SWIFT complete guidebook€¦ · Please note that investing involves risks. Any decision to invest in real estate is a personal decision that should be made after thorough research,

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Lease Options

Profiting from Property Without Owning It Creating Multiple Streams of Income off One Asset

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SWIFT Delivers beginner and advanced training nationally that enables its clients to achieve greater knowledge, wealth, and financial

independence through real estate investing.

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Disclaimer The educational training program provided is intended solely for the purpose of personal enrichment, and learning. The company’s products (including but not limited to training and coaching materials, and newsletters) are for educational and/or illustration purposes only and are provided with the understanding that the company is not engaged in rendering legal, accounting, or other professional opinions. Please note that investing involves risks. Any decision to invest in real estate is a personal decision that should be made after thorough research, including a personal risk and financial assessment. Results are based on each individual, the action they take and the time and effort they put in.

Contracts, Forms and Letters Disclosure All contracts, forms and letters contained herein are provided for training purposes only. The provider does not assert any warranty, express or implied, as to the legal effect and/ or completeness of the contract, forms and letters. The provider hereby disclaims any and all liability with respect to these forms. The provider suggests that you contact an attorney to ensure that the contracts, forms and letters are modified to meet the laws of your state.

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Table of Contents Introduction: SWIFT RE Academy .................................................................................................. 8

Team Agreements ...................................................................................................................... 8

About the Course ....................................................................................................................... 9

Introduction Interviews ................................................................ Error! Bookmark not defined.

Course Entrance Poll .................................................................... Error! Bookmark not defined.

Course Agenda ............................................................................. Error! Bookmark not defined.

Chapter 1: Introduction to Lease Options .................................................................................... 11

Real Estate Investing Strategies ............................................................................................... 11

Roadblock’s To Traditional Real Estate Investing ..................................................................... 13

Real Estate Investor Offering Strategies .................................................................................. 14

Types of Option Purchases ....................................................................................................... 15

Why We Focus on Sandwich Lease Options ............................................................................. 17

How Lease Options Compare to Other Forms Of Creative Financing ...................................... 18

Activity: Deals That Might Have Been Perfect for This ............................................................. 18

Chapter 2: Finding Lease Option Deals ........................................................................................ 20

Introduction to The Lease Model ............................................................................................. 20

The Power of Circumstance ..................................................................................................... 21

Characteristics of Lease Option Sellers .................................................................................... 22

Characteristics of Tenant Buyers .............................................................................................. 22

Evaluating and Targeting Neighborhoods ................................................................................ 23

Finding Lease Option Deals ...................................................................................................... 24

Marketing Your Lease Option Business .................................................................................... 26

Chapter 3: Marketing ................................................................................................................... 28

Marketing Mission/ Message with Sellers ............................................................................... 28

Marketing Your Business .......................................................................................................... 29

Car Magnets ......................................................................................................................... 29

Newspaper Ads .................................................................................................................... 29

Real Estate Finance / Services .............................................................................................. 30

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Flyers .................................................................................................................................... 32

Postcards .............................................................................................................................. 33

Activity: Example Seller Marketing Piece ................................................................................. 34

Marketing Mission/ Message with Tenant Buyers ................................................................... 34

Ways to Market to Tenant Buyers ........................................................................................... 35

Activity: Example Tenant Buyer Marketing Piece .................................................................... 36

Chapter 4: Calculation Expected for a Sandwich Lease Option .................................................... 37

Overview of The Sandwich Lease Option Process .................................................................... 37

Overview of The Lease Option Process .................................................................................... 38

Lease Options Have Multiple Profit Centers ............................................................................ 38

Activity: Delayed-Payment Scenario ........................................................................................ 39

Introduction to Lease Option Profit Analysis ........................................................................... 43

Hypothetical Scenario .............................................................................................................. 44

Chapter 5: Communication with Lease Option Sellers ................................................................. 51

The Lease Model Revisited ....................................................................................................... 51

Interacting With Sellers: Overview ........................................................................................... 52

Marketing To Lease Option Sellers: The Perfect Tenant Program ........................................... 52

Introduction To Seller - Motivation Analysis ............................................................................ 56

Interacting with Sellers: Motivation Analysis Questionnaire ................................................... 57

Phone Scripts ........................................................................................................................ 59

Role Playing: Seller Screening .............................................................................................. 59

Interacting with Sellers: Meeting With The Seller ................................................................ 60

MEETING WITH THE SELLER: COMING TO TERMS ............................................................... 61

Interacting With Sellers: Handling Objections ..................................................................... 62

Role Playing: Deal Making With Sellers ................................................................................ 63

Due Diligence With Sellers ................................................................................................... 64

Interacting With Sellers: Keys To Success ............................................................................ 66

Chapter 6: Paperwork with Lease Option Sellers ......................................................................... 67

The Importance Of Paperwork ................................................................................................. 67

Paperwork with Sellers: Samples ............................................................................................. 69

Sample Authorization To Release Information .................................................................... 71

Sample Letter of Instructions To Lender .............................................................................. 73

Sample Residential Lease With Option ................................................................................ 75

Sample Memorandum Of Option ......................................................................................... 80

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Sample Assignment Of Option To Purchase Real Estate ...................................................... 82

Sample Addendum To Lease/Lease Option Agreement ...................................................... 83

Activity: Paperwork With Sellers .............................................................................................. 84

Blank Authorization To Release Information ....................................................................... 86

Blank Letter Of Instructions To Lender ................................................................................ 87

Blank Residential Lease With Option ................................................................................... 88

Blank Assignment Of Option To Purchase Real Estate ......................................................... 95

Blank Addendum To Lease/Lease Option Agreement ......................................................... 96

Paperwork With Tenant/Buyers ............................................................................................... 97

Paperwork With Tenant/Buyers: Summary ............................................................................. 97

PAPERWORK WITH TENANT/ BUYERS: SAMPLES ................................................................. 98

Sample Rental Application ................................................................................................... 99

Sample Rental Application Deposit Receipt ....................................................................... 101

Sample Rental Application ................................................................................................. 102

Sample Residential Lease Agreement ................................................................................ 103

Sample Option To Purchase Real Estate ............................................................................ 106

Sample Option To Purchase Disclosure .............................................................................. 107

Sample Option To Purchase Disclosure .............................................................................. 108

Activity: Paperwork With Tenant/Buyers ............................................................................... 109

Blank Rental Application .................................................................................................... 109

Rental Application Deposit Receipt .................................................................................... 110

Blank Authorization To Release Information ..................................................................... 111

Blank Residential Lease Agreement ................................................................................... 112

Blank Option To Purchase Disclosure ................................................................................. 115

Blank Addendum To Lease/Lease Option Agreement ....................................................... 116

Chapter 7: The Closing Process for Lease Options ..................................................................... 118

The Closing Process For Lease Options .................................................................................. 118

Setting Up A Double Close ..................................................................................................... 119

Overcoming Challenges In The Closing Process ..................................................................... 120

Team Members Needed For Lease Option Closings .............................................................. 121

Real Estate Attorney: ......................................................................................................... 122

Mortgage Broker: ............................................................................................................... 123

Title Company/Closing Agent ............................................................................................. 124

Funding Your Lease Option Business With Private Money .................................................... 125

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Chapter 8: Review of the Lease Option Process ........................................................................ 128

Activity: Practicing With The Triad Role Play ......................................................................... 128

Practicing Your Technique Role Play #1 ................................................................................. 130

Practicing Your Technique: Role Play #2 ................................................................................ 132

Lease Option Overview Scenario Analysis .............................................................................. 134

Action Plan ............................................................................................................................. 140

Glossary ...................................................................................................................................... 143

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Introduction:

SWIFT RE Academy

Team Agreements Content

• Training provided by leading experienced real estate and investment experts • Delivers training and tools proven to help customers immediately with real-world

investments • Mentoring provided in a collaborative atmosphere with a “hands-on” approach • Curriculum tailored to address state regulations and local needs

Value

• Provides training unavailable through traditional institutions • Long-term support through continuing customer services, mentoring and company

commitment • Maintains unrivaled network of knowledgeable local experts available to assist customers

when needed Commitment

• Providing our clients information and tools they need to consistently make better financial decisions

• Client-centered approach, “your success is our success” • Constantly innovating, updating, and supplying with new techniques • Actively responds and appropriately acts on feedback from clients, in order to better

support you and your training

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About the Course Course Description Real estate investors buy one of two ways: either cash or terms. Wholesale Buying teaches you how to get the best cash deals and to do so by using Other People’s Money. Terms purchases are taught in in this course: Lease Options training you will learn how to both buy and sell properties via lease options. When using lease options to buy properties, you can engineer the deal so that you do not need to use any of your personal cash and credit. Also, you will discover how lease options maximize your selling profits on the properties you control, creating multiple profits streams of income, by leveraging a contract. This powerful strategy is detailed with advanced training will teach you, what investors have been using for years.

