Re: Lease option/Flip execution confusion - Posted by Jim FL
Posted by Jim FL on January 29, 2003 at 14:17:23:
Scottie,
I’ll try to answer you.
You asked/said:
“1. How do I explain to the owner why I’m going to need to walk tons of people (potential “sandwich” tenants, etc.) through the property?”
REPLY:
Simple, be sure to set up your agreement with a specific possession date, as well as a clause which gives you a key, and access to the property to show it to potential tenants and buyers.
When you get calls on the house, arrange for more than one party to see the house at the same time, as many as possible, this creates a competitve atmosphere and you will get better results.
Before the showing, call the seller 24 hours in advance, tell them you will be showing the house on such and such day and time. Ask if they have a phone number where they will be during the showing, and offer to call them when you are done.
A not so subtle way of saying “Get out so I can show the house without you being there to muck things up.”
After the first showing, sellers will be much easier to work with.
Next Question:
“2. If I “sandwich” myself and put a tenant in under a sub-lease option, am I the “landlord” under state (NJ) laws? Does this make me responsible for repairs, liability claims, lead paint stuff, mold, and the 100 other possible hazards that might be in a house that I don’t know about?”
REPLY:
You are the landlord, so you have a responsibility to the tenant you place in the house.
However, your state laws and agreements will dictate what you are responsible for.
Be sure to disclose anything you know, and what you don’t, as long as it is not an obvious problem, don’t sweat it…(if it is obvious, you will know about anyway, 
Next ?:
“3. How do I make sure that the owner is paying his mortgage, insurance, taxes, etc. when he gets my checks every month?”
REPLY:
This is a simple one to handle.
Make your agreement state that the monthly payments for rent with the landlord/seller will be sent directly to the lender.
Put this in your agreement, because if not there, the seller could very well get an attorney and request that you send the rent payments directly to the seller.
Ask me how I know this?
Next ?:
“4. If the owner DOESN’T pay his bills and somebody eventually shows up to change the locks and kick out my tenant (who has been paying all along), will the court clobber me?”
REPLY:
Again, simple solution, stay in control of EVERY aspect of your deal.
Don’t allow yourself to be put in a position where th court will “Clobber” you.
Next:
“5. If I find a buyer at a profit (for me) over the option strike price, who does the buyer make the offer to - me or the true owner of the property?”
REPLY:
The agreement between you and the buyer remains between you and the buyer, just as the agreement you have with the seller remains with them.
Unless of course you assign your position in the agreement to someone else.
Next ?:
“6. When the buyer and seller figure out that I’m in the middle and walking away with a fat profit for introducing them, how do I keep myself from disappearing (a few of these sellers are “friends of theirs”)? I know I would be furious. Do I have to show up to the “simultaneous closing” at all or can I just have a lawyer take care of it all while I hide in another state?”
REPLY:
Why hide?
Are you running a business or what?
Most businesses I know exist so that they can make a profit.
Why on earth would you try to hide such a thing?
As for the close, you don’t have to be there, you could get someone with a power of attorney to close for you.
Again though, why?
Just close the deal and get paid.
The buyer will not care, because they are getting the house they live in, and the seller should not be a problem because you took care of their situation.
NExt ?:
“7. Any suggestions on how to best learn what the title researchers do to be 100% sure about clouds on the title? I’d like to investigate these properties before I make formal offers, but when I went to the courthouse (Middlesex County, NJ) it was baffling (records in many different places, etc.) and the people “working” there acted like I was a space alien. I’d like to know which books to look at, which sequences, what exceptions there might be, etc.”
Reply:
In one word…“Don’t”.
Get a pro to do your title searched, it will save you time now, aggravation later, and money in the long run.
HTH,
Jim FL