Posted by Mike Daly (GA) on March 30, 2002 at 14:44:58:
Yeah, I agree that if you had a uncooperative T/B they could really mess things up by just refusing to move out – it would be hard to evict somebody just based on this clause in the option contract if they’d otherwise been following all the terms of the lease. I hadn’t really thought it through to that level.
owners move back L/O - Posted by Star
Posted by Star on March 26, 2002 at 09:21:43:
We are considering lease optioning a larger house with a rental on the property. The bank says we need to show 2 years worth of renting that property to give us a loan. We are able to L/O it for 3 years- great deal. Here is my question… we are considering L/O our home at the same time. What if at the end of 3 years we decide we would not like to excersize our option on the larger home or sell our option, could we move back into our own home? If so, couldn’t there be several con artists acting if they are L/O their homes to get premium rent and option consideration to only then turn around and move back in?
Re: owners move back L/O - Posted by Mike Daly (GA)
Posted by Mike Daly (GA) on March 29, 2002 at 07:05:50:
Another idea if you want to L/O your residence but want a way to get it back would be to put in a “buy back” clause in the contract where you would pay the T/B a certain amount to cancel their option – I’d offer just their deposit back minus any cleanup costs, and give them a small cancellation fee if they ask for it. This also helps if you want to sell to another buyer that gives you a better offer. It’s better to get this writing in upfront than try to negotiate it after the fact. I have a house I rehabbed and L/Oed, was getting ready to close with the T/B and then got a much higher offer from a developer who wanted the land – got it worked out but had to agree to pay a fairly large sum to the T/B to cancel their contract.
Re: owners move back L/O - Posted by JohnBoy
Posted by JohnBoy on March 26, 2002 at 10:35:09:
If you L/O your home and later decide you want to move back into it then you would have to wait until your L/O with the tenant expires first and hope they don’t exercise their option. Once their L/O expires and IF they don’t exercise their option by the time it expires, then you don’t have to renew their lease or option. After that you could move back in. But they could exercise their option at any time up until their L/O agreement expires and you are obligated to sell to them for the option price you agreed upon in your contract.
When you are buying on a L/O then you have the OPTION of buying or walking away when the option expires. When you are selling on a L/O then you are OBLIGATED to sell if the tenant decides to exercise their option. You can’t just take the property back because you decide you no longer want to sell it and now you want to move back into it! You have to wait until the tenant’s L/O expires first and hope they don’t decide to exercise the option. Otherwise you’re stuck having to sell to them if they want to buy it!
If you have any intentions of wanting to move back in later then don’t offer someone a L/O. Instead just rent the property out. If you want to leave your options open as to when you might choose to move back in then just do a month to month lease with your tenant. Then you would only need to give them a written 30 - 60 days notice to vacate prior to the 1st of the previous month you want them out. Check your state laws as to how many days notice to vacate is required in your state. Most are 30 days but I think I remember reading where someone said their state was 60 days notice required. Don’t remember the state mentioned.
I don’t know why your bank is requiring two years of payment history. Most will only require one year and depending on your credit not even that long. Find a good mortgage broker that has many loan programs to offer or try other banks. Most banks only have a few programs to offer where a good mortgage broker will have many programs to choose from through lenders across the country that make loans in your state.
Re: owners move back L/O - Posted by JohnBoy
Posted by JohnBoy on March 29, 2002 at 22:54:04:
As far as the rehab deal, you may have had to pay a large sum to the tenant/buyer, but obviously it was worth it since you still made more money on the deal. Plus they made something which would be more than fair!
As far as the other thing with putting in a buy back clause for just their DEPOSIT back minus clean up costs, I can’t imagine anyone being that stupid to agree to such a thing!
Let’s see, you L/O your house to me. I put up $5k option money and pay you $1000 per month in rent, do some work on the property to increase it’s value, plus it appreciates some in value, then you want the right to just be able to hand me my $5k option money back minus your clean up costs??? Yeah, right!
How about giving me all my option money, plus my rent paid, plus any money I may have spent on the property and a small profit for MY troubles for keeping up your property??? Hey, if you want it back then don’t L/O it! Or at least be REASONABLE about it if you want a buy back clause! I know there are a lot of stupid people in the world, but I can’t imagine any tenant/buyers being THAT stupid!
