Lease Agreement and Options Agreement

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  • Hello,
    I am at a new juncture with my deal so I thought it would be best to start a new thread with the new direction I am taking. Quick recap: I optioned to buy a house that is at the top of its value range and it needs a little work (flooring mostly). The owner is in foreclosure and I just got the reinstatement amount from the bank yesterday of $8100.00. I have a buyer lined up who has $10,000 for a down payment and who loves the house but cant get a traditional mortgage so is ready to Rent to Own (or Lease to Own….is there a difference?). She can pay above the mortgage amount which will pay for the account servicing at the title company ($125 to set up and $15 a month). I would love feedback on my next steps but I believe at this point I need to draft a lease agreement and then a separate option to buy contract for the new buyer. I understand I can record the option to buy contract myself, without the title company. I will also draft an agreement for the owner where he acknowledges that he wont be able to take out another FHA loan while this one is tied up (he is happy to allow the new person to pay his mortgage for him for as long as they wish so he can avoid a foreclosure on his record, plus he has already moved out and is renting so it appears his housing needs are covered). I think I will write in that there is no pre-payment penalty if the new buyer wishes to refinance and perhaps add in a 5 year refinance clause with the option to extend every 2 years for some monetary amount, either a lump sum or a slight increase in the monthly payment. Then I can make an appointment with the title company to set up just an escrow account.
    Here are the questions I am still working on answering:
    Should I draft the lease agreement as a standard rental contract?
    Is there a difference between lease agreement and rental contract?
    Does the rental contract/lease agreement stay in affect until the point in time the new buyer either pays it off in 30 years or pays it off early and then they exercise their option to buy?
    I would like to make money on this so I will keep the difference between the $8100 and the $10,000 ($1900) so Im assuming I will need to make sure the amount I charge her for the house is $1900 over the payoff price?
    I’m assuming there is no extra interest needed to be charged to the new buyer since I’m not making any monthly income nor is the owner asking for anything extra?
    How do I claim my $1900 since I’m not going through the title company for this part?
    Does the title company send the monthly payments in the name of the new buyer to the bank? Will this be a problem for the bank since its an FHA loan or should the money come in the current owner’s name? (I want an escrow account to handle the money in order to protect both parties: protecting the owner from the buyer not making payments on his note and protecting the buyer from the owner not sending in the money to the bank).

    Jackie you take this one please. Way to many questions for me and I do things a little differently. Eliz I know this is a great learning experience for you but you need to carve more profit out of the deal. Jackie will explain.

    Thanks Don. I am working on a lease agreement as well as a separate option to purchase agreement this very moment. It will be between the current owner and the new lease to purchase buyer, not myself. I will receive about $3000 for my efforts on this one and then move out and on to better deals with more meat on them.

    Good deal and good luck. Don’t forget to tell us about the next deal.

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