In a recent options class in Tampa, there were several investors successfully using the contract for option for tenants. They were using it with tenants with marginal credit to get them qualified for a loan. Many lenders will treat financing an option buyer as a refinance, which is faster and less expensive for the borrower. Many people have had short sales and foreclosures and still want to buy their own home.
The contract for option is a good device since it doesn't create the risk of having to foreclose a tenant with a real option. That took me a year to foreclose an option tenant and was very expense. The contract for option tenant does not receive an option until they make all the scheduled rent payments. This is a good market for that tool.
Thanks for this bit of info on Contract for Options. I’ve read your book with Warda, I believe it is. Since publishing, have you ever had or heard of a contract for option being tested in court? Also, have you found it useful in situations where HOAs limit the number of renters? Is there a case to be made to an HOA that the “renter” has an interest in the property beyond renting? Or does that hurt your case with the renter if you ever get the contract for option challenged?
Tiffany, Thousands of students have been using the contract for option for over 20 years and I do not know of any legal challenges. It would help with the H OA situation, since they may believe they have a right in the property, but they do not. Another tool also in the book is The Contract for Beneficial Interest, which resembles an agreement for deed, but is not. These are covered in greater detail in the course, which is also on DVDs and CDs. Thanks for your comments and let me know if I can help further.
You have more useful info than the Brisith had colonies pre-WWII.
Can the contract for option be used in all states or is it unique to Florida?
Fred, Yes it can be used in all 50 states. It is contract law not real estate law. Thousands of friends and students have been using it for over 20 years and I do not know of any problems. We simply agree to deliver an option after the tenant makes the agreed number of payments on time. Typically we deliver an option valid for 90 days while he is getting financing. It can be extended, but expires if he does not close. It is all described in my lease option book and course, including forms.
Jack,
Does this method comply with the new Frank Dodd rules allowing one to essentially sell with owner financing?
Which course are you referring to in your June 20, 2012 at 7:07 pm comment? “These are covered in greater detail in the course, which is also on DVDs and CDs.”
Thank you!
Jeremy
Jeremy, It should. It is not seller financing and it is not an option. It is an agreement to deliver an option in the future after certain conditions have been met. A certain number of payments, on-time performance and other reasonable requirements agreed to by each party. I have used it for over 20 years and thousands of investors also use it. The details are in my course.