Question about lease options/FSBO (tenant, appraisal, foreclose, clause)

[businessperson]

Can someone explain the difference between Owner Financing and Lease Options? If you buy using owner financing does the deed go in your name with the seller listed as first lien holder? And, when you lease with option to purchase the deed stays in the seller's name until you obtain alternative financing?

[Greeenback]

Originally Posted by businessperson

Can someone explain the difference between FSBO and Lease Options? If you buy "for sale by owner" does the deed go in your name with the seller listed as first lien holder? And, when you lease with option to purchase the deed stays in the seller's name until you obtain alternative
financing?

FSBO is a For Sale By Owner. FSBO can be the main dwelling or a rent home, and so on. A FSBO usually has a purchase agreement (a requirement to buy under specific terms), unless the owner decides to move on with a lease option to buy or another venue. A FSBO is typically straightforward, unless a buyer negotiates a lease option to buy or a similar venue.

The deed will reflect the final executed purchase contract, with both parties (seller and buyer) acknowledging it (signatures). Once the sale has closed, the seller should not hold a lien on it, unless for some reason, the vendor wants to hold a special lien that is within the seller's rights. However; in my state, it is rare for a seller to hold special liens on the property they sold.

A Lease Option to buy is typically an agreement between a landlord and a tenant. A Lease Option is a right to buy (under specific terms). The optionee (tenant) is the one who has a right to buy, while fulfilling the terms and paying the price of the lease.

Make sure there is a Lawyer to observe the lease option so it can stand up strong in court for future reference. Until the lease option to buy is completed, the seller holds title, unless stated otherwise that you have a right to have your name in the title as an owner during the lease (which is also rare in my state). If you want to obtain financing to complete the lease option early, then make there are clauses in the contract with strong economic terms.

EDIT TO ADD: A lease option typically portrays a tenant living in the property, paying down the agreed upon price (lease consideration) monthly, or whatever the terms are, and the title shall pass with legal assistance once the terms of the options have been met (including additional consideration for the property)

[MikeJaquish]

Originally Posted by businessperson

Can someone explain the difference between FSBO and Lease Options? If you buy "for sale by owner" does the deed go in your name with the seller listed as first lien holder? And, when you lease with option to purchase the deed stays in the seller's name until you obtain alternative
financing?

FSBO means "For Sale By Owner."
All that means is that the owner is marketing and selling the property. It does not imply any seller financing for the buyer, or a lease-option.
Seller would deed the property to buyer.

"Lease-Option" is a means for the buyer to get into the home with the choice to buy it at some point. It is not a financing solution, but an occupancy until purchase solution. Yes, the deed stays in the seller's name until purchase.

[businessperson]

Thanks for the info. I really didn't word my question correctly. I meant to say the difference between Owner Financing and Lease Option. If the owner finances the purchase would the deed be in the buyers' names with a lien held by the sellers? And, if lease option, then same as renting with the option at some point to purchase, but deed remaining in sellers' names until buyer gets financing. Sorry to be so confusing.

[Greeenback]

Originally Posted by businessperson

Thanks for the info. I really didn't word my question correctly. I meant to say the difference between Owner Financing and Lease Option. If the owner finances the purchase would the deed be in the buyers' names with a lien held by the sellers? And, if lease option, then same as renting with the option at some point to purchase, but deed remaining in sellers' names until buyer gets financing. Sorry to be so confusing.

Owner financing will usually be in the form of a promissory note or bond (there are several types). In my state of Louisiana, and in my area, a promissory note will be used and recorded or filed, typically. If it were me, I would have my Lawyer hold it without putting it in the title. Many states do not force an individual to have it recorded publicly.

There are lien theory states, title theory states, and hybrid states.

With reference to a mortgage, in a lien theory state, the consumer holds title. In a title theory state, with regard to "deed of trust," the lender will hold title.

A lease option - the owner or the optionor, will hold title, unless stated otherwise by law.

A promissory note between seller and buyer may or may not, in "common law," abide by lien and title theory law as it applies to owner financing with a promissory note (or whatever instrument is used or agreed to). And, many states may have their own ways, as well. So it is best to check what your state's law says, too; see your state's legal definition of "mortgage" or "deed of trust" and how it applies to owner financing.

I live in Louisiana. In Louisiana, we do not have a lot of common law; instead, we have civil Law (a code). However; when we take classes and study, and take exams, we are expected to know national and state. We have a book for common states and a book for Louisiana -- we are expected to know both.

EDIT TO ADD: http://title.grabois.com/ this website gives a map of lien and title theory states, but I believe I do not see the hybrid states being showcased.

[Greeenback]

Having a Lease Option locked in for a period of two or more years (fixed) in an environment of rising values or even inflation, along with a promissory note, may save some monies. The seller may agree to account for the lease consideration paid as part of the value of the home when the option says it is time to buy -- so long as it is disclosed.

If this occurs, I would get an Independent Real Estate Appraiser to appraise the interest and the whole property as of the effective date of the option and at the end of the period before the purchase is executed; this way, value is accounted for, and the terms are analyzed. Having these appraisals will assist your legal standing and help your Lawyer in any legal disputes that may occur go more smoother and quicker.

I would want an Independent Real Estate Appraiser either way, however (option to buy or option to buy along with a Promissory Note, and FSBO).

EDITE TO ADD: A lease option to buy may or may not be a financial solution. A lease option to buy can be creative and economical; both in increasing and declining state of values. Locking in (terms) interests, values, time limits, and so forth, as well as agreeing to a certain type of lease that does not have an adverse affect.

Have a good one!

[Brandon Hoffman]

Think of it this way:
Lease option: the person is renting the place and normally puts down a non refundable deposit to secure the rights to purchase the home for a fixed price by some fixed future date.

Owner financing the owner is granting a mortgage to the buyer. If the buyer fails to pay the owner can foreclose on the property and take it back.