brian-gibbons
01-11-2005, 10:08 AM
Non-exclusive option to purchase contract is your KEY contract in CREI
Before you get into this LONG thread, please see this link about our DISCLAIMER
http://www.creiu2.com/Disclaimer-Please-Read
------------------------------------------------------------------------
Now that we are in the EDUCATION mode,
I'm starting this thread because this is the best way to make money FAST.
I'm presuming everyone here knows that an OPTION to PURCHASE CONTRACT can control a property for a period of time.
There are problems with a Sale and Purchase Agreement with YOUR NAME and/or Nominee (and /or Assigns) for a FLIP with contingency clauses out the WAZOO......
A. You usually have to to put down some money as a deposit/down payment (earnest money).
B. Playing games about the LOWEST amount of EARNEST MONEY, especially with an agent, even with a FSBO, from an INVESTOR's PERSPECTIVE is SILLY BUSINESS.
C. Regarding BUYERS, either WHOLESALE or RETAIL, he-she may may cancel, not buy, and screw the whole thing up.
And, are you being honest with the Seller? You aren't going to BUY, you are going to FLIP?
And are you the REAL OWNER to the prospective buyer? NO. You are a MIDDLEMAN-WOMAN.
Well, how do you do it?
Non-exclusivity is the KEY.
Non-exclusive Option to Purchase Contract.
Everybody has heard of an EXCLUSIVE RIGHT TO SELL AGREEMENT from AGENTS. NO ONE ELSE CAN SELL OR REPRESENT.
Well, this is the OPPOSITE. Non-exclusive means You can sell it and I can sell it. An Open Option Contract.
I can buy it at a certain price, and you can still sell it. IT'S A RACE!
So, say Sally Seller has a price of $100,000. I do the comps and it is worth $120,000. Good possible flip. Or Private Money All Cash Purchase.
Sally can FSBO it herself, and I can assign my option in escrow for whatever EXCESS over my OPTION PRICE. Or just buy it with Private Money and RTO (Rent to Own) it.
If Sally lists with an Agent, she just communicates that there is an Open Option on the property for $100,000, expiring on xx/xx/xxxx, that is recorded against the property.
HERE IS THE BEST PART:Option Consideration = $1.00 ($10.00 in some states)
Do you, as a Seller, get money from an Agent to List? NO. Actually, a lot of AGENTS ask for MARKETING MONEY to sell your house. Sorry. That's DUMB.
An Open Option on a Rehab property is a GREAT idea. An Open Option on a NICE HOME is a REALLY GREAT idea.
Who cares if it does not sell? What are you OUT? a few bucks marketing? $1 Option consideration?
A word about REAL ESTATE AGENT LAW.
See our disclaimer at http://www.creiu2.com/Disclaimer-Please-Read
================================================== ====
Look up in your state about the REAL ESTATE ACT OR LAW.
You can not get a FEE or COMMISSION to sell a house as an AGENT FOR. Here's where you are not an AGENT FOR:
1. When you are a Principal in a Transaction Definition of a Principal: Either PURCHASER or VENDOR-SELLER or ASSIGNOR or ASSIGNEE or LESSEE OR LESSOR Any of those 6 words
AND
2. When you are AT RISK in a TRANSACTION
Let's see if an Agent is #1 ==================== >>No
And #2? ===============================>>No
Well, you are not ACTING AS an Agent. You are a PRINCIPAL. And YOU ARE AT RISK IN THE TRANSACTION.
Agents and RE Brokers out there, Let The Games Begin!
==============================================
We at www.creiu.com advertise for Sellers who need to GET OUT NOW. Here is our web for MOTIVATED SELLERS: www.falnz.com We are in Auckland NZ. But we build Webs for US, CA, and AU Do you need one? Great Prices!!! websites@falnz.com.
================================================== ==
If you have been diligent in raising Private Money for the Purchase, and can get the property wholesale, buy it with your PRIVATE LENDER'S MONEY. See www.EARN-HUGE-RETURNS.com to RECRUIT BIG DOLLARS TO PAY CASH FOR PROPERTY And
Tell your Mortgage Broker and Banker NO THANKS, MATE!
================================================== =
Here is the NFL TOUCHDOWN, the Over-Time NHL Goal, the last MLB RBI in the 9th Inning.....
Your Seller-Vendor SIGNS YOUR OPEN OPTION AGREEMENT.
You use our scripts and its all easy.
If it is a NON-Rental it is easy.
If it is an EXISTING RENTAL, there's more data to collect.
But we have a SYSTEM though. Kinda SEMI IDIOT PROOF.
When negotiating, you and the Seller have an adversarial relationship, but after signing your Option Agreement, you and the Seller are actually working together. CO-OPERATING!
He/she knows that you are not going to buy the property yourself but that you are selling it for him/her (at your own expense).
================================================== ==
NOW, for MOTIVATED BUYERS......
Say you have an Open Option Agreement. YOU NEED BUYERS!
Check this out:
www.WE-HATE-RENTING.com
Go look at it. I'll wait here......... :SM050:
You back?
Then...
Sell our e-book for $27 US. AU, USA, CA and NZ versions.