§ How to create wealth using the seven forms of options § How to buy properties by attracting and interacting with flexible property owners § How to quickly set up streams of income that are fun and easy to manage § How to maximize your profit when you sell by setting up a network of hungry buyers • How to calculate and realize profits in ever-changing conditions of any local market

The structing of the proper paperwork for a profitable lease option deal The secrets of making money on properties you control, but do not own You will learn a proven, step-by-step system that is so powerful that you can put it to work to build your financial freedom as soon as you step out the door. Our experienced trainers bring you proven strategies - not just textbook information and theories - and they’ll show you how to make these strategies work for you, hands on. Learning Objectives By the conclusion of the training, you will be able to:

• Recognize the typical roadblocks to traditional investing that lead to creative transactions like lease options

• Define the important terms that relate to the completion of lease option transactions • Identify seven types of options purchases that can be used in real estate • Determine ideal ways to match the needs of a qualified seller with a lease option exit

strategy Course Training Goals

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• Prepare a well-conceived marketing message as an initial offering to lease option sellers and tenant buyers

• Recognize profit centers of a sandwich lease option and when they occur • Calculate the profitability of lease options, given a variety of topical scenarios • Appreciate the role of motivation analysis when attracting possible lease option sellers • Practice communicating lease option terms to and handling objections from a seller • Recognize the specific due diligence that is necessary before finalizing an agreement with

a lease option seller • Recognize the role of screening in the approval process for tenant buyers • Understand strategies behind and practice specific scenarios that are common, when

interacting with tenant buyers • Review and practice using the paperwork that is essential to securing a sandwich lease

option agreement with a seller • Review and practice using the paperwork that is essential to securing a qualified tenant

buyer • Review and be able to explain the simultaneous closing process that is used to exit a

sandwich lease option transaction • Identify the specific need for business capital in some lease option transactions and how

private lenders can fill this critical need • Evaluate their own improvement as a creative investor through participation in practical

role-playing exercises pertinent to lease options

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Chapter 1: Introduction

to Lease Options Learning Objective:

• Recognize the typical roadblocks to traditional investing that lead to creative transactions like lease options

• Define the important terms that relate to the completion of lease option transactions • Identify seven types of options purchases that can be used in real estate

Real Estate Investing Strategies Real Estate Investors are looking for properties, but more specifically, we are looking for DEALS on properties. Below are the four-primary exit strategies you might consider for any investment property, along with advantages and disadvantages for each. WHOLESALING Definition: The business of buying non-performing property at a significant discount followed by the immediate discounted resale to another investor or end user. The asset is the paper, not the property! Advantages: ____

____ ______

Disadvantages:

____

____ ______

RETAILING/REHABBING Definition: Buy, fix, and sell to a homeowner or investor. Investor’s buy is based on NUMBERS. Homeowner’s buy is based on EMOTIONS.

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Advantages: ____

____ ______

Disadvantages:

____

____ ______

BUY, RENT, AND HOLD Definition: Residual income, wealth building tool. Advantages: ____

____ ______

Disadvantages:

____

____ ______

CREATIVE FINANCING (E.G. LEASE OPTIONS) Definition: Hybrid exit strategy, long-term retail deal or short-term buy and hold. Advantages: ____

____ ______

Disadvantages:

____

____ ______

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Roadblock’s To Traditional Real Estate

Investing

1. ____________________: Buying a home for either residential or investment purposes by using conventional methods requires 10 - 30 percent down payment and your personal signature and guarantee. Lease option investing allows you, the investor, to utilize strategies to get your sellers to be your bank.

2. ____________________: Rental properties tend to be very management and labor

intensive. By selling your property on a rent-to-own basis to a tenant/ buyer, you deal with the mentality of someone who wants to own. Your tenant/buyer will give you a significant down payment and pay a slightly higher-than-market monthly lease payment for the option to purchase. The best thing is, your tenant/buyer is responsible for the repairs and daily maintenance of the property.

3. ____________________: Performing or overseeing a rehab project takes time; sweat

equity, and sometimes-large amounts of capital. The lease option strategy will allow you, the investor, to buy nice homes in nice neighborhoods that require little to no fix-up so that you can profit with virtually no risk.

ADVANTAGES OF LEASE OPTIONS Getting the Control Without the Ownership

• No obligation, just the right to buy • Not high volume, but high profit

The Pathway to Profiting Is Problem Owners

• The deal is created by circumstances • We’ve got to find the problem owners

NEEDY PEOPLE, NICE HOMES, NICE NEIGHBORHOODS

• Desirable areas create demand • Match: “Need to get out” with “Want to get in”

THE DETERMINING FACTOR IS DEBT RELIEF

• Not people who want to sell, but need or have to sell, distressed.

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NOT BUYING PROPERTY, SOLVING PROBLEMS

• Little or no money out-of-pocket • Focus on solving the problem, not buying the property

THERE IS A PIPELINE OF MOTIVATED BUYERS

• People that are just starting out or starting over

Real Estate Investor Offering Strategies To understand the true value of lease options, you need to understand how they fit into your arsenal when you make offers on properties. One of the best ways to do this is to revisit the so-called Cash or Terms script that you will get in this course. Here is a sample script you may use: Mr./Mrs. Seller,

Why is this important? First, it gives your sellers options, which is usually a very good thing to do when placing offers. It also shows your sellers that there is no such thing as a perfect offer, when you are operating as an investor. The other things this sort of script does is set up your lease option program. Many lease option sellers will be in no position to entertain a cash offer, (and thus deeply discounted), making your other “terms” offer look all the more attractive. This sets the table for you to introduce to a seller just what a “terms offer” might entail, opening the door for a process like a lease option. Once you learn the details of lease options, your real estate investing will be much more complete. Remember, how you introduce and then explain your business can go a long way toward your ultimate success as an investor. There’s a reason for everything you say and do to accomplish your objectives, all the way down to the simple script that can carry forward to the deals you will eventually do.

