and yet another lease option ???

[kimesha]

how do you protect your butt from the seller screwing up the title. to make it more clear, say the seller went and got sued while i have it under the lease option. a lein is placed on the house. what can i do to prevent this?

[dealmaker]

Maybe the answer is different in different states, but I don't think you can prevent the seller getting sued, or the judgement being placed. That's one of the problems with being in the "weak" position of not being an owner. Of course your option is for a "marketable" (clear) title.

That's one of the reason's I've never liked doing L/Os. Exact same reason I'll NEVER do a land contract/contract for deed.

dealmaker

[kimesha]

maybe you could make this a stipulation in the contract. ie,: option will only be exercised by the specified date if there is a clear and marketable title. of course if the owner screws up you loose all the cash you invested. but i believe there is a downside to just about every creative real estate niche. even in a convential mortgage there is no guarentee that the lender will not have to forclose on the borrower

[Jim FL]

Kimesha,
I read your post,and understand your concern with lease options, or sandwich lease options.
I no longer use this technique to buy, but only because its just as easy to get ownership, in my humble opinion.

However, if you are doing lease options, when you sign with the seller, there is a way to secure your position.
That would be to use a 'performance mortgage'.
This is a document that the sellers sign, notarize, and you record.
It effectively puts a lein on title, which insures the performance of all parties.
Should the seller refuse to pass title, try to get a second/third mortgage, or encumber the property in anyway, then your performance mortgage will have a senior position on title to that.
If/when you exercise your option the seller causes trouble, you simply foreclose on your performance mortgage and force them to comply.
I have a sample FREE one at my website, linked in a banner at the top of my forum, at REmentors.com
It is FREE, so I know Dan won't mind me sharing the link.

Go ahead, read that, print it out, and take it to your local RE attny to prepare one that fits your state.

There are other advantages to using the performance mortgage as well.
Example:
You buy a house with a lease option, and sub-lease option the same house to an end T/B'er.
Your T/B'er goes to exercise, BUT, they can only get funding from a lender with title seasoning requirements.
This means the seller who is selling the house to your T/B'ers MUST be on title for a certain length of time.
Since you are in the house with a lease option, you are NOT on title, and this won't fly as a double close.
So, instead, you simply execute an agreement between your sellers, and your buyers for the price your buyers agreed to pay you.
Then, when the title company or closing attny runs title, your performance mortgage comes up in the report.
This is when the closing attny, or title company will contact YOU for a payoff for that 'mortgage'.........which of course is the amount of the difference between the purchase price you agreed to pay the sellers, and the purchase price the buyers agreed to pay you.
This way, title passes direct from your sellers, to your buyers, and title seasoning requirements are met.
You are simply singing a release at close to release your performance mortgage, in exchange for getting paid.

MANY advantages to using this document.

anyway,
HTH,
Jim FL

[Dan Auito]

Jim even if it isn't free I trust what you recommend to your fellow members here and will back up your offers with the standing offer to refund anyones purchase price of anything they buy from you that they are not satisfied with.

Folks some people you can trust, Jim is one of them. Feel free Jim, you've earned the right to help others with your expert knowledge and hands on experience.

Keep up the good work! :praise:

[Jim FL]

Dan and Kimesha, and others of course,
Rather than have you stray away from this wonderful website looking for a performance mortgage to review and study, I'll just link it here for you.

Take a look here:
http://rementors.hypermart.net/perf_mort_sample.htm

Remember though folks, this is a SAMPLE!
DO NOT PRINT AND USE THIS FORM!
It needs to be reviewed by local competent legal counsel before use, to comply with local laws etc.

The other thing I should tell you, don't cut/paste it, because there is some hidden text in it, designed to thwart half hearted copiers and theives.
I had someone do that once, and their seller found the extra words in the document and was not happy.
So, print, take to attny after you study it, and have the attny draft a new one that complies with your laws.

Anyway, enough of the CYA, enjoy, its FREE!
Jim