Posted by JohnBoy on November 07, 1999 at 22:09:02:
“”““1) they are going to be getting a divorce soon and need to sell. Will this affect the deal?””“”
As long as the deal is properly structured and both spouses agree to the terms of the contract then it shouldn’t affect the deal. Is there any equity in the property that the sellers would get once the option is exercised? This should be spelled out in your contract as to what amount each spouse will receive once the option is exercised. Each state has different laws pertaining to a divorce, so I would recommend using an attorney to properly structure this deal to protect everyone involved. In fact, I would recommend using an attorney to help you properly structure this deal all together since you don’t understand how a deal like this works.
“”““2) Does the deed go in my name or stay in theirs with their financing already in place?””“”
First of all your talking about doing a sandwich lease option. Since you would only be lease optioning this property from the sellers you wouldn’t get the deed until you actually exercise your option and purchase the property. The sellers retain legal ownership until you exercise your option.
“”““3) If I sublet this and in 2 years my new option people who are optioning from me want to buy the house…how is the closing set up. Are they buying it from me or from the people I bought it from?””“”
You haven’t bought anything yet since your only leasing the property with an option to buy. When you lease option the property and then sublease with an option to your tenant/buyer, your tenant/buyer would be buying from you when they decide to exercise their option. When your tenant/buyer is ready to exercise their option then you contact the sellers and inform them that you will be exercising your option with them. You would set up a simultaneous closing with a title company or your attorney and close on the property. The cash coming from your tenant/buyer would pass through to cover the amount you would owe the sellers. Any amount left over would be passed over to you. So you wouldn’t need to come to closing with any cash from your pocket since your tenant/buyer would be coming in with more than enough to cover what you would have to pay your sellers. Of course that’s assuming your option price to your tenant/buyer is higher than your option price to your sellers is.
“”““Could someone who has done one help me out with the step by steps of a sandwich option? I know of several properties with stressed sellers but I need advice.””“”
The best step by step advice I can give you would be to invest into a course that goes into detail on how lease options work, how to structure them properly and how to limit your liability when doing these type of deals.
Bill Bronchick has a course available on this site that covers everything you would need to properly get started in lease options. He is a real estate attorney, owns his own title company and is active in doing actual deals like this every day. What better of a source could you ask for than from a person like this? For a few hundred bucks you can have all the information you will need to properly get started and protect yourself from future liability that could end up costing you thousands of dollars in mistakes.
Here is the link to his course available on this site. Check it out for yourself and give it some serious thought about investing in the most important thing you can ever invest in, yourself!