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Types of Option Purchases Lease Option to Buy Personal Residence

¾ Smaller down payment ¾ Locked in price ¾ Depreciation protection ¾ Easier to qualify

Example:

Purchase Lease Option

¾ Buy a property then lease option to a tenant buyer

¾ Tenant buyer pays down principal

¾ You benefit and profit from appreciation

¾ Avoid the landlord trap

¾ Option consideration: Nonrefundable

¾ If option isn’t exercised, you aren’t hurt Example:

Sandwich Lease Option

¾ Profit from controlling, not owning

¾ Minimal risk

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¾ Minimal management

¾ No fix up or repairs

¾ Multiple-exit strategies

¾ Win, Win, Win situation

Example:

Fixer-Upper Lease Option

¾ Alternative exit strategy for distressed property

¾ Can sell to an investor or homeowner

¾ Profit without doing the work yourself

¾ Allows you the ability to improve the home without qualifying

Example:

¾ Get into higher priced units with smaller than normal down payments

¾ Profit while improving your ability to qualify

¾ Perform necessary repairs over time with profits from the cash flow

¾ Assign to another investor and profit without ever owning or qualifying

Example:

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Option Without a Lease

¾ Gain control ¾ Take advantage of appreciating markets

¾ Secure properties to prevent someone else from buying it while you obtain financing or

find a buyer

¾ Commonly used for Land Development

¾ Profit from “specialized” knowledge Example:

Why We Focus on Sandwich Lease Options With all the different kinds of options purchases that are available, it is important to understand why you will be focusing on the sandwich lease option transaction in this course. For starters, remember this:

The number one motivation to a sandwich lease option seller is debt relief.

This is important because it gives you, as an investor, an excellent way to get into the deal creatively, as an alternative to a traditional purchase. It also gives you some direction when

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marketing your business, as a focus on general seller motivation in your marketing will reveal sandwich lease option opportunities. Another thing that favors the sandwich lease option is the type of target properties that you will be seeking. As a rule, sandwich lease options are best suited to:

Nice Homes in Nice Neighborhoods

This keeps you out of the rehab game and gives you a nice selection of properties that are easy to market when you are just starting out in your business. Overall, the focus on sandwich lease options in the course can be explained with three key points:

1. They are deals that can be pursued with little to no capital, making them appealing for novice investors, or those with limited resources.

2. They keep you away from traditional investor pitfalls, like repairs and property

management.

3. They train on the entire process of working with sellers and buyers, meaning that when you learn the sandwich lease option process, you are also learning several other types of options purchases at the same time!

How Lease Options Compare to Other

Forms Of Creative Financing Lease options are often confused with owner financing, namely in the sense that the two concepts are often seen as being somehow different. To help clarify this point, remember this key concept:

A Lease Option is simply one example of a creative financed deal

Activity: Deals That Might Have Been

Perfect for This

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Chapter 2: Finding

Lease Option Deals Learning objectives:

• Differentiate between the primary types of sellers and buyers that you will face when working with lease options

• Determine ideal ways to match the needs of qualified sellers with a lease option exit strategy

• Prepare a well-conceived marketing message as an initial offering to lease option sellers and tenant buyers

Introduction to The Lease Model Sometimes, with any new concept, it is beneficial to use some sort of learning model to help you learn and retain information. In the case of lease options, you’ll be working from what is appropriately called the LEASE Model, which progressively walks you through each step of running a successful lease option business. The LEASE Model is an acronym that stands for:

Locating Lease option deals

Evaluating Profit Potential

Attract Sellers and Buyers

Secure the Deal

Exiting the Transaction As you can see, the first step is to locate the types of properties that will be good fits for your lease option program. As you move through the course material, you’ll come back to this model periodically, to review where you’re at in the process.

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The Power of Circumstance The Progression of Motivation: Sellers you will encounter in your business fall into one of three categories. They either:

_______________________________ to sell, _______________________________ to sell, or _______________________________ to sell.

As investors, you’ll want to focus on sellers that have more than a simple desire to sell their properties. The seller’s specific circumstance will determine where they fall into this progression.

“LOCATION is why we buy real estate but MOTIVATION is the reason they sell!”

A common question that arises with lease options and other creative purchasing scenarios is why a seller would be compelled to accept the kinds of terms you are offering. Take a moment and brainstorm some reasons why a seller would have more than just a simple desire to sell their home. Why Would Anyone Do This?

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

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Characteristics of Lease Option Sellers Sellers who would consider a lease option as a way to alleviate a circumstance for their properties are going to have motivation as a common linking feature, for any of the reasons listed above. However, the general source of the motivation is also important, for you to properly determine the suitability of the deal for a lease option. Motivation can generally be classified in one of two ways:

Distressed _______________________________ Distressed _______________________________

A simple motivation analysis (which you will see later in the course) will reveal which of these two sources of motivation is most applicable to your seller. If the source of seller motivation is the condition of the property, which exit strategies are going to be the best fits?

1. ________________________________ 2. ________________________________

You should find in thinking this through that lease option (or most any other type of creative financing) is not the best fit for property-based motivation. Never forget that when you offer “cash or terms,” the cash offer still has its place and may be more appropriate in some instances. When seller distress (due to any number of life circumstances) is the cause of motivation, you have a much broader array of exit strategies to choose from, including a lease option. The key is to find out as early as you can what is causing the motivation in a seller, so you can plan to handle the deal in the best way.

Characteristics of Tenant Buyers Prospective tenant buyers (and buyers in general) will fall into one of five purchase categories, which are listed below. Take some time to define these types of buyers and make a recommendation as to what kinds of real estate purchases, they are best suited. Once you’ve completed the exercise, you will compare notes and review your responses as a group. The All-Cash Buyer:

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The Good-Credit (with cash) Buyer

The Good-Credit (with no cash) Buyer

The Poor/No-Credit (with cash) Buyer

The Poor/No-Credit (with no cash) Buyer

Evaluating and Targeting Neighborhoods One of the important things you need to be able to do when looking for lease option deals is to properly segment your market. This means being able to identify different types of income brackets or characteristics of different parts of your area, and then matching the right investment strategy to each area. Examples are shown below. Low Income Low-income areas are a great starting point for beginning investors as well as a profitable area for the experienced. The lower-price points and the favorable price-to-rent ratios provide a number of excellent opportunities for the savvy investor. Based on the increased ratio of renters to owners, wholesaling is a great primary strategy in low-income areas. Be sure to attend other advanced trainings to learn how to create quick cash by dealing with problem properties in low and moderate-income areas. Moderate/Working Class Moderate-income areas are similar to low-income areas because the price points are still reasonable and the price-to-rent ratios will still provide for positive cash flow. The difference between low-and moderate-income areas is that the ratio of homeowners is greater in moderate-income areas. Having more homeowners than renters will stabilize the area and

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provide for lower-risk wealth building investment opportunities. Your primary strategy will be based on your investment goals. Wholesaling is still a great strategy because it requires no money, no credit, and no qualifying. Holding properties for long-term wealth building is a profitable strategy based on the stabilization and the improved tenant profile. Terms purchases, such as lease options, are also a great strategy because of the desire for homeowners to live in the area as well as the affordability. Middle Income The higher price points of the middle-income areas completely change your investment strategies. You will start to see that your price-to-rent ratios will be upside down, making it difficult to hold a traditional rental property. Middle-income areas will be predominately occupied by higher-end, blue-collar and white-collar workers, which results in an increase in home ownership. Retailing is a strategy used by many investors in this area because they can fix up properties to sell to homeowners rather than renters. Homeowners buy based on emotions, thus providing larger profit margins. Middle-income areas are also a great place to use the Lease Option strategies taught in this training because of the desirability and stability of the area and its occupants. Most people want to live in middle-income areas but they just can’t afford it. Lease option strategies will give your hungry buyers the ability to live where they thought they couldn’t.

