Is there a market to sell paper on L/o homes? - Posted by Bill Taylor

Posted by John (OR) on January 16, 2005 at 14:48:49:

I doubt you will get much for a L/O deal as you are not selling the right
to buy, just the right to sell. It depends on the contract if someone
would want to step into your position.

An improvement would be to sell the note after converting the option
holder into the buyer.

As to 1031 exchanges. From the little I have done in this area you are
not helping the situation. You can sell them the place when they go to
exercise the option using a 1031 facilitator. Little to no impact to the
buyer so they should largely be open to the process. Selling the L/O
contracts does not help and in effect stops your ability to defer the tax.


Is there a market to sell paper on L/o homes? - Posted by Bill Taylor

Posted by Bill Taylor on January 15, 2005 at 19:10:18:

I have quite a few homes that I have sold on l/o. Is there a market for these to note buyers if you have had seasoning with your buyers paying rent with checks? I would like to convert theese to cash to buy more deals. Does anyone have any other advice? Some of these buyers pay very well but still have credit issues enough to not qualify for financing yet. I would like any and all interesting ideas here. The reason that I would like to sell them while still under lease option is so I can do 1031 exchanges on these deals.

Re: Is there a market to sell paper on L/o homes? - Posted by Rod

Posted by Rod on January 27, 2005 at 11:16:56:

You could become a passive investor and make $10,000 to $30,000+ on each deal by doing a L/O with your tenants. This will help you to cash out faster and even make more money

Selling right vs. obligation - Posted by John Merchant

Posted by John Merchant on January 24, 2005 at 10:07:52:

John’s right here.

The only thing that could be sold is a buyer’s OBLIGATION to pay…not his RIGHT to buy, which is all that an option really is.

The property tenant who had an L/O with you on your property could sell his option rights, as then he’d be selling YOUR obligation to sell for price and terms certain.

So if/when you have a REC or buyer’s note, that might* be advertised and sold.

The only actual current and existent obligation YOU own is the leases…which could be sold (possible but unlikely IMHO).

If you’d work at turning those L/O’s into REC’s, then you’d have a sellable commodity, as a sellers’ rights on a REC can be sold. Your buyer might get something real if he were to buy your rights in and to a particular REC.

*Remember that lots of tenants and L/O “buyers” walk and forfeit their option money, so while technically possible, a real sale of sellers’ rights on any REC might be purely illusory and might never come about.

To test this hypothesis, think to yourself which buyer’s promise to pay YOU’D be willing to buy…knowing that the alleged B could walk any day.