Posted by Doug (ON) on October 25, 2001 at 16:24:20:
My new book will be out for Christmas shopping, it’s entitled:
Domestic Violence: The Dark Side of Residential Real Estate Investing
grin
Doug
Lease option bankruptcy - Posted by doug
Posted by doug on October 25, 2001 at 14:20:37:
OK folks here’s a question thats been bugging me for quite a while. As I read the posts on the board here in regard to screening applicants for L/O’s, everyone seems to run credit reports etc. on Tennant/Buyers. When I recently closed my first one, I went through and checked out every single reference, personal, job, landlord etc. This person is currently going through a bankruptcy and asked me if that was a problem. I smiled and told her I didn’t care at all as long as the payments were made. I didn’t check her credit and I can’t quite figure out why I should. If someone has 3% or more to put down and has good credit, why would they come to me to get in a L/O? So I guess my question is, am I putting myself at risk with this tennant? In my mind, if they walk on the deal I simply keep the option money, and do it all over again. Am I missing something??
Thanks
Doug Olsen
Re: Perhaps - Posted by Ed Copp
Posted by Ed Copp on October 25, 2001 at 20:59:27:
I am not sure from your post just exactly what is meant by “going through” as far as bankruptcy is concerned.
Her interest in the lease may be protected as her homestead…or not.
Did she enter into this agreement with you before or after filing? Did she conceal the 3% cash from her other creditors?
Now if an option is part of this agreement the court may look at the option as an asset that could be sold (by the trustee in bankruptcy), are you ready for that possibility?
If the entire transaction was concealed from the court system, and is discovered later; is it possible that your position could be weakened?
You do not state how or if you hold title to the property mentioned. Consider this If she concealed the money from her bankruptcy, as well as her option (sellable asset) and is found out later could the court place a lein on your transaction, the option and the property itself no matter who owns it? The answer is “I don’t know”. This to me would be a bit of a couse for concern.
Re: Lease option bankruptcy - Posted by doug
Posted by doug on October 25, 2001 at 15:40:52:
Doug, point well taken. I guess I have a bad habit of trusting people a little more than I should. In answer to your question, I probably would have punched her back. Hmmm Carlton Sheets didn’t mention anything about physical abuse from tennants on his CD’s…
Re: Lease option bankruptcy - Posted by Doug (ON)
Posted by Doug (ON) on October 25, 2001 at 15:31:00:
Currently going through bankruptcy? That sounds a little odd. If they are currently stiffing their other creditors, why would they pay you?
In my opinion, 3% option money isn’t enough protection in a situation like this. Now, if she’d given me 10% that might be another matter.
Let’s say she doesn’t pay from day one. Ok, you go over there and offer her a bribe to leave, but say she punches you in the nose. Now you go and start eviction proceedings. She uses the system every which way to delay the eviction for who knows how long, all the while she’s trashing the place.
Finally, sometime down the road, you have the pleasure of seeing her behind dragged to the curb along with her belongings, but it’s a bitter-sweet victory when you look inside and find $20k worth of damage. I’m guessing that 3% wasn’t $20k?
That’s what you could be missing.
Of course she could turn out to be the model tenant too 
Doug