Finding Lease Option Deals Once you’ve identified the characteristics of your ideal sellers and buyers, and then picked the right area of your market on which to focus your efforts, it’s time to actually find the deals! You’ll spend some time discussing each of the following proven ways to find lease option deals and then will spend a little more time on the final one listed, marketing, which will prove to be critical to your business success. 1. FSBO/ Newspaper Ads Notes:

2. Foreclosure Services Notes:

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3. Churches Notes:

4. Real Estate Agents or Brokers

Notes:

5. Attorneys Notes:

6. “For Rent” Ads Notes:

7. Title Companies Notes:

8. Tax Liens Notes:

9. New Construction Developments

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Notes:

10. Marketing Notes:

Marketing Your Lease Option Business The role of marketing when it comes to your lease option business is not just essential; it’s much more important than that! Your marketing is the life blood of your business and is all the more important when you are just getting started and have no prior credibility. Your clients must come to learn who you are as they won’t come to you out of the blue. Furthermore, marketing is the key to expanding beyond the scope of what your competition is offering. First and foremost, one of the most effective marketing tools you can implement is not printed, stamped, or buried in the Sunday classified section. You will need a credibility website in place. SWIFT can assist you in having this done for you Motivated sellers are everywhere. You’ve heard the stats on how rampant foreclosures are in this country, how many employers are downsizing jobs, how many people are finding costs of living more and more burdensome. They are in your area, your town or city, even your neighborhood. The more you promote what it is you do via marketing tools, the sooner and more likely it will be that someone you are speaking to either fits into the motivated category or at least knows someone who does. These types of deals can be the proverbial “diamonds in the rough” and are often devoid of any attention by your competitors. Promote yourself and your business; the results will follow. Ask yourself: “How many lease option deals would it take to justify being an active self-promoter of my business?”

Question: How much better than your competition does your marketing need to be? Answer: As much as you want it to be. You can elect to be head and shoulders above the

competition or you can elect to stay a step ahead of them. Being a step ahead of your competition when it comes to marketing has two-key elements:

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____________________: Outshine your competition by implementing a more diverse array of marketing tools. Use at least three different concurrent forms of marketing, although there are more that you can choose from and the more you use, the more successful you will be. ____________________: Outwork your competition by being more persistent with your marketing. Using postcards as an example, the more consistently and persistently you send them, the better the response rate you will get. Apply this concept to your other marketing tools as well and the results will follow. Below, you will review the details of a three-step marketing model called The 3M Formula for Marketing. Message/Mission What is the most important thing your marketing must convey to those who receive it? What is it about your business that makes you unique, sets you apart from the crowd, or simply a more appealing option for your potential sellers? What catch words or phrases might you use to best convey your message and induce action? Media Given the nature of your target market and the message you want to deliver, what would be the most effective media (specific forms of marketing) to use to get your message across and best relate to your target market? As you might expect, this may vary, depending on the focus of your business.

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Chapter 3: Marketing

Marketing Mission/ Message with Sellers The mission you convey when marketing to sellers should reflect what overall approaches to the business you want to communicate directly to clients. Any basic approach or philosophy you really believe in is often helpful to build into your marketing. Examples include the following: Crafting a plan that has the seller’s needs in mind

• Emphasis on flexibility

• Emphasis on empathy

• Emphasis on family (or at least a personal touch)

• Emphasis on customer service These underlying topics are easy to build into your marketing program, are often very compelling, and yet have little to do with the specific services you provide. The marketing message with sellers is a little different, in that you actually get more into the specific attributes or features of your services as a real estate investor. Examples of your specific message might include:

• Emphasis on how quickly you can close deals

• List of circumstances your services cater to (e.g. foreclosure, job loss)

• Comparisons to competitive services (i.e. a Realtor)

• Emphasis on types of offers you make (e.g. cash or terms)

• Emphasis on other key offer features (e.g. lack of contingencies) Both a mission and a message can be effectively communicated in a simple marketing piece but there are clearly types of media that afford you more information to offer. Look for verbiage in

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the sample pieces below that specifically addresses the needs of sellers, as this will help you formulate your own marketing mission/message.

Marketing Your Business

Car Magnets

Newspaper Ads

I’ll Buy or Lease your house

Within 48 Hours or Tell You Why No One Else Will

Ask for Tyler 800-XXX-XXXX

We’ll Buy your home today!!!

Don’t Make Another Payment Ask for Mark 800-XXX-XXXX

Or visit our website @ www.XXXXXXXXXX.com

Do you own an unwanted home?

Free Consultation Sell Today C

all Dave 800-XXX-XXXX

Tara Buys houses

Immediate Debt Relief Locally Owned and Operated

800-XXX-XXXX

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Real Estate Finance / Services

Payment Assistance

We Buy and Lease Houses Don’t Delay, Call Today Bryson 800-XXX-XXXX

Behind on payments?

Need Immediate Help? Call today for free consultation

800-XXX-XXXX

Or visit our website for information

on how we can provide you with hassle-free help!

www.XXXXXXXXXX.com Area Specialist Buys Real Estate

Little or No Equity OK

Cash or Terms Prices Quoted By Phone

Dana 800-XXX-XXXX

Corporate Leases Needed

Your Home May Qualify Don’t Make Another Payment

Ask for Perry 800-XXX-XXXX

Can’t Sell your house?

Are you Behind on Payments? Little or No Equity?

I can Help! Call Jordan 800-XXX-XXXX

Free Report

How to Sell Your Home in 3 Days or Less

Any Area or Condition AC 800-XXX-XXXX

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**Ads should be in paper every day!**

(You can’t catch any fish if your line is not in the water)

Signs

I’ll Buy Your Home Fast!!!

Here’s your immediate Solution:

• Fast Closing • Instant Debt Relief • No maintenance • Foreclosure Help • No Equity? No Problem! • No Commissions

24-hour FREE recorded message

800-XXX-XXXX toll-FREE

WE BUY

HOUSES 555-555-0000

Fast Cash!

Sell Your House In 40 Hours or Less

555-555-0000 We Pay Cash for Houses

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Flyers

CASH FOR YOUR

HOUSE 555-555-0000

WE BUY HOUSES

555-555-0000 Fast Cash!

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Postcards

PUT YOUR PROPERTIES ON “AUTO PILOT” WITH OUR PERFECT-TENANT PROGRAM Dear Property Owner: How would you like all the benefits of investment property ownership without any of the headaches? Our company will lease your property on a long-term basis, guarantee the monthly payments, take over the maintenance, and deal with all of the management headaches! Just tell us where to send the monthly rent check. For a no-obligation proposal, call Michael or Thomas at 800-555 -5555 or visit our website @www. urwebsite.com and never be faced with problem tenants, late payments, maintenance calls, vacancies, evictions, and all that other management nonsense. Thank You! YourName

Tired of being a landlord?

Tired of filling vacancies?

Stop! Dear Property Owner, My name is ___________________. How would you like all the benefits of Land lording without the management and maintenance nightmares? Our company will lease your property on a long-term basis, guarantee the monthly payments, take care of the maintenance, and deal with all other management headaches! You just tell us where to send the monthly rent check. Call now, and never Deal with vacancies, late payments, maintenance calls, evictions or any other management nightmares again! 24-Hour Recorded Message – 800-555-5555 Thank you, Your Name

TIME MAY BE RUNNING OUT! Dear Property Owner,

This is an urgent attempt to reach you concerning your property @ 123 Main St. My name is your name here and I have tried to reach you previously by mail but have not heard from you. I realize that you maybe in a situation where time is of the essence, which is why it is urgent that you contact me as soon as possible. Our company is a full-service real estate solution provider. We focus on creating solutions for any type of real estate situation or need. We can help homeowners who need QUALIFIED help for dealing with a foreclosure even in situations where there is little to no equity. We can help homeowners who are behind on payments or substantial repairs are necessary to improve the property’s current condition before selling.

We have qualified professionals on staff that can help save your credit and, in some cases, save your home. We have programs where we can buy your home TODAY and give you, the homeowner, immediate debt relief.

Problems rarely go away; they just get worse. Call now, don’t delay, let us solve your problems today!

800-555-5555 TIME MAY BE RUNNING OUT! Thank You! Your Name

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Activity: Example Seller Marketing Piece Once marketing brings leads to you, the focus shifts to effective-deal analysis, negotiation, and sales to complete the transaction. Use the space below to create a marketing piece that specifically highlights and caters to a lease option seller you will be working with in your own business. ______________________________________________________________________________

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Marketing Mission/ Message with Tenant

Buyers Let’s revisit the 3M Formula for Marketing, this time in the context of working with tenant buyers. The mission you convey when marketing to tenant buyers should reflect what overall approaches to the business you want to communicate. It does not have to be extensive but any basic approach or philosophy you really believe in is often helpful to build into your marketing. You’ll likely find that the mission you use with tenant buyers is very similar to that for sellers.

