In California it is absolutely illegal to ask tenants to do repairs, even if they have an option to buy in place. If they are paying rent to a seller/landlord, the seller/landlord cannot ask tenants to pay for any repairs, even if tenants agree to and sign an agreement or lease that says they will pay for repairs. This has a serious impact on most lease option systems working. Cover yourself in this area, don't even go there with tenant repairs.
OK, when my end buyer goes to get his permanent financing at the lender, part of his qualifying requirement is to show a down payment and principal credit on his payments, if any but, his "down payment" credit was paid to me as an "option fee" and not to the seller! I'm not in the final transaction so how does he get credit for those payments and the option fee to qualify for the loan?
Some lenders will allow the option fee to used as a down payment, and others won't. A lot depends on how you structured the deal in the beginning.
Typically, what we do to help, is have the tenant/buyer write the option fee check to the seller, and we have the seller sign/endorse it over to us... so then it IS made out to the seller.
The credit normally comes off the price of the house, moreso than is used as down payment. I would have him explain it to his lender...
In California it is absolutely illegal to ask tenants to do repairs, even if they have an option to buy in place. If they are paying rent to a seller/landlord, the seller/landlord cannot ask tenants to pay for any repairs, even if tenants agree to and sign an agreement or lease that says they will pay for repairs. This has a serious impact on most lease option systems working. Cover yourself in this area, don't even go there with tenant repairs.
californiameltdown 1 year ago
OK, when my end buyer goes to get his permanent financing at the lender, part of his qualifying requirement is to show a down payment and principal credit on his payments, if any but, his "down payment" credit was paid to me as an "option fee" and not to the seller! I'm not in the final transaction so how does he get credit for those payments and the option fee to qualify for the loan?
HJosephD 1 year ago
Some lenders will allow the option fee to used as a down payment, and others won't. A lot depends on how you structured the deal in the beginning.
Typically, what we do to help, is have the tenant/buyer write the option fee check to the seller, and we have the seller sign/endorse it over to us... so then it IS made out to the seller.
The credit normally comes off the price of the house, moreso than is used as down payment. I would have him explain it to his lender...
REITV 1 year ago