Posted by Brad Crouch on April 16, 2003 at 14:34:57:
Rich,
> A confused mind always says no…
Point well taken 
Brad
A Different Lease/Option Question - Posted by SD, Trustee
Posted by SD, Trustee on April 14, 2003 at 11:14:42:
Recently I have started working on a lease/option deal as lessee. If I start looking for a loan a few months down the road, will it be considered a refinance since I have equitable title to the house? Would I need a minimum number of months residing in the house with proof of monthly payment for this to qualify?
Thanks to all
Re: A Different Lease/Option Question - Posted by KC Questions
Posted by KC Questions on April 14, 2003 at 23:05:46:
Of all of the lenders and loan brokers that I have spoken with, only one has brought up the fact that they will refi lease/options and contract-for-deeds. He did tell me that there needs to be a recorded memorandum of agreement before he could do the refi.
He did tell me that the quickest that he could do one of these refi’s was two weeks.
The last time that I tried to contact this broker, he got transferred to a different department in his company. I never asked any other lenders what their view was on the subject.
even though… - Posted by marc NJ
Posted by marc NJ on April 14, 2003 at 21:59:25:
Even though a judge might rule that you have equitable interest or just a interest, you may not be able to get that loan, it would not matter either way. B/C, I doubt that you will ever get the chance to present this to the judge. The lender is going to dictate whether or not you will get this loan, not a judge. It will never make it to court. You wont be able file a complaint that a lender will not give you a loan, the court would need a good reason to here this case.
I dont think approval for a loan would be up to the courts to decide.
My 2 cents.
Marc
Re: A Different Lease/Option Question - Posted by Tim (CT)
Posted by Tim (CT) on April 14, 2003 at 12:22:42:
I have a question. Why would you be considered as having equitable title? You only have a lease.
Re: A Different Lease/Option Question - Posted by Eric SoFLA
Posted by Eric SoFLA on April 14, 2003 at 11:30:44:
Usually it is considered a refinance and it usually takes a minimum of 6 months.
Make sure payments are made by check.
Re: even though… - Posted by SD, trustee
Posted by SD, trustee on April 14, 2003 at 22:09:52:
thanks, no problem for me to qualify for a loan. Only question is if a loan will be considered a refinance out of a lease option. And how many months…
Because… - Posted by Sd
Posted by Sd on April 14, 2003 at 12:31:17:
I have a lease with an exclusive option to buy at a set price for a specific term. This allows me equitable title at my option.
Re: even though… - Posted by Marc NJ
Posted by Marc NJ on April 15, 2003 at 24:20:50:
SD, for my T/B the loan is considered a purchase, b/c he has only a lease with an option to buy, on seperate documents.
It is going to be up to lender if they will consider you loan a refi. Many lenders will not, b/c you only have a lease w/ an option. If you can make it look like a land contract and show a large down payment or option consideration and rent credits ,they (the lender) might let you refi, key word here: MIGHT. Even if the courts say that you have an equitable interest, it will never make it that far in the system. Understand how are you going to get this in front of a judge. The lender is going to say yes or no, thats as far as it will go.(your loan app) that is.
Now if, like I said, show the lender that this deal looks like a land contract you might have a chance at a refi.
I had refi my property that is L/O to a T/B and the lender wanted min 6 months seasoning, most want 12 for the same refi, it will depend on the lender. You should try another if the first says no, and keep trying to you find one that approves your loan. But make sure that they dont all pull credit checks on you, that will lower your FICO, so I’d recommend that you pull a tri-merge and hand that in with your loan applications.
I hope this helps, Good luck and keep us posted.
Marc NJ
Re: Because… - Posted by Rich[FL]
Posted by Rich[FL] on April 14, 2003 at 14:30:15:
My understanding is that options only give you an INTEREST in a property, not an equitable interest. Best bet would be to ask for clarification over on the legal board.
Rich
Re: Because… - Posted by Tom (MI)
Posted by Tom (MI) on April 14, 2003 at 16:53:48:
Depends on how the lease option is set up. That is why they recommend using a seperate lease and a seperate option when selling on lease option. I don’t know about the loan but you can argue that you do have equitable title. Especially if you are given rent credits. If I am buying then I will have the lease and the option as one contract. I will get as much of a rent credit as possible and I would record the option. It also depends on the amount of money you have into the property with the option consideration and the rent credits.
Tom
Re: Because… - Posted by Rich[FL]
Posted by Rich[FL] on April 14, 2003 at 20:32:29:
If my understanding of Bronchick’s material is correct, an option, or lease-option, doesn’t convey EQUITABLE title, only an INTEREST in property. An interest can be extinguished by non-performance. Equitable title must be foreclosed.
Now, as you say, a lease-option can be VIEWED as giving equitible title in a court of law depending on the slant of the judges. It all depends on how the lease-option is set up, as you say. As long as you can aviod the appearance of giving equitible title, it’ll be harder for a lawyer or judge to argue against you. (At least in most courts; in others, it seems, just being a landlord is three strikes against you before you even get started!)
I’ll have to go back to Bronchick’s materials to be certain of what he said, but that may be awhile since I’m kinda busy right now. Hopefully he’ll chime in here if he’s reading the thread.
Rich
me again - Posted by SD, trustee
Posted by SD, trustee on April 14, 2003 at 20:05:10:
You are correct Tom. And as lesee it is smarter to have the lease and the option on the same document and then have it notorized to make it public record. Can anyone else help me with the original question, is it considered a refinance when searching for a loan? thanks
More creative… - Posted by Brad Crouch
Posted by Brad Crouch on April 14, 2003 at 21:41:08:
Rich,
You said,
“As long as you can aviod the appearance of giving equitible title, it’ll be harder for a lawyer or judge to argue against you.”
I agree with that and propose that you look into the following senario.
This applies to a lease option “exit” strategy:
Suppose the property in is a land trust? Either because you acquired it that way or you put it into a land trust subsequent to the acquisition. It doesn’t matter.
Now you give your tennant buyer a lease on the property that doesn’t mention any type of option, and give an option on the beneficial interest of the trust. Seems to me this would pretty much eliminate the possibility of a judge being able to rule against you on the “equitable interest” issue. And this would also sucessfully eliminate the tennant buyer being able to claim “equitable interest” at a later time. You could even give a “contract for option” on the beneficial interest if you wanted to.
Brad
Re: me again - Posted by Mike
Posted by Mike on April 14, 2003 at 20:17:45:
It depends on the lender. Some will consider it as a refi and some won’t.
Re: More creative… - Posted by Rich[FL]
Posted by Rich[FL] on April 15, 2003 at 07:19:53:
What is it the experts say? A confused mind always says no…
You have to balance the complexities (or creativeness) of any deal arrangement with the risk the seller/buyer will simply say no and walk away. We can carry these examplies on ad nauseam but what’s the point?
The idea is to keep things simple so everyone understands what’s happening and goes away happy. I like Bronchick’s 1- and 2-page forms with large font; easy to read and understand. It shows I’m not trying to hide anything.
The bottom line is that there are risks in nearly every RE transaction we do. It’s also why we get paid the big bucks. When problems come along, deal with it. If people don’t want to do that, then they can get a RE license and get paid tips, or, in reality, actually less then that; we at least tip waiters and waitresses 10% or more while agents only get 6-7%. Plus they are safely protected by those multi-page, 6-pt font contracts that’d scare any reasonable person away.
Rich