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Examples include the following:

• Crafting a plan that has the buyer’s needs in mind • Emphasis on flexibility • Emphasis on empathy • Emphasis on family (or at least a personal touch)

Emphasis on customer service These underlying topics are easy to build into your marketing program, are often very compelling, and yet have little to do with the specific services you provide. This is Step One in building rapport with a client. If they like your business philosophy, you’re already a step ahead of the game. The marketing message with tenant buyers is a little different, in that you actually get more into the specific attributes or features of your services as a real estate investor. Examples of your tenant buyer specific message might include:

• Emphasis on payment flexibility (creative financing) • Emphasis on having properties available for immediate occupancy • Comparisons to traditional loans (i.e. offering better terms than the bank) • Emphasis on quality schools and neighborhoods • Emphasis on other key offer features (e.g. credit assistance, help with closing costs)

Ultimately, the kicker with tenant buyers will be a combination of the property’s attributes and a sales plan that matches them. This means hitting the right target market with your tenant buyers and having properties suited for their needs. When you are out there working your business, you should know what this ideal combination entails.

Ways to Market to Tenant Buyers Both a mission and a message can be effectively communicated in a simple marketing piece but there are clearly types of media that afford you more information to offer to a prospective tenant buyer. Look to include verbiage that specifically addresses the needs of tenant buyers, as this will help you formulate your own marketing mission/ message. An example of a piece that could be used to attract tenant buyers is shown below.

Why RENT when you can OWN? Your job is your credit

Call Today for a FREE EVALUATION 1-800-XXX-XXXX www.yourwebsite.com

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One of the best ways to market to tenant buyers is to showcase a specific property and really pay attention to the things your prospects desire. The attributes of the property itself are important, however so are the terms of purchase for the tenant buyer you seek. When you can press the right buttons and also show the property to be of value, sales are on your horizon.

Activity: Example Tenant Buyer Marketing

Piece Use the space below to create a marketing piece that specifically highlights and caters to a lease option tenant buyer. ______________________________________________________________________________

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Chapter 4: Calculation

Expected for a

Sandwich Lease Option

Overview of The Sandwich Lease Option

Process Steps in the Process:

1. Market Your Business 2. Sellers Calling You 3. Determine if There is a Lease Option Deal 4. Finalize Agreement with Seller:

a. Price: Our option to purchase needs to be at or below current-market value. b. Period: 36 – 60 months c. Payments

5. Market Property to Motivated Buyer 6. Install Motivated Buyer and Finalize Paperwork

As you can see, the sandwich lease option process is one that involves working with both sellers and buyers, so it is important to understand the kinds of people you’ll be working with as you put your deals together.

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Overview of The Lease Option Process Learning Objectives

• Recognize the Five profit centers of a sandwich lease option and when they occur

• Calculate the profitability of lease options, given a variety of topical scenarios The Lease Model Revisited You have now seen how and where to find lease option deals, and it is now time to learn how to run the numbers for your prospective deals. Real estate is a numbers-based business, when it comes down to it, so knowing how to do this is critical in a successful sandwich lease option. With that in mind, let’s see where you are in the Model that accompanies the course: The course content centers on the Lease Model, an acronym that stands for:

Locating Lease Option Deals

Evaluating profit potential


Secure the Deal

Exiting the Transaction

Lease Options Have Multiple Profit

Centers There are many different profit centers that exist in a quality sandwich lease option deal. These five multiple profit centers can be easily summarized below. 1. Delayed payment with the Seller 2. Nonrefundable option consideration 3. Positive monthly cash flow from tenant buyer

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4. Back end profit: difference of our purchase price from seller and sell price to tenant buyer 5. Discount

1.) Delayed Payment with Seller The delayed-payment profit center is one that is commonly overlooked by many investors and can provide a nice shot in the arm by providing some early revenue in a lease option deal. Here’s how it works: When you negotiate terms with a lease option seller, one of the things you need to determine is when the first payment to them needs to be made. Naturally, this is ideally on or after a date when you already have a tenant buyer in place, making this first payment to the seller a no-out-of-pocket expense. Despite the desire from many sellers for you to start making their payments immediately, you need to stick to your guns and always make sure you leave yourself some time to get a tenant buyer screened, qualified, and in place before ever making a payment to a Seller. Once you are more familiar with attracting Tenant Buyers, you will often find that you can find one before you ever are due to make a payment to your Seller. What does this mean? Yes, you guessed it! You will be collecting rent from a Tenant Buyer that briefly has no Seller obligation to offset it, improving your cash flow significantly! This sort of cash flow “bonus” is a delayed payment profit center and one that you should try to incorporate into your deals as often as possible.

Activity: Delayed-Payment Scenario You are working with a seller who is motivated to sell, but also lives in a pricier area of town, making the process of finding a renter or tenant buyer more challenging. Because of this, you negotiate that, even though you do paperwork with the seller in the middle of April, you will not make your first payment to them until the first of July (75 days later). The rent you are seeking from a tenant buyer is $2,500 per month. Take a few moments and determine the extra revenue you could earn by placing a tenant buyer into this property by:

May 1: ________________________________ May 15: _______________________________ June 1: ________________________________ June 15: _______________________________

As you can see, once you have a regular pipeline of eager tenant buyers (which you obtain through marketing your business), the results can be significant.

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2.) Nonrefundable Option Consideration from Tenant Buyer One of the earliest and most substantial profit centers in a sandwich lease option is the down payment from a tenant buyer. Also sometimes referred to as a deposit, you need to think of this in a manner that is comfortable to you but get used to the idea of referring to it as a nonrefundable deposit not a down payment. _____________________________________ This term is one that is critical to understand when setting up agreements with tenant buyers. A deposit or down payment suggests that the tenant buyer is putting money toward the property’s purchase, which can legally disadvantage you in the event of any disputes. By contrast, a nonrefundable option consideration suggests that the funds are simply to secure the option (or right of first refusal) and have no direct relation to the property’s purchase. This is smart investing, and an easy thing to do, when setting up your agreements with tenant buyers. From a basic financial point of view, the option consideration is usually three five percent (minimum) of the agreed purchase price. It is collected in verifiable funds prior to a tenant buyer ever being allowed to move into the property and is clearly identified to be nonrefundable. The size of the typical option consideration, along with its no refundability, makes this an attractive profit center for your deals. That said, never secure a lease option with a tenant buyer without an option consideration! This may be a temptation, since many tenant-buyer prospects will lack sufficient funds to offer an acceptable option consideration. However, if you don’t collect it, your tenant buyer will basically be a tenant, and their likelihood of ever closing with you will drop substantially. Chapter 3: Calculating Expected Profit for 3.) Debt (aka Cash Flow) Along with the profitability of lease options, a great secondary benefit of them is that they can and should provide you with monthly cash flow during the span of your deals, making them additionally beneficial. Because you will not be taking on all the responsibilities of a typical landlord, cash flow is usually more consistent with a lease option. Because lease options can command more rent than a traditional rental, cash flow for them should also be greater than with rental properties. There are two ways to go about setting the rental bar for lease options. One is to take normal market rents for your area and to add a small premium (10-20 percent) for a lease option rental payment. An example is shown below.