All about Rent to Own and Contract for Deeds.
From the TENANT BUYER'S (TBer's) PERSPECTIVE!
This is the BEST WAY to build a buyer's List of TB'ers, BAR NONE!
Put something in the paper like:
RENT TO OWN
ALL CREDIT CONSIDERED
3B 2B Maple St, Bedford NY
Owner will Finance
lv message 222-3434
www.we-hate-renting.com
When they call
Have them drive by the property
Have them buy the e-book
Have them fax you an application that is downloadable from your TENANT BUYER WEBSITE
Call em back & Go over it
Give them the Earnest money agreement to sign, notarize and get back to you
-------------------------------------------------------------------------
A word about the EBOOK:
You sell a book that TEACHES the TBer about Rent to own
See http://www.we-hate-renting.com/Table-Of-Contents-DBer
You sell for $27.00 US Dollars
You Keep $13.50
Imagine....$13.50 x 100/month = $1,350.00 a month
And you get the LEAD for Tenent Buyer TOO!
Let me know....brian@creiu.com
--------------------------------------------------------------------------
A word about our EARNEST MONEY AGREEMENT:
EARNEST MONEY DEPOSIT FOR LEASE WITH AN OPTION TO PURCHASE REAL PROPERTY
Property Address : _____________________________________
Tenant/Buyer has deposited with Landlord/Seller a sum of $1000.00 (one thousand and 00/100 dollars) to take the property off the market until (date)_______________________.
1. Tenant/Buyer agrees to Lease the property at a rental rate of $$1000.00 (one thousand and 00/100 dollars/month for (12) months. The Lease shall start on (date)___________________.
The first Lease payment shall be due upon the start of Lease. This deposit shall be credited toward the Tenant/Buyer’s Option Fee (described below).
2. Tenant/Buyer shall have the right to buy a property on the following terms:
A. Tenant/Buyer may buy a property at any time during the term of Lease.
B. Tenant/Buyer shall qualify for and obtain his own financing.
C. The purchase price is $215,000.00
D. Home Inspection
( ) Inspection Waiver. Tenant/Buyer was encouraged to conduct an inspection of the property by the licensed building inspector of his/her choice. Tenant/Buyer conducted his own inspection and has decided to wave the professional inspection of the building. Tenant/Buyer has accepted the property in its present condition.
( ) Inspection Period. Tenant/Buyer shall have the right to conduct an inspection of the property by the licensed building inspector of his/her choice no later than within 7 days from this date. If Tenant/Buyer is not satisfied with the results, (s)he may cancel this Lease with Option to Purchase by giving Landlord/Seller a written notice no later than within 7 days from this date. If Tenant/Buyer gives such a notice this Earnest Money Deposit shall be promptly refunded. If such a notice is not received as specified Tenant/Buyer shall be deemed to have accepted the property in its present condition.
E. The parties shall sign a formal Lease Agreement and separate Option to Purchase Real Estate Agreement prepared by Seller/Landlord prior to the beginning of the Lease. If Tenant/Buyer fails to appear and sign these Agreements as specified above, Tenant/Buyer shall be in default on the Lease and shall forfeit this deposit as liquidated damages. No exceptions.
F. Tenant/Buyer shall pay an Option Fee in the amount of $10,750.00 no later than (date)______________. The Option fee shall be applied toward the future purchase price, and/or down payment, and/or Tenant/Buyer’s closing costs at closing of the purchase if the Option is exercised. The Option Fee is not refundable if the Option is not exercised.
_____________________ Initial(s)
G. Tenant/Buyer shall earn a PERFORMANCE CREDIT toward the purchase at the rate of $____________ per month. The credit will only be earned if the payment is received on time. in full (NOT PARTIAL PAYMENT) and the property is maintained as per the attached SCHEDULE OF RESPONSIBILITIES. Any payments paid by Tenant/Buyer in excess of the monthly payment shall also be applied toward the future purchase price.
The credit earned by Tenant/Buyer can not be redeemed as cash and is not refundable if the Option is not exercised.
_____________________ Initial(s)
By signing below Landlord/Seller acknowledges the receipt of the deposit and Tenant/Buyer acknowledges that he agrees to the terms above.
Date ___________________________
Tenant/Buyer ___________________________
Tenant/Buyer ___________________________
Landlord/Seller ___________________________
---------------------------------------------------------------------------------------------------------------
Let's look at this in detail.
THIS IS NOT A LEASE OPTION or a CONTRACT FOR DEED AGREEMENT.
More like a Contract of Intent. WITH PENALTIES FOR NON-PERFORMANCE.
With this document, most of my work is done. The hard stuff. The Tenant Buyer - Contact for Deed Signor (CFDS) already:
1. Knows all the terms and conditions of the purchase (we usually communicate all of that over e-mail, my website and phone).
2. Has read our Rent to Own Program on our Website
3. Has driven to and looked at the house
4. Has been explained what work we will will pay for as far as fix up.
5. Knows about the money to bring before we can deliver the keys and LEGAL POSSESSION and the actual Lease/Option Contract or CFD Contract will be signed.
