Banks take on LWOTP...?

[5happycampers]

I think I would like to lease option my home for a year. I know that I can give the would-be buyer a rent credit and take some up-front option cash. I THINK that its a CREDIT just in escrow. Right? BUT does the bank look at that as a required cash downpayment?

I did a search of this site but didnt find the answer to my questions - so sorry if this question has been asked before.

THanks for your help.

[StJake316]

I THINK that its a CREDIT just in escrow. Right? BUT does the bank look at that as a required cash downpayment?

I did a search of this site but didnt find the answer to my questions - so sorry if this question has been asked before.

THanks for your help.

The amout you choose to credit the tenant/buyer is up to you, but be sure you set this as a deduction of the price, not a deduction of the downpayment, since you don't control that (the lender controls the down payment, not you.) Typically, this is a non-refundable option consideration (generally 2 1/2 - 5 % of the purchase price) and a percentage of the monthly rent credited towards the purchase price.

Once again, do not promise things you cannnot deliver. Lenders generally credit this money toward the down-payment, since it is a verifiable transfer of funds, but you cannot guarantee this in your contract, since you do not control what the lender does.

Again, only contractually promise what you can deliver.

[5happycampers]

Thanks for the reply and the answer. It makes - sense the way you describe it - you said "generally". Since some optioness have low FICO - I was wondering if "generally" still applies. I suppose I could advise the tenant/optionee to talk to a bank now - but promies good for 12 months from now I dont think happen.

Does anyone have a "good" - LWOTP contract? I have seen messages stressing the importance of having an attorney draft or review the lease and option contracts. I am leaning to no leagl help -just commonsens. Am I being naive and foolish? BTW - this will be my first of many I hope (lease options that is) I have 2 properties with tenants in that I want to offer them for sale.

[StJake316]

You can find contracts pretty much everywhere, and I'd bet that where you look will determing the sort of contract you find.

You will probably find some general contracts at the local stationary store - these will usually not protect your interests or anyone elses -
they are most frequently generic.

You can get lease option contracts from a RE agent - these will often be bulky things, and will intimidate buyers and sellers alike.

You can download free contracts from the internet - they may or may not be crafted by a 12-year old for a school project (for which they received a "C"). I wouldn't recommend this unless you really know what you're doing, and what you need.

You can get an attorney to draft contracts for you. This will be pricy, and the contracts may be overly complicated.

The most reliable way to get substantial contracts that will protect an investor would be from another investor. They usually charge to share these, since they are proprietary tools of the trade.

Hope this helps.