Lease Options

Hi PropertiesatBest,

You are charging way to much to bird dog lease options. The common bird dog fee is $500 to $1,000.00. The best way I do this is, I find out what buyer has to put down and how much monthly payments they can afford, then I talk with seller and reduce the amount $1,000.00 for my fee. Example: if buyer has $10k to put down then I tell seller they can put down $9,000.00. You can get a bird dog agreement in place with either buyer or seller to make sure you get paid, which ever side you feel you have a better relationship with or both in some cases.

Good luck, I like this strategy, its quick and easy way to make money.

Thanks,
Shah

I have been receiving some calls recently from owners who would like to sell their homes, but owe more than their houses are worth. Is there any strategy to help these people and make a profit at the same time? Would a sandwich lease option be a solution? Is it possible to find a buyer who don't qualify for a mortgage now because of credit problem or lack of down payment, but would be willing to pay more for the house, if we give him a chance to own it? And even if they agree to pay more for the house, will any bank give him a mortgage later if they need to pay more than market value?
I have heard some investors have been doing this – what is your advice?

Thank you, Kasia

Hi, Shah,

I appreciate your comment.

I am not Birdogging. I am putting together (creating) the whole deal and marketing, finding, both the Seller and the Buyer.
I am doing all the work.

I just need to know which contracts I need for each. I have an option to Purchase for the Seller, and have the Assignment One for the Buyer, but know I need more.

Thank you.

For the Seller you need a Rental Agreement and an Option to Purchase Agreement. If you are doing a Wholesale L/O (also called a Co-op L/O) you use an Assignment Contract with the Tenant/Buyer.

If you are doing a sandwich L/O, use the same contracts with the T/B as you used with the Seller, but modify them accordingly.

If you get the contract for $100k, you add your fee to the price of the house for the T/B. Their price would be $105K.

If they have $10K to put down, you have several ways you can do this. You can give the other $5K to the seller or if you have gotten a very good price on the house initially and know that the house will probably appraise for $110K, you can sell the house for $110K and you make a bigger profit. Often, the seller is just happy to get out from under the pmt and doesn't care if they get nothing but "out".

Do NOT give it to the mtg broker.

The option fee if non-refundable. Make sure your contracts say that. If the Buyer decides not to buy, you keep the option fee. It also does not have to be kept in an escrow acct or any other acct. It can go directly into your pocket.

Be sure to keep copies of all checks-the option fee, etc., so that there is a paper trail when they go to get their new mtg. The option fee counts toward their down pmt.

My rule of thumb amt that I estimate for an option fee is 5%.

Also, please fill out your bio page fully so that we have a name that we can use to address you and have an idea as to where you are located. Helps with networking and advice can differ according to where you are in the country.

Good luck!

Karen

So, the Assignment Contract is the only contrcat I use with the Tenant/Buyer?

If I would add, say, $5,000 to the price, what that total amount go on the assignment contract or on the Contract with the Seller?

Sorry, I'm confused ...

Karen, thank you so much for all your info.

Mary

I have exactly the same problem, but I'm not sure it will be answered in this thread. I was going to start another for that topic. Perhaps you could follow me over there.

It's really difficult when a house is upside down, because the lender/first mortgage position has to be satisfied. I have a house for sale (regular listing, as a realtor) where the owner owes more than the house is worth. I wouldn't buy it, either. What's weirder, the upside down-ess did not occur because the buyer bought more of a house than they could afford, but it occurred because the house depreciated suddenly (foundation problems) which is uncommon in my home market. House values are going up, not down or staying flat, like many other places in the country.