6. Knows how much money to bring to the initial appointment with me IN CASHIER's CHECK to take the property off of the market (VALUABLE NON-REFUNDABLE CONSIDERATION)
7. Knows he’ll have 7 days after putting down a deposit-down payment to inspect the property and choose one of 3 Options:
a) Terminate the earnest money agreement in writing within 7 days and receive his money back unconditionally,
b) Request specific repairs to be performed. At this point we’ll negotiate the amount and nature of repairs and either agree to complete them or cancel the earnest money agreement and return the funds back to Buyer,
c) Say nothing and therefore accept the property in the “as is” condition. The earnest money deposit becomes nonrefundable at that point and will be held as liquidated damages if the client doesn’t appear to sign Lease/Option
agreement or fails to produce the rest of funds necessary to close.
Did you notice how much of the preliminary work has already been done before I ever see a Prospective Tenant Buyer?
Therefore, at the time of our first meeting when Buyers come to drop off the Earnest Money deposit, my job is really easy.
I, once again, give them a quick run through the program to make sure there are no flaws in their understanding of how all of this will work, ask if they have any questions, clarify those questions – and we are ready to sign.
The purpose of the Earnest Money agreement is to:
1. Collect the good faith money from a client to make sure he is for real and not a looker just playing games.
2. Show a client how much extra funds they will need to bring to our next meeting.
3. [B]Allow a client enough time to inspect the property and be comfortable with what they are buying, including refund of their deposit if they are not satisfied and we can’t agree on the repair amount.
4. Provide a summary of the ENTIRE Lease/Option transaction, so when he comes with the rest of the money there’s no discrepancies between what I had in mind for the financing terms and what he thought the terms were. We don’t want them to get a surprise at the closing table when we expect then to bring the money and to sign on the dotted line. It’s better to discover our miscommunications about the terms of the deal now.
5. Set up a deadline for our next meeting for finalizing the transaction.
6. Communicate to them the consequences of them not showing up for closing (they’ll lose their deposit).
I always insist on them making their own independent inspection of the house by a licensed building inspector.
I want to eliminate any possibility of them ever coming back and claiming I knew about some defective condition in the house, or something not working properly or not being up to building code and failed to tell them about.
This could, if litigated, give them grounds for terminating the agreement and getting their money back.
When they hire a professional inspector to tell them everything about the home, it’ll be very hard for them to claim they didn’t know something.
In addition to their own inspection I still provide a Seller Disclosure of Property Condition, a standard 3-page form where I tell them everything I know about the house. :SM081:
I don’t want them to be turned off by the inspection either. The inspector’s duty is to note every little thing that’s wrong with the house. Those reports are thick and filled with a ton of “bad” notes. Of course, 99.9% of those are mostly very minor items which don’t really pose any serious concerns. However for the unsuspecting 1st time homebuyer looking even at a very innocent report like that could be quite disturbing. Therefore, at our meeting I try to prepare them for what they might see on such an inspection report. I explain to them – the real purpose of the inspection is to identify serious problems with the house which could potentially cost them a lot of money to correct, like latent defects, foundation settlements, failure of major appliances or systems (HVAC, plumbing, electrical), etc. That helps to set them up for not being terrified by the inspection report when it comes back. It also allows us to look constructively at serious problem areas and discuss what we can repair for the clients prior to their move-in.
On-Going Repairs and Maintenance
As you recall, one of our big cash flow boosting strategies (Profit Center #6) is to NOT have any responsibility for repairs or maintenance of the house. Our 1st meeting, when they drop off their Earnest Money deposit, is a great opportunity to set right expectations about the ongoing repairs and maintenance. I say it to them very clearly,
"Once the house passes the inspection and we repair the deficiencies – we are not going to be responsible for ANY maintenance or repairs."
It’s their responsibility once they take possession of the house. Of course, it’s also stated in our Lease Agreement which they will be signing later.
The Earnest Money Deposit Agreement
Regarding the Earnest Money Deposit agreement, it’s pretty much self-explanatory. I’ll be only commenting on clauses that may need special attention.
Clause #D: Inspection
We have two sub-clauses.
One of them is an inspection waiver where we say that the Tenant/Buyer was encouraged to conduct an inspection by a licensed building inspector, however, they conducted their own inspection and decided to waive the professional inspection.
This usually is the case when they have somebody in the family who is in the construction industry. Perhaps, it’s a remodeling contractor, a building contractor, a home inspector, a home appraiser or something of that nature. These type of folks know what they’re doing, often they go in the house, inspect it themselves and say,
“Well, we’re not going to hire anybody, we’re not going to pay anybody. We’re taking the house based on our own inspection.”
So we want to mark this box in that case to prove that we wanted them to inspect, but they refused. If the inspection showed up some minor deficiencies, we’re going to talk about it and we might actually do repairs.
If we want to get somebody in the house quickly, we might do some minor repairs, maybe fix a few things, replace an appliance or something like that, to satisfy them and put them in the house right away.
What if there are some major things they want to have done?
