buy, usually a portion of the lease payments go towards the purchase price. The "option" part means you promise not to sell the property except to the lessee within a certain time. Sometimes, you can also pay a set fee for the option.

If the lessee is willing to agree to those terms, then go with it. I would find out what terms they expect.

jaden3292002 · Joined: 30 Jun 2008 Posts: 12 7.48 Dollars($)

Would we be better off trying to see if they want an owner finance?
or do i have to hold the 'note' to do that

kpatrick · Posted: Tue Jul 15, 2008 10:51 am Post subject:

Hi Jaden,

It sounds like, to me, that either the mortgage holder is trying to get your buyer to pay the amount you are in arrears, to allow it to come out of foreclosure. Or maybe, the loan amount you owe is more than the home is worth...You haven't really given enough details to know what the reason is.

What is the balance on your mortgage? How much would YOU have to pay to get your home out of foreclosure? Are you trying to stucture it so that your current mortgage co finances the buyer?

Eventually a closing atty would put the numbers together and show you how you are coming out. But just call the mtg co and find out what your "payoff" would be and that tells you what it would take to pay off the loan, and don't forget to find out what the closing costs would be (from the lender the buyer is using to get the financing)

In an owner finance, basically you would be accepting payments from your buyer, and then you would be turning around and sending the pymt to you mtg holder. This isn't really an "owner finance", and if you officially"sell" the home to someone, your mtg holder can (and will) call the loan due. So this is not really an option for you. Owner finance is when you own a home free and clear and THEN you can owner finance the property.

Guest 0.10 Dollars($)

The situation is that it is a business. We are in foreclosure, and trying to find anyway to get out of it.
But in order to do so i need to get the 25k to catch up the mortgages.
The bank is not really into working with us, the business is 'worth' more than what the bank is going to try to get through foreclosure, and we are going to get thourally screwed if we let the bank just take it.
Any insights would be helpfull as to what we CAN do?!!!

kpatrick · Posted: Tue Jul 15, 2008 11:08 am Post subject:

Ahhh-A business deal is a totally different animal than a residential deal. Hopefully, if someone is trying to buy your business, they know that there really isn't any such thing as a "zero down" business deal. Hopefully they have monies that they planned to purchase the biz with.

Depending on what industry your business is in, and whether or not you own the "sticks and bricks" will determine what kind of financing the buyer could get. In a best case scenario, you are looking at 80% max loan, and that is only if you own the land.

Have you considered finding an investor that could be offered an interest in your business in return for getting you out of foreclosure?

jaden3292002 · Joined: 30 Jun 2008 Posts: 12 7.48 Dollars($)

They were denied financing, which I find so wierd because thier situation is so much better than ours was when we bought the place, but of course the economy has drastically changed since then. The business is owned, its 1.5 acres, northern vermont country store with all equipment etc.
It is closed though, so it would be somewhat a challenge to find an investor at this point.
I am racking my brain for the best type of lease options to present to them. The situation is so complicated, the costs were so much, so being back 25,000 was pretty quick and easy thing to happen. If at the very least I could have them give me a 10,000 deposit to start leasing the place with a 15-1600 monthly payment it could work out somewhat o.k. for us, with us having to pay off some debt much slower. The store brought in for us about 100,000 in gross profits and I think someone with more of a passion could do much better justifying the somewhat high lease price.
Im wary of directly speaking to my bank at this point, and my lawyer is very expensive so I am trying to figure it out before I even bring these suggestions to the lawyer.
I hope this explanation helps to put things into perspective.
Is this latter lease option sound ...well normal!?
Thank you!

Guest 0.10 Dollars($)

Also if we give them the option to lease it with a 10 grand deposit, and say a 1700 monthly payment, with the option to buy it for what is owed on the 'notes' that would be a good deal for them wouldn't it? So in a few years they could turn around and just buy it for what is still owed on it and not pay market value? Then they have an incentive to pay a higher lease?

larry · Joined: 27 Jun 2007 Posts: 3328 473.40 Dollars($)

Hi jacqui.

Have talk with the borrower and offered it to them? What are they saying to this? I think this is a good offer. Have you consulted with any real estate agent? A real estate agent may help you to fix this matter for you.

Talk to the borrower and let us know whether he accepts it or not.

Best of luck.
Larry

Guest 0.10 Dollars($)

The bank is behind it as LONG as we can pay the past due amounts.
That brings it to this:
a double net lease
15 grand down
with option to buy it for the notes after a certain time
I am waiting to here back from my lawyer to make sure its all good then i am gonna offer it to them.

larry · Joined: 27 Jun 2007 Posts: 3328 473.40 Dollars($)

hi Jacqui.

It's good that you have talked with the lawyer. Hope every thing will be okay.

Best of luck,
Larry

Guest 0.10 Dollars($)

Hey Larry, Thank you. I feel that the lawyer we spoke with isn't the right one. He is telling us to go chapter 13, but in order to do that you have to have disposable income. We don't. We live in Northern Vermont, Our only hope of jobs right now will meet our survival needs and that is it. Is their any other options? What do you do when you have NO money?
Chapter 7 looks a little more doable, but I am not sure.
ANy advice on this part of things would be greatly appreciated.

larry · Joined: 27 Jun 2007 Posts: 3328 473.40 Dollars($)

Hi Jacqui.

Welcome back.

I think the lawyer is the best person to guide you. BTW if you don't have the disposable income and cannot be approved for filing chapter 13 then you can think about filing chapter7 also. So talk with the lawyer on this issue.

Best of luck,
Larry

Guest 0.10 Dollars($)

Hi Larry,
Our lawyer is trying another approach with our bank.
If we are willing to hand over the keys now, will the hold us harmless and if not we will fight it and then it could take about 6 months for them to auction off the business's building. The building is now vacant, and noone wants to heat it for the winter. How common is this?

larry · Joined: 27 Jun 2007 Posts: 3328 473.40 Dollars($)

Hi Jacqui.

Welcome back.

I think your lawyer is asking you for deed in lieu of foreclosure. Is the lender accepted the deed in lieu?

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