Would you agree to a buy back clause if a bank put that in your mortgage??? We’ll just give you your down payment back minus any clean up costs for us and you just kiss all your payments and any equity and any upgrades you may have put into goodbye!!! LOL
I’ll give you credit for being creative, but you need to be more reasonable and fair about it to the buyers you put into the property. This isn’t a business to screw your buyers. Everyone should come out with a win/win deal!
Perhaps something like, all your option money back plus $2500 OR any appreciation the property got since you lease optioned it from me, which ever is more. Now something like that would be fair. Besides, how much more could it appreciate if you L/O it above FMV to begin with? And if $2500 is to much then it isn’t worth wanting to try a buy it back! Yes?
Re: owners move back L/O - Posted by Mike Daly (GA)
Posted by Mike Daly (GA) on March 30, 2002 at 10:57:39:
What I meant was for making that a starting point for negotiating an amount – sure, it would be dumb for someone to actually go along with that, and if they did and I actually did buy it back I’d give them at least their deposit plus a couple grand back. And I agree if they’ve been in the house for 2 or more years they should get more for their “equity”. But by getting a written amount up front it keeps me in control – otherwise they can demand whatever crazy amount they want and I’m at their mercy.
Re: owners move back L/O - Posted by JohnBoy
Posted by JohnBoy on March 30, 2002 at 13:41:03:
Actually, even with a written amount up front doesn’t give you much control. With something being written in the contract it could certainly “help” should you want to buy it back, but your control is limited to your buyer living up to that end of the agreement.
Let’s say you have an option to buy back the property and a year later you have someone that is offering you more for the property. That’s sounds all great BUT, what happens when the buyer says they don’t want to sell? Hey, they agreed to sell it back according to the agreement! True, but now they changed their minds! They claim they didn’t understand that part or whatever. They claim the property is worth a lot more than that and unless you agree to their terms they will refuse to honor it! Now what? Now you have to take them to court and sue for specific performance. You know how long that could take and how costly it can get? Sellers back out of contracts all the time. In most cases it isn’t worth pursuing because by the time you go through the legal channels your profit is eaten up in costs and if you had a buyer willing to pay more they’re long gone by the time this gets hashed out through the courts! That means to keep your buyer and get the property right away you’re going to have to give them more just to settle it so you don’t lose your buyer! That puts them back in control! If they just roll over and go along with everything then great, but if they have seconds thoughts or get wise about it, you lost control. You may have legal recourse to enforce the buy back, but that will take time and money and there still is no guarantee a Judge will up hold it and rule in your favor.
Although just having the clause wouldn’t hurt. But it offers no guarantees.
Also, what’s to stop your buyer from going to your buyer and dealing with them and cutting you out? Once your contract is up with your buyer they either buy or walk. If they go to buy and you’re trying to buy it back you are at the point of having to decide to go through with the sale or tying everything up and fighting it out in court. You risk losing your case and in the end your profit is in the toilet in legal costs trying to fight it out through the courts. So in the end win or lose, you still lose!
As far as the last part of statement saying they can demand whatever crazy amount they want and you’re at their mercy…you still are regardless, if they decide to fight you on it.
But I guess it’s also how you look at it. I wouldn’t view it as being at their mercy because I’m the one who agreed to sell to them in the first place! I got MY price and terms that I wanted. THEY were the one’s that were at my mercy in order to get the property in the first place. I got better than most in the area for the property and now I should cry later that I’m at their mercy because I have someone else willing to pay me more for it? I don’t see it that way.
Anyhow, if they held out on you in the end and refused to sell it back to you, what do you really think the chances would be of you winning in court over it if you took it that far? Yeah, Judge, they agreed to pay my inflated price and they have lived up to their end of the agreement, but Judge, they agreed to sell it back if I decided to buy it back. Why do you want to buy it back so bad, especially for more than what they paid you? Because I have another buyer that will give me more for it, Judge! Hey, they agreed to this and a contract is a contract! So you want to just buy it back so you can turn around and profit more from it just because you have someone else willing to pay you more. Well, yeah, Judge, that is correct, but that’s what they agreed to!
Somehow I don’t see a Judge ruling in your favor and meanwhile you’re out all that money trying to fight it and your buyer is long gone by the time the matter is settled anyway!
Back to square one. You are at their mercy no matter what because they are in possession and without their co-operation you are SOL!
We can put anything we want in a contract, but just because we put something in it doesn’t mean it will hold up in court.