For example, replace the carpet, paint a house outside, replace a roof or air conditioning system (providing that the current air conditioning system is working, maybe it’s just a little too old). We’d have to think about it, because we don’t want to spend a lot of money up front in this transaction, unless the Buyers spend a lot of money up front too. And some of them do. We have some clients who’ll hand us a $5,000 or $7,000 check. In our business when a client puts a lot of money at risk upfront we’ll be happy to oblige and replace the carpet for them or put a new A/C unit in. Something maybe within a $1,000 to $2,500 expense. We try to match what we do for Buyers with the kind of investment they have in the house.
If they have a substantial investment and they’re very serious, we’ll be willing to do something for them to make them happy.
What if the clients don’t have a substantial investment in the house up front?
Say, they only have a couple of thousands to put down. What we’ll probably do is still try to provide the things they want in the house but offer to do it later.
We’ll create a separate “Repair Agreement” where we’ll list the items we are prepared to repair for them at our expense.
However, said remodeling/repairs will not be done until the time they qualify for a new mortgage.
When their loan is approved and they’re ready to pay us in full, we will be able to complete the repairs for them just before the closing.
THIS IS IMPORTANT:
We need to resist the temptation to throw money at the house at the inception of our agreement with Buyers who don’t give us much upfront. We will commit to doing it at the time when we know they money is coming right back to us from the proceeds of their loan.
Refunds of Earnest Money
First of all, when you get the Earnest Money Deposit you should tell the client up front very explicitly what will happen if they default and don’t show up.
“Mr. Buyer, you’re putting $1,000 or $1,500 to get this house tied up for inspections. If within seven days you don’t say anything, we assume you’re taking the house. So if you don’t object in writing, that’s it. If later you decide you don’t want to do the deal, that’s too late and we will not refund your deposit.”
If your clients are unhappy about the house and communicated it to you promptly, please don’t try to find a “reason” not to refund them their deposit or hold back a part of it.
Even if you feel that it’s not the problem with the house, but they just got cold feet, as long as they object within the time allowed by your inspection deadline, don’t argue – just give it back to them. It isn’t worth it. Part friends, they may refer somebody else to you.
There’s one other use for the earnest money deposit agreement.
As you know, I only give them 7 days to inspect the house.
Usually after the seven days, assuming they decided to take the house, I expect them to come to my office, sign the Lease/Option Agreement or Contract for Deed Agreement and pay the remainder of the down payment.
The only money that’s deferred until their actual move in is the 1st month rental.
Sometimes they don’t have their full down payment right at the end of the inspection period.
Let’s say they were planning on bringing $4,000 total down upfront.
They already paid $1,000 Earnest Money deposit.
Maybe they’re waiting for a tax refund, or for their parents to give them the check for the difference.
Whatever the reason is, we can allow them to have up until the shorter of [U]
30 days (which is the most we’ll ever tie the house up for), or
their move in date.
We’d give them that extra time to produce the remainder of the down payment funds. We can use the Earnest Money Deposit agreement to specify the date by which they MUST pay all of their down payments funds (Option Fees).
The first month rental payment will be due at move in time.
Filtering Our Lookers.
If you have a lot of houses to sell and advertise for Buyers a lot, you won’t have a lack of interested prospects.
In fact, about six months ago, we started tracking (and storing prospects’ names) in our database on the website. In just half a year we are up to 1,300 people who registered for our Lease/Option program.
So don’t be concerned you won’t have clientele.
What comes with a lot of clients is a lot of waste too.
You would not believe how many people come in contact with me who say, “Oh, we love this house. We want the house. We want it. We want it now. We’re going to come to you tomorrow and put down the earnest money to tie up this gorgeous home...” And they never show up.
This is by tens and by hundreds.
So I really don’t pay attention to the talk and you shouldn’t either.
In this business the words don’t mean much.
You must be prepared and always have a blank Earnest Money Deposit agreement handy, so you can sign them up if they show up.
If they don’t come, forget about them.
They’re not serious.
On the other hand when you have somebody who does show up and puts their money where their mouth is - you know they’re for real, your know they want the house.
That’s what separates the lookers from the people who actually want to do something with you and want to do it NOW.
The clients who bring you money are the ONLY type of clients you want to spend you valuable time with.
So now you have a signed Agreement and $500 or $1,000 earnest money.
What now?
Well, first of all, make sure that the deposit is in certified funds (cash, money order, or cashier's check) only.
Until now, the property wasn't tied up, but at this time you need to do so.
-----------------------------------------------------------------------------------------------------------
To Summarize:
1. You learned that the non-exclusive option to purchase contract is the best way to tie up a property for $1 to $10 option consideration.
2. You learned that the best way to buy for ALL CASH is use PRIVATE LENDERS. see www.EARN-HUGE-CASH.com
3. You learned that the best way to market for Tenant Buyers is to use an EARNEST MONEY DEPOSIT FOR LEASE WITH AN OPTION TO PURCHASE REAL PROPERTY
I hope you enjoyed this short ACTION-PACKED mini course on how to:
BUY PROPERTIES RIGHT,
USE PRIVATE MONEY RIGHT,
CONTROL PROPERTIES RIGHT, and
RUN YOUR CREI BUSINESS RIGHT.
