Posted by Jim FL on December 21, 2005 at 08:31:16:
gerald,
why would that matter?
the way I describe it is simple, you draft and execute the contracts at close.
Problem solved.
Take care,
Jim FL
How to Close SALE of Sandwich Lease? - Posted by Todd-Ohio
Posted by Todd-Ohio on December 20, 2005 at 11:31:47:
Is anyone out there doing sandwich leases?
More importantly, is anyone out there actually cashing out of any sandwich leases with actual closings?
Since true double closings are virtually extinct due to seasoning issues and all the anti “flipping” hype, it appears that the final frontier for sandwich lease investors is assignments at the beginning or end of the deal. Specifically I am concerned about the END of the deal.
In theory (i.e. seminars), assignments work great in these situations.
However, in reality, what how are you sandwich lease investors handling the assignment from your Buyer/Tenant to the Seller?
Specifically how are you guys dealing with these issues:
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The cash requirement issue must be dealt with if there is a significant back end
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The “I can’t believe you’re making so much money” factor from the Seller when the deal closes
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The “I can’t believe you’re making so much money” factor from the Tenant/Buyer when the deal closes
Any feedback from actual practitioners will be greatly appreciated!
Re: How to Close SALE of Sandwich Lease? - Posted by Brian (UT)
Posted by Brian (UT) on December 21, 2005 at 13:53:03:
Todd
I like Jims idea. I had a friend do something similiar in California recently, he told me he assigned his contract back to the seller and had the seller place a second trust deed on the property for the amount of his assignment fee.
Which was then paid off in escrow in the deal with the end-buyer and on the hud-1 it is just a junior mortgage being paid off.
Didn’t require a lawyer and appears to be effective.
Brian
Re: How to Close SALE of Sandwich Lease? - Posted by Jim FL
Posted by Jim FL on December 20, 2005 at 12:34:27:
Todd,
First, a disclaimer. I ‘used to’ do sandwich lease options. It’s been a long time since I signed one with a seller, and frankly, won’t any longer. I’d rather own.
However, some of the L/O’s I had signed in previous years, still were going until late last year. Thankfully, the last one cashed out then.
You are correct in that title seasoning has become an issue. There are basically two ways to deal with this in my opinion.
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Direct your T/B’ers to lenders without title seasoning requirements, and certainly keep them away from FHA and other govt backed loan programs.
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The other way, is using an assignment sort of, instead of a double close.
Here is how I closed the last one where my buyers used financing from a lender that required the seller to be on title for more than 12 months.
I simply had my attorney handle the close. He drafted a contract to sell the property, between my sellers, and my buyers, for the price my buyers agreed to pay. He then prepared a release of contract form for me to sign, at the close, to release the seller’s from the obligation to sell to me. Of course, this release gets signed for a fee, which is equal to the difference in prices.
This does go on the hud-1, and is done completely above board. No assignment fee appears on the hud-1, just a release of contract fee, which looks like an encumbrance is being paid off.
You may need to locate a decent real estate attny to set thesse up for you. Only because in my experience, most practicing re attny’s only understand conventional closes, and claim to not do anything else.
It can be done, just explain the above to your re closing attny, and the reasoning behind it.
HTH,
Jim FL
P.S. From now on, take title instead of mere control.
Re: How to Close SALE of Sandwich Lease? - Posted by gerald(tx)
Posted by gerald(tx) on December 20, 2005 at 23:21:37:
Jim, I like your strategy. Only one problem I see for some:
In Texas, a RE purchase contract expires after 6 mos. Several other states have similar limitations. Any thoughts?
gerald