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In the example above, your cash flow moves from $150 to $350/ month, just by offering a lease option to a tenant buyer. This may rule out some buyer prospects, but it usually eliminates those who aren’t that serious about buying, which is not a bad thing at all. This model for setting lease option rents works for lower-or average priced markets but typically does not for medium-or higher-priced areas, where home values are often well in excess of market rents. In such cases, an alternative approach is to use the one-percent rule with tenant buyers. Look at the example below for a higher priced market:

Do you see the difference? Even though what you are charging monthly to a tenant buyer is well in excess of market rents, it is also much closer to what they will be paying, once they close with you and obtain a mortgage. Setting the bar higher in this case will not only attract better caliber tenant buyers to your properties but will also greatly increase the likelihood that they close later.

Market Rent (average for a 3-bedroom house): $1,000 Lease Option Premium (20 percent): $200 Lease Option Rent: $1,200 Agreed Payment to Seller: $850 Net Cash Flow: $350/month

Option A Market Value (3-bedroom house): $250,000 Seller Payment: $2,000 Market Rent: $1,500 Market Rent with Lease Option Premium: $1,800 ($1,500 + 20%) Cash Flow: -$200/month Option B (same property) Market Value (3-bedroom house): $250,000 Seller Payment: $2,000 Sales Price to Tenant Buyer: $280,000 Likely Buyer Payment (1 % of price): $2500 “Adjusted” Market Rent: $2,800 Cash Flow: $2,500 $500/month

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The bottom line is that when you deal with tenant buyers as if they are “soon-to-be homeowners,” rather than renters, the differences in both the ease of your deals and in your cash flow, will be substantial. 4.) Backend Profit Far and away, your biggest profit center in a sandwich lease option is at the delivery stage, when the final closing takes place. It is here that you are able to profit from both any profit you negotiate with the seller up front and the appreciation that takes place during the option period with your tenant buyer. Some sample numbers for this profit center are as follows:

Property Value at Time of Agreement: $85,000

Agreed Purchase Price with Seller: $75,000

Base Profit Spread: $10,000

Appreciation During Option Period: (3 years at 5%/year, 15% total) $12,750

Total Delivery Profit: $22,750

When you see these kinds of numbers, it makes it all the more important to not only find tenant buyers for your deals, but also to help them fulfill their option and close, to recognize your biggest payday as an investor. Too often, you might hear (in REIA clubs or from other investors) that it doesn’t matter if your tenant buyers don’t close; they can just be replaced by someone else if they don’t. When you consider the profit potential that is lost (or at least delayed another year or two) by following this philosophy, you too will hopefully see that this is flawed thinking. Even though statistics show that less than half of all tenant buyers actually complete their purchases, you can improve these odds, something that you will learn how to do later in the course. 5.) Discount In addition to the delayed payment profit center, one of the other most often overlooked profit centers in a sandwich lease option is discounting. While this may never show up as a separate line item on a closing statement, this is still a separate profit center, since it is not a source of revenue at the onset of the deal. Here’s an example of how it works: You agree to a purchase price with a seller of $120,000, with an option to purchase at that price for the next 48 months. The property is worth $130,000 at the time you make the agreement,

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but the seller only owes $110,000 on their mortgage. Two years into the four-year option with the seller, you have secured a tenant buyer who is now ready to close. Because you are essentially closing “early” with your seller, closing the book for them on the property for good, you decide to ask for an additional purchase price discount with the seller, asking if they will sell to you for $115,000 instead of the originally agreed upon $120,000. They still are getting enough to satisfy their mortgage and, after some consideration, the seller agrees. While this is not in any way a given, it is worth asking for consistently, especially if you are completing your end of the bargain ahead of schedule. Your deal’s profitability should not depend upon this profit center but, when you are to negotiate it, it is extra money in your pocket, $5,000 in this example.

Introduction to Lease Option Profit

Analysis The different profit centers in a lease option are important to understand, but you also need to be able to put it all together and run numbers for an entire deal, to make sure that properties you analyze for your program are sufficiently profitable. The scenario below walks you through some of the basics of this process. Scenario Seller is moving out of state and needs a quick resolution with their current home

Worth: $100K Asking: $90K Balance: $72K Payment: $710.00/mo.

FMV: $130,000

Agreed Sell Price from Seller: $120,000

48 Month Term

24 Month Term go to close

Ask for Discount __

NBew Agreed Price: $115,000

Discount Profit Just by Asking: $5,000

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Appreciation Rate: 9% Deal with Seller

Lease Option 36 months Option Price: $85K Payments: $710.00 (First payment due in 30 market days) Option Money: $1000 (Moving money)

Deal with Tenant/Buyer After 30 days of marketing, you’ll install your tenant buyer

Option to purchase: $111K Nonrefundable Option Consideration Money: $5000 Monthly Payment: $995.00

The Numbers

$ 995 Tenant buyers first payment (prior to scheduled payments to seller) $ 6,555 Cash flow ($285/mo. x 23 months) $5,000 Option Consideration - $1,000 Down payment to Seller $22,000 Back-end profit $33,550 Total profit

“How many deals would you have to do per month to make a great living, if you averaged

$33,550 per deal?” As you can see in the sample above, all profit centers but the “early closing” discount are present, showing just how valuable a typical lease option can be to an investor. Chapter 3: Calculating Expected Profit for

Hypothetical Scenario SCENARIO #1

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A seller recently lost his job of 15 years, and based upon his savings, thought he had about a year to live comfortably before selling the home became a necessity. A recently declining market accelerated this time frame and, even though the market has rebounded, he needs to get out ASAP to stabilize his situation. Basic Numbers

Property Value: $100,000 Mortgage Balance: $79,000 Payment: $780/month Asking Price: $90,000 Appreciation Rate (est.): 5% Market Rents: $950

EVALUATION WORKSHEET Property 123 Lincoln Avenue

Value: $100,000 Mortgage Balance: $ 79,000 P.I.T.I.: $ 780 /mo Appreciation Rate: 5% Asking Price: $ 90,000 3 Area Comps: Market rents: $ 950 . 1. $105,000

2.$ 95,000 3. $100,000

Deal with the Seller

Purchase Price: $80,000 Term: 3 yrs (3-5 years) Monthly Pmt.: $780.00 Purchase Deposit: $1,000.00

Property Appreciation:

5% (Appreciation rate) x $ 100,000 (Market value) = 105,000 yr 1 5% (Appreciation rate) x $ 105,000 (year 1 value) = 110,250 yr 2 5% (Appreciation rate) x $ 110,250 (year 2 value) = 115,762 yr 3 5% (Appreciation rate) x $ 115,762 (year 3 value) = 121,551 yr 4 5% (Appreciation rate) x $ 121,551 (year 4 value) = 127,628 yr 5

Deal with the Tenant Buyer

Purchase Price: $104,500 * Term: 2 yrs (2-3 years)

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Monthly Pmt.: $ 1,100.00 Option Consideration: $ 5,000 (3-5% of Purchase Price w/TB)

* Purchase price with the Tenant Buyer is determined by taking the appreciated value x 95%. (yr 2 value of 110k x 95%= $104,500)

Profit Amounts

Purchase price with the tenant buyer: $ 104,500 Net Option Consideration (PC) -$ 4,000 Purchase price with the seller owner: -$ 80,000 $ 20,500.00 (PC)

Tenant buyer monthly payment: $ 1,100.00 Owner seller monthly payment: -$ 780.00

24 x $ 320 $ 7,680.00 (PC)

Total Profit: $ 32,180.00

** Note: Profit centers are highlighted with (PC) SCENARIO #2 For each of the two following scenarios, take some time to review the numbers and prepare a profit analysis, using the provided worksheet. Your trainer will be browsing the room to answer any questions and you will discuss your results once finished. Scenario A seller’s father passed away and his estate includes a rental property that has equity and income production from a long-time tenant. The executor of the estate is interested in some creative options to foster both income and profit for the family. Basic Numbers

Property Value: $85,000 Mortgage Balance: $25,000 Payment: $300/month Asking Price: $85,000 Appreciation Rate (estimated): 5% Market Rents: $750


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2.$ 95,000 3. $100,000




___% (Appreciation rate) x $_________ (Market value) = _________ yr 1 ___% (Appreciation rate) x $_________ (year 1 value) = _________ yr 2 ___% (Appreciation rate) x $_________ (year 2 value) = _________ yr 3 ___% (Appreciation rate) x $_________ (year 3 value) = _________ yr 4 ___% (Appreciation rate) x $_________ (year 4 value) = _________ yr 5

Deal With The Tenant Buyer:

Purchase Price: $ ______________* Term: ______yrs (2-3 years) Monthly Pmt.: $ _______________ Option Consideration: $_________

* Purchase price with the Tenant/Buyer is determined by taking the of the Lease Option Process appreciated value x 95%. (yr 2 value of _____k x 95%= $______k)

Profit Amounts

Purchase price with the tenant/buyer: $ ____________ Purchase price with the seller owner: $ ____________ $ _____________ Private lender interest (2 years @ ___%) $ ____________

Tenant/buyer monthly payment: $ ________________ Owner seller monthly payment: $ ________________

$ ________________ $ ________________ x 12/24/36

TOTAL PROFIT: $ ________________ SCENARIO #3 A seller lives in a nicer area of town and, due to recent divorce is finding the monthly mortgage to be more and more of a problem. They are challenged by the fact that market rents still leave

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the property with negative cash flow and need a better option to be able to walk away and move forward with their life. Basic Numbers

Property Value: $300,000 Mortgage Balance: $279,000 Payment: $2,180/month Asking Price: $290,000 Appreciation Rate (estimated): 7% Market Rents: $1,750



2.$ 95,000 3. $100,000







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Profit Amounts



$ ________________ $ ________________ x 12/24/36

TOTAL PROFIT: $ ________________ SCENARIO #4 Given the scenario below, practice your profit analysis by determining the estimated profitability. A seller owes nothing on their property, other than fixed costs like taxes and insurance. They are interested in a potential income stream from the property, in lieu of selling it, to help manage their capital gains as they move into retirement. Basic Numbers

Property Value: $125,000 Mortgage Balance: $0 Payment (fixed costs): $250/month Asking Price: $125,000 Appreciation Rate (estimated): 5% Market Rents: $1,000



2.$ 95,000

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3. $100,000








Profit Amounts



$ ________________ $ ________________ x 12/24/36

TOTAL PROFIT: $ ________________

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Chapter 5:

Communication with

Lease Option Sellers Learning Objectives • Appreciate the role of motivation analysis when attracting possible lease option sellers • Practice communicating lease option terms to and handling objections from a seller • Recognize the specific due diligence that is necessary before finalizing an agreement with a

lease option seller

The Lease Model Revisited You have now seen how and where to find lease option deals, and also learned how to run the numbers for your prospective deals. The next step is to learn how to work with the buyers and sellers that are each critical in a successful sandwich lease option. With that in mind, let’s see where you are at in the Model that accompanies the course: The course content centers on the LEASE Model, an acronym that stands for:




Secure the Deal

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Interacting With Sellers: Overview Your ability to interact with potential sellers will be one of the most important aspects to your success in the Lease Option business. People skills RULE in a business that is based on the seller’s NEED to sell vs. just WANTING to sell. Your seller’s decision to sell to you will be based on your ability to build rapport, trust, and establish an emotional connection with him/her. If your seller feels that your motivation for buying his home is strictly for financial gain, then you will not meet with a whole lot of success. Based on the way you will be advertising your business; you will be attracting sellers who have a CIRCUMSTANCE. Your job is to find out what their CIRCUMSTANCE is and how it relates to their NEED to sell. Chapter 4: Communications Most beginning Investors make the mistake of making potential sellers feel they have no other choice but to give their home away to them. This combative approach builds roadblocks and creates a wall between you and your seller. A more successful approach is to create an environment that will allow you to discuss several different types of solutions to a seller who may feel he had no choices. Being able to provide a situation where everyone truly wins will separate you from your competition and will be the key to you finding deals on a consistent and repeated basis. Over the next several pages, we will discuss how to perform a motivation analysis with your seller, how to interact and negotiate, make offers, structure your deal, and overcome any objections. Rule to Live By: Sellers are more motivated by the fear of making a mistake than the hope of making a profit.

Marketing To Lease Option Sellers: The

Perfect Tenant Program A good platform from which to operate when working with sellers is to have a catchy way of presenting your program. In addition to the marketing examples you’ve seen earlier, one way to accomplish this objective is shown as an example in this section. The so-called Perfect-Tenant Program captures the essence of what you can do for a seller and does much of the “heavy lifting” for you, making the process easier. The components of the program summary fall into three parts: • An Introductory Letter

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• A Q&A List • A Summary Letter Take a look! Sample Intro Letter

SAMPLE FAQ LIST FAQ –Why is it a benefit to place my home in the “Perfect Tenant Program?” Q What are the benefits of selling my house on a lease option?

It is our goal to ensure the process of selling your home is a smooth and easy one for you. We strive to achieve a win-win-win situation in all our lease option purchases. You, as the seller of the house, win by receiving the assurance of knowing that while the house is being sold, all of the expenses are taken care of, the house is maintained, and you are receiving all of the tax benefits associated with being a landlord, with none of the management responsibilities. Our tenant/buyer wins by getting to own a home in a shorter amount of time than it would take them if they were trying to buy conventionally, as well as being able to immediately occupy their new home, while qualifying for a loan. We have created a system that creates the paperwork that mortgage lenders look for when qualifying people for loans to assist our tenant/buyers. In addition, we give our tenant/buyers immediate credit tips to assist in the loan qualification process. We win by profiting from the sale of the home, as well as gaining two more satisfied customers. The reason that we are in business, of course, is to make a profit, as well as to use our expertise in real estate transactions to assist homebuyers and sellers in making the sale or purchase of their home an easy, stress-free one. Thank you for taking the time to explore our “Perfect-Tenant Program.” We hope you see the benefits of PRICE, CONVENIENCE, and SECURITY that we have worked to create in our program. We look forward to working with you soon and making the sale of your home a stress-free and easy one. The following pages summarize our “Perfect-Tenant Program,” answer many of the most common questions regarding the program, and explains how it can be a very beneficial way to sell your property for full-market value and pay no commissions or fees. We look forward to discussing our program further and meeting with you soon. Thank you.

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A PRICE, CONVENIENCE, and SECURITY. We offer to buy your house at today’s full-market value and take care of the rest. When we lease option a house, we guarantee in writing that all maintenance and repairs will be paid by us while we are selling your house to a tenant/ buyer. We only deal with high-quality people who are looking to buy, not just rent a house. When you sell your home to us, we handle all the marketing of the house. This includes paying for advertising, screening potential tenant/buyers, and showing the house. We want the process of selling your home to go as smoothly as possible, with no more headaches for you caused by buyers who tell you that they want a house, but end up not being able to qualify for financing. You are also relieved of having to pay double mortgage payments in the event that you have to move before you are able to get a buyer for your home. We simplify the process of selling your home by handling all the details that waste much of your time and money. Q What are the advantages of selling my home by lease option over listing it with a Realtor? A We make your monthly payments while a tenant/buyer is qualifying for a loan. All your expenses related to the house are taken care of. Try getting a Realtor to do that while listing your home! Another advantage is that our objective is to put only high- quality tenant/buyers in the house since we make our profit by selling for higher than we buy. Since we guarantee all maintenance on the house, it is in our best interest to ensure that our tenant/buyer will take care of the home and eventually secure financing to cash you, the seller, and us out. This means that we put our tenant/buyers through an intensive pre-screening process before they are even permitted to look at the house. We don’t work for commissions, so you keep your equity. And, because our profits are made by selling for slightly higher than what we buy for, we have a vested interest in the house and in making sure it gets sold. Q How long does it take before your tenant/buyer cashes me out? A That can depend on a number of different factors. We work with many mortgage brokers that are usually able to get most people financed after they have paid for 12 months on the lease option. Since everyone’s credit history and circumstances vary, that time period can be shorter or longer for the tenant/buyer that we eventually put into the home. Because of this, we cannot guarantee the exact time our tenant/buyer will secure financing. However, until our tenant/buyer qualifies for financing, we continue to pay all the expenses related to the home. It is also in our best interest to get our tenant/ buyer a new loan as soon as possible, since that cashes us out as well. We aggressively work to get our tenant/buyer financed as soon as possible. Q Why don’t I just sell my house myself or rent it in the meantime? A These are always option that are available to you. The difference would be that you are responsible for your monthly payments, maintenance and repairs during the selling period. You need to try to find someone who can actually qualify for financing, wait for them to get

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approved, and hope that they don’t pull out of the deal, making you start the whole process over again. Renting during this period opens entirely new difficulties that would-be landlords often overlook, especially when you are trying to show the home and sell while renters are living there. Q Why don’t I just find my own tenant/buyer? A Our tenant/buyers are carefully pre-screened to ensure that they want to buy the house and are able to do so at some point in the future. However, circumstances can change in someone’s life, such as an unexpected job transfer that can make it necessary to move. In situations like that, we continue to pay all the expenses for the house while we find another qualified tenant/buyer to put into the home. Remember, we make our money when your house sells!! Sample Summary Letter

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Introduction To Seller - Motivation

Analysis Once your marketing gets the phone ringing, it then becomes necessary to effectively screen possible sellers, as not all of your respondents will be adequately motivated, and thus suited to your programs. Screening is a must because some sellers who respond to your marketing will be unqualified for one of the following two reasons:

It is our goal to ensure the process of selling your home is a smooth and easy one for you. We strive for a win-win-win situation in all our lease option purchases. You, as the seller of the house, win by receiving the assurance of knowing that while the house is being sold, all of the expenses are taken care of, the house is maintained, and you are receiving all of the tax benefits associated with being a landlord, with none of the management responsibilities. Our tenant/buyer wins by getting to own a home in a shorter amount of time than it would take them if they were trying to buy conventionally, as well as being able to immediately occupy their new home, while qualifying for a loan. We have created a system that creates the paperwork that mortgage lenders look for when qualifying people for loans to assist our tenant/buyers. In addition, we give our tenant/buyers immediate credit tips to assist in the loan qualification process. We win by profiting from the sale of the home, as well as gaining two more satisfied customers. The reason that we are in business, of course, is to make a profit, as well as to use expertise in real estate transactions to assist home buyers and sellers in making the sale or purchase of their home an easy, stress-free one. Thank you for taking the time to explore our “Perfect-Tenant Program.” We hope you see the benefits of PRICE, CONVENIENCE, and SECURITY that we have worked to create in our program. We look forward to working with you soon and making the sale of your home a stress-free and easy one. XYZ Real Estate Solutions PS We will differentiate ourselves from our competition by becoming a full-service Real Estate Solution Provider. We can take any phone call and create a profitable solution by utilizing our specialized knowledge. Deals aren’t found; they are created. We will stay in our seller’s lives until their Real Estate problems have been solved.

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• They aren’t circumstantially motivated enough to accept a creative proposal • They are too afraid to take any action at all

There are of course other possible reasons, but these two will be the most common issues that impair a prospect’s ability to work with your program. You want to be able to identify these potential weaknesses as soon as possible in the screening process, to avoid wasting undue time on an otherwise unqualified prospect. Screening seller prospects can be simplified with a couple of basic goals: You Have Two Goals During Initial Seller Contact:

1. Find out the Circumstance

2. If the Circumstance is Right; Get The Appointment!

If these are the primary goals, how do you get there? The following sections offer a couple of viable ways to gather the information you will need to qualify a seller for a lease option. Chapter 4: Communications

Interacting with Sellers: Motivation

Analysis Questionnaire *Introduce Yourself: My name is ____________________________and my company provides full-service real estate

solutions for any and all of your Real Estate Needs.

Who am I speaking with? __________________________________ In case we are disconnected

may I get a good contact number to call you back? _________________________

1. How did you hear about us? _______________________________ _

2. Are you the Owner of the Property? __________________________________________

3. Where is the Property Located? __________________________________________________

4. How Long Have You Owned the Property? __________________________________________

5. Why are you Selling? _______________________________________________________

6. Have you tried to sell your property? _________________________

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7. How soon do you want to sell? ______________________Close? _______________________

8. What is Your Asking Price? $________________________________ You are willing to owner

finance at that price, aren’t you? ________

9. In Your Opinion, What is the Appraised Value of Your Property? ____

10. Is there a Mortgage on the property, or is it Owned Free and Clear? _______________

a) What is Your Mortgage Balance? $ ______________________

b) What is Your Monthly Payment? $ _______________________

c) Are Your Payments Current? Yes/No

d) If no, how far behind are you? __________________________

e) Have you received any Default Notices from the Lender? ____

11. Tell me about your property

a. Bedrooms __________________________________________

b. Bathrooms __________________________________________

c. Square footage _______________________________________

d. Construction type ____________________________________

e. Year built __________________________________________

12. What, if any, Repairs are Necessary? ________________________

___________________________________________________________

___________________________________________________________

___________________________________________________________

What is your best-case scenario? ______________________________

___________________________________________________________

What is your worst case scenario? _____________________________

___________________________________________________________

Are there any other bills weighing you down? ____________________

___________________________________________________________

___________________________________________________________

___________________________________________________________

___________________________________________________________

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Phone Scripts “Thanks for calling. I’m a local real estate investor. I buy houses in any area or condition. Do you have time for a few questions? One thing I would like to ask of you is that if you dislike any of the ideas we discuss, are you agreeable to telling me that you dislike them? On the other hand, if you think any of the ideas we discuss are a good fit for you, are you agreeable to moving forward with them? I appreciate your honesty, because I plan to do the same for you. If I feel your property is a good fit for any of our programs, I’ll let you know by the end of our conversation. It is important to me to be respectful of your time as well as mine. Is that fair?” Note: Always discuss MOTIVATION before money! if the seller’s response to the motivation analysis reveals that we cannot purchase the property based on the seller’s inability to sell to us at a significant discount, then we say: “Normally, we buy houses one of two ways, either all cash at a significant discount, or with our lease option program. I hope you can appreciate the fact that we can’t pay you cash for your property because you are unable to give the discount we would need to make a profit. However, that doesn’t mean we can’t buy your property. One thing that may work is our Lease Option Program where we guarantee to make your monthly payment for an agreeable period of time and then pay you close to the full amount of your asking price. Does that sound like something you might be interested in hearing more about?” Your goal here is to set an appointment with the seller to meet him at the property as soon as possible.

Role Playing: Seller Screening Now that you have seen some ways to screen your sellers, you will participate in a couple of role-play scenarios that will help you see what to expect when you start fielding calls of your own. Two volunteers will participate with your trainer in two-different scenarios that represent different levels of seller qualification. Take notes on what you observe and you will discuss the results of each, as a group, once finished. Notes Scenario One:

______________________________________________________________________________

______________________________________________________________________________

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______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

Notes Scenario Two:

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

Interacting with Sellers: Meeting With The Seller Once your sellers have passed the screening process, it is time to meet, and hopefully secure the deal. There are steps involved here, and these steps are summarized in the next few sections. To start, let’s address the steps and dialogue in meeting in person with your seller. Drive By

Survey the neighborhood and check the exterior of the house Notice the families and businesses in the neighborhoods Make sure the area and home provide a desirable situation for a family to live

Greet Seller

Greet seller with a smile; introduce yourself, and allow him to show