See you in the Trenches!!
Brian Gibbons
www.creiu2.com :SM005:
Before you get into this LONG thread, please see this link about our DISCLAIMER
http://www.creiu2.com/Disclaimer-Please-Read
------------------------------------------------------------------------
Now that we are in the EDUCATION mode,
I'm starting this thread because this is the best way to make money FAST.
I'm presuming everyone here knows that an OPTION to PURCHASE CONTRACT can control a property for a period of time.
There are problems with a Sale and Purchase Agreement with YOUR NAME and/or Nominee (and /or Assigns) for a FLIP with contingency clauses out the WAZOO......
A. You usually have to to put down some money as a deposit/down payment (earnest money).
B. Playing games about the LOWEST amount of EARNEST MONEY, especially with an agent, even with a FSBO, from an INVESTOR's PERSPECTIVE is SILLY BUSINESS.
C. Regarding BUYERS, either WHOLESALE or RETAIL, he-she may may cancel, not buy, and screw the whole thing up.
And, are you being honest with the Seller? You aren't going to BUY, you are going to FLIP?
And are you the REAL OWNER to the prospective buyer? NO. You are a MIDDLEMAN-WOMAN.
Well, how do you do it?
Non-exclusivity is the KEY.
Non-exclusive Option to Purchase Contract.
Everybody has heard of an EXCLUSIVE RIGHT TO SELL AGREEMENT from AGENTS. NO ONE ELSE CAN SELL OR REPRESENT.
Well, this is the OPPOSITE. Non-exclusive means You can sell it and I can sell it. An Open Option Contract.
I can buy it at a certain price, and you can still sell it. IT'S A RACE!
So, say Sally Seller has a price of $100,000. I do the comps and it is worth $120,000. Good possible flip. Or Private Money All Cash Purchase.
Sally can FSBO it herself, and I can assign my option in escrow for whatever EXCESS over my OPTION PRICE. Or just buy it with Private Money and RTO (Rent to Own) it.
If Sally lists with an Agent, she just communicates that there is an Open Option on the property for $100,000, expiring on xx/xx/xxxx, that is recorded against the property.
HERE IS THE BEST PART:Option Consideration = $1.00 ($10.00 in some states)
Do you, as a Seller, get money from an Agent to List? NO. Actually, a lot of AGENTS ask for MARKETING MONEY to sell your house. Sorry. That's DUMB.
An Open Option on a Rehab property is a GREAT idea. An Open Option on a NICE HOME is a REALLY GREAT idea.
Who cares if it does not sell? What are you OUT? a few bucks marketing? $1 Option consideration?
A word about REAL ESTATE AGENT LAW.
See our disclaimer at http://www.creiu2.com/Disclaimer-Please-Read
================================================== ====
Look up in your state about the REAL ESTATE ACT OR LAW.
You can not get a FEE or COMMISSION to sell a house as an AGENT FOR. Here's where you are not an AGENT FOR:
1. When you are a Principal in a Transaction Definition of a Principal: Either PURCHASER or VENDOR-SELLER or ASSIGNOR or ASSIGNEE or LESSEE OR LESSOR Any of those 6 words
AND
2. When you are AT RISK in a TRANSACTION
Let's see if an Agent is #1 ==================== >>No
And #2? ===============================>>No
Well, you are not ACTING AS an Agent. You are a PRINCIPAL. And YOU ARE AT RISK IN THE TRANSACTION.
Agents and RE Brokers out there, Let The Games Begin!
==============================================
We at www.creiu.com advertise for Sellers who need to GET OUT NOW. Here is our web for MOTIVATED SELLERS: www.falnz.com We are in Auckland NZ. But we build Webs for US, CA, and AU Do you need one? Great Prices!!! websites@falnz.com.
================================================== ==
If you have been diligent in raising Private Money for the Purchase, and can get the property wholesale, buy it with your PRIVATE LENDER'S MONEY. See www.EARN-HUGE-RETURNS.com to RECRUIT BIG DOLLARS TO PAY CASH FOR PROPERTY And
Tell your Mortgage Broker and Banker NO THANKS, MATE!
================================================== =
Here is the NFL TOUCHDOWN, the Over-Time NHL Goal, the last MLB RBI in the 9th Inning.....
Your Seller-Vendor SIGNS YOUR OPEN OPTION AGREEMENT.
You use our scripts and its all easy.
If it is a NON-Rental it is easy.
If it is an EXISTING RENTAL, there's more data to collect.
But we have a SYSTEM though. Kinda SEMI IDIOT PROOF.
When negotiating, you and the Seller have an adversarial relationship, but after signing your Option Agreement, you and the Seller are actually working together. CO-OPERATING!
He/she knows that you are not going to buy the property yourself but that you are selling it for him/her (at your own expense).
================================================== ==
NOW, for MOTIVATED BUYERS......
Say you have an Open Option Agreement. YOU NEED BUYERS!
Check this out:
www.WE-HATE-RENTING.com
Go look at it. I'll wait here......... :SM050:
You back?
Then...
Sell our e-book for $27 US. AU, USA, CA and NZ versions.
All about Rent to Own and Contract for Deeds.
From the TENANT BUYER'S (TBer's) PERSPECTIVE!
This is the BEST WAY to build a buyer's List of TB'ers, BAR NONE!
Put something in the paper like:
RENT TO OWN
ALL CREDIT CONSIDERED
3B 2B Maple St, Bedford NY
Owner will Finance
lv message 222-3434
www.we-hate-renting.com
When they call
Have them drive by the property
Have them buy the e-book
Have them fax you an application that is downloadable from your TENANT BUYER WEBSITE
Call em back & Go over it
Give them the Earnest money agreement to sign, notarize and get back to you
-------------------------------------------------------------------------
A word about the EBOOK:
You sell a book that TEACHES the TBer about Rent to own
See http://www.we-hate-renting.com/Table-Of-Contents-DBer
You sell for $27.00 US Dollars
You Keep $13.50
Imagine....$13.50 x 100/month = $1,350.00 a month
And you get the LEAD for Tenent Buyer TOO!
Let me know....brian@creiu.com
--------------------------------------------------------------------------
A word about our EARNEST MONEY AGREEMENT:
EARNEST MONEY DEPOSIT FOR LEASE WITH AN OPTION TO PURCHASE REAL PROPERTY
Property Address : _____________________________________
Tenant/Buyer has deposited with Landlord/Seller a sum of $1000.00 (one thousand and 00/100 dollars) to take the property off the market until (date)_______________________.
1. Tenant/Buyer agrees to Lease the property at a rental rate of $$1000.00 (one thousand and 00/100 dollars/month for (12) months. The Lease shall start on (date)___________________.
The first Lease payment shall be due upon the start of Lease. This deposit shall be credited toward the Tenant/Buyer’s Option Fee (described below).
2. Tenant/Buyer shall have the right to buy a property on the following terms:
A. Tenant/Buyer may buy a property at any time during the term of Lease.
B. Tenant/Buyer shall qualify for and obtain his own financing.
C. The purchase price is $215,000.00
D. Home Inspection
( ) Inspection Waiver. Tenant/Buyer was encouraged to conduct an inspection of the property by the licensed building inspector of his/her choice. Tenant/Buyer conducted his own inspection and has decided to wave the professional inspection of the building. Tenant/Buyer has accepted the property in its present condition.
( ) Inspection Period. Tenant/Buyer shall have the right to conduct an inspection of the property by the licensed building inspector of his/her choice no later than within 7 days from this date. If Tenant/Buyer is not satisfied with the results, (s)he may cancel this Lease with Option to Purchase by giving Landlord/Seller a written notice no later than within 7 days from this date. If Tenant/Buyer gives such a notice this Earnest Money Deposit shall be promptly refunded. If such a notice is not received as specified Tenant/Buyer shall be deemed to have accepted the property in its present condition.
E. The parties shall sign a formal Lease Agreement and separate Option to Purchase Real Estate Agreement prepared by Seller/Landlord prior to the beginning of the Lease. If Tenant/Buyer fails to appear and sign these Agreements as specified above, Tenant/Buyer shall be in default on the Lease and shall forfeit this deposit as liquidated damages. No exceptions.
F. Tenant/Buyer shall pay an Option Fee in the amount of $10,750.00 no later than (date)______________. The Option fee shall be applied toward the future purchase price, and/or down payment, and/or Tenant/Buyer’s closing costs at closing of the purchase if the Option is exercised. The Option Fee is not refundable if the Option is not exercised.
_____________________ Initial(s)
G. Tenant/Buyer shall earn a PERFORMANCE CREDIT toward the purchase at the rate of $____________ per month. The credit will only be earned if the payment is received on time. in full (NOT PARTIAL PAYMENT) and the property is maintained as per the attached SCHEDULE OF RESPONSIBILITIES. Any payments paid by Tenant/Buyer in excess of the monthly payment shall also be applied toward the future purchase price.
The credit earned by Tenant/Buyer can not be redeemed as cash and is not refundable if the Option is not exercised.
_____________________ Initial(s)
By signing below Landlord/Seller acknowledges the receipt of the deposit and Tenant/Buyer acknowledges that he agrees to the terms above.
Date ___________________________
Tenant/Buyer ___________________________
Tenant/Buyer ___________________________
Landlord/Seller ___________________________
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Let's look at this in detail.
THIS IS NOT A LEASE OPTION or a CONTRACT FOR DEED AGREEMENT.
More like a Contract of Intent. WITH PENALTIES FOR NON-PERFORMANCE.
With this document, most of my work is done. The hard stuff. The Tenant Buyer - Contact for Deed Signor (CFDS) already:
1. Knows all the terms and conditions of the purchase (we usually communicate all of that over e-mail, my website and phone).
2. Has read our Rent to Own Program on our Website
3. Has driven to and looked at the house
4. Has been explained what work we will will pay for as far as fix up.
5. Knows about the money to bring before we can deliver the keys and LEGAL POSSESSION and the actual Lease/Option Contract or CFD Contract will be signed.
6. Knows how much money to bring to the initial appointment with me IN CASHIER's CHECK to take the property off of the market (VALUABLE NON-REFUNDABLE CONSIDERATION)
7. Knows he’ll have 7 days after putting down a deposit-down payment to inspect the property and choose one of 3 Options:
a) Terminate the earnest money agreement in writing within 7 days and receive his money back unconditionally,
b) Request specific repairs to be performed. At this point we’ll negotiate the amount and nature of repairs and either agree to complete them or cancel the earnest money agreement and return the funds back to Buyer,
c) Say nothing and therefore accept the property in the “as is” condition. The earnest money deposit becomes nonrefundable at that point and will be held as liquidated damages if the client doesn’t appear to sign Lease/Option
agreement or fails to produce the rest of funds necessary to close.
Did you notice how much of the preliminary work has already been done before I ever see a Prospective Tenant Buyer?
Therefore, at the time of our first meeting when Buyers come to drop off the Earnest Money deposit, my job is really easy.
I, once again, give them a quick run through the program to make sure there are no flaws in their understanding of how all of this will work, ask if they have any questions, clarify those questions – and we are ready to sign.
The purpose of the Earnest Money agreement is to:
1. Collect the good faith money from a client to make sure he is for real and not a looker just playing games.
2. Show a client how much extra funds they will need to bring to our next meeting.
3. [B]Allow a client enough time to inspect the property and be comfortable with what they are buying, including refund of their deposit if they are not satisfied and we can’t agree on the repair amount.
4. Provide a summary of the ENTIRE Lease/Option transaction, so when he comes with the rest of the money there’s no discrepancies between what I had in mind for the financing terms and what he thought the terms were. We don’t want them to get a surprise at the closing table when we expect then to bring the money and to sign on the dotted line. It’s better to discover our miscommunications about the terms of the deal now.
5. Set up a deadline for our next meeting for finalizing the transaction.
6. Communicate to them the consequences of them not showing up for closing (they’ll lose their deposit).
I always insist on them making their own independent inspection of the house by a licensed building inspector.
I want to eliminate any possibility of them ever coming back and claiming I knew about some defective condition in the house, or something not working properly or not being up to building code and failed to tell them about.
This could, if litigated, give them grounds for terminating the agreement and getting their money back.
When they hire a professional inspector to tell them everything about the home, it’ll be very hard for them to claim they didn’t know something.
In addition to their own inspection I still provide a Seller Disclosure of Property Condition, a standard 3-page form where I tell them everything I know about the house. :SM081:
I don’t want them to be turned off by the inspection either. The inspector’s duty is to note every little thing that’s wrong with the house. Those reports are thick and filled with a ton of “bad” notes. Of course, 99.9% of those are mostly very minor items which don’t really pose any serious concerns. However for the unsuspecting 1st time homebuyer looking even at a very innocent report like that could be quite disturbing. Therefore, at our meeting I try to prepare them for what they might see on such an inspection report. I explain to them – the real purpose of the inspection is to identify serious problems with the house which could potentially cost them a lot of money to correct, like latent defects, foundation settlements, failure of major appliances or systems (HVAC, plumbing, electrical), etc. That helps to set them up for not being terrified by the inspection report when it comes back. It also allows us to look constructively at serious problem areas and discuss what we can repair for the clients prior to their move-in.
On-Going Repairs and Maintenance
As you recall, one of our big cash flow boosting strategies (Profit Center #6) is to NOT have any responsibility for repairs or maintenance of the house. Our 1st meeting, when they drop off their Earnest Money deposit, is a great opportunity to set right expectations about the ongoing repairs and maintenance. I say it to them very clearly,
"Once the house passes the inspection and we repair the deficiencies – we are not going to be responsible for ANY maintenance or repairs."
It’s their responsibility once they take possession of the house. Of course, it’s also stated in our Lease Agreement which they will be signing later.
The Earnest Money Deposit Agreement
Regarding the Earnest Money Deposit agreement, it’s pretty much self-explanatory. I’ll be only commenting on clauses that may need special attention.
Clause #D: Inspection
We have two sub-clauses.
One of them is an inspection waiver where we say that the Tenant/Buyer was encouraged to conduct an inspection by a licensed building inspector, however, they conducted their own inspection and decided to waive the professional inspection.
This usually is the case when they have somebody in the family who is in the construction industry. Perhaps, it’s a remodeling contractor, a building contractor, a home inspector, a home appraiser or something of that nature. These type of folks know what they’re doing, often they go in the house, inspect it themselves and say,
“Well, we’re not going to hire anybody, we’re not going to pay anybody. We’re taking the house based on our own inspection.”
So we want to mark this box in that case to prove that we wanted them to inspect, but they refused. If the inspection showed up some minor deficiencies, we’re going to talk about it and we might actually do repairs.
If we want to get somebody in the house quickly, we might do some minor repairs, maybe fix a few things, replace an appliance or something like that, to satisfy them and put them in the house right away.
What if there are some major things they want to have done?
For example, replace the carpet, paint a house outside, replace a roof or air conditioning system (providing that the current air conditioning system is working, maybe it’s just a little too old). We’d have to think about it, because we don’t want to spend a lot of money up front in this transaction, unless the Buyers spend a lot of money up front too. And some of them do. We have some clients who’ll hand us a $5,000 or $7,000 check. In our business when a client puts a lot of money at risk upfront we’ll be happy to oblige and replace the carpet for them or put a new A/C unit in. Something maybe within a $1,000 to $2,500 expense. We try to match what we do for Buyers with the kind of investment they have in the house.
If they have a substantial investment and they’re very serious, we’ll be willing to do something for them to make them happy.
What if the clients don’t have a substantial investment in the house up front?
Say, they only have a couple of thousands to put down. What we’ll probably do is still try to provide the things they want in the house but offer to do it later.
We’ll create a separate “Repair Agreement” where we’ll list the items we are prepared to repair for them at our expense.
However, said remodeling/repairs will not be done until the time they qualify for a new mortgage.
When their loan is approved and they’re ready to pay us in full, we will be able to complete the repairs for them just before the closing.
THIS IS IMPORTANT:
We need to resist the temptation to throw money at the house at the inception of our agreement with Buyers who don’t give us much upfront. We will commit to doing it at the time when we know they money is coming right back to us from the proceeds of their loan.
Refunds of Earnest Money
First of all, when you get the Earnest Money Deposit you should tell the client up front very explicitly what will happen if they default and don’t show up.
“Mr. Buyer, you’re putting $1,000 or $1,500 to get this house tied up for inspections. If within seven days you don’t say anything, we assume you’re taking the house. So if you don’t object in writing, that’s it. If later you decide you don’t want to do the deal, that’s too late and we will not refund your deposit.”
If your clients are unhappy about the house and communicated it to you promptly, please don’t try to find a “reason” not to refund them their deposit or hold back a part of it.
Even if you feel that it’s not the problem with the house, but they just got cold feet, as long as they object within the time allowed by your inspection deadline, don’t argue – just give it back to them. It isn’t worth it. Part friends, they may refer somebody else to you.
There’s one other use for the earnest money deposit agreement.
As you know, I only give them 7 days to inspect the house.
Usually after the seven days, assuming they decided to take the house, I expect them to come to my office, sign the Lease/Option Agreement or Contract for Deed Agreement and pay the remainder of the down payment.
The only money that’s deferred until their actual move in is the 1st month rental.
Sometimes they don’t have their full down payment right at the end of the inspection period.
Let’s say they were planning on bringing $4,000 total down upfront.
They already paid $1,000 Earnest Money deposit.
Maybe they’re waiting for a tax refund, or for their parents to give them the check for the difference.
Whatever the reason is, we can allow them to have up until the shorter of [U]
30 days (which is the most we’ll ever tie the house up for), or
their move in date.
We’d give them that extra time to produce the remainder of the down payment funds. We can use the Earnest Money Deposit agreement to specify the date by which they MUST pay all of their down payments funds (Option Fees).
The first month rental payment will be due at move in time.
Filtering Our Lookers.
If you have a lot of houses to sell and advertise for Buyers a lot, you won’t have a lack of interested prospects.
In fact, about six months ago, we started tracking (and storing prospects’ names) in our database on the website. In just half a year we are up to 1,300 people who registered for our Lease/Option program.
So don’t be concerned you won’t have clientele.
What comes with a lot of clients is a lot of waste too.
You would not believe how many people come in contact with me who say, “Oh, we love this house. We want the house. We want it. We want it now. We’re going to come to you tomorrow and put down the earnest money to tie up this gorgeous home...” And they never show up.
This is by tens and by hundreds.
So I really don’t pay attention to the talk and you shouldn’t either.
In this business the words don’t mean much.
You must be prepared and always have a blank Earnest Money Deposit agreement handy, so you can sign them up if they show up.
If they don’t come, forget about them.
They’re not serious.
On the other hand when you have somebody who does show up and puts their money where their mouth is - you know they’re for real, your know they want the house.
That’s what separates the lookers from the people who actually want to do something with you and want to do it NOW.
The clients who bring you money are the ONLY type of clients you want to spend you valuable time with.
So now you have a signed Agreement and $500 or $1,000 earnest money.
What now?
Well, first of all, make sure that the deposit is in certified funds (cash, money order, or cashier's check) only.
Until now, the property wasn't tied up, but at this time you need to do so.
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To Summarize:
1. You learned that the non-exclusive option to purchase contract is the best way to tie up a property for $1 to $10 option consideration.
2. You learned that the best way to buy for ALL CASH is use PRIVATE LENDERS. see www.EARN-HUGE-CASH.com
3. You learned that the best way to market for Tenant Buyers is to use an EARNEST MONEY DEPOSIT FOR LEASE WITH AN OPTION TO PURCHASE REAL PROPERTY
I hope you enjoyed this short ACTION-PACKED mini course on how to:
BUY PROPERTIES RIGHT,
USE PRIVATE MONEY RIGHT,
CONTROL PROPERTIES RIGHT, and
RUN YOUR CREI BUSINESS RIGHT.
See you in the Trenches!!
Brian Gibbons
www.creiu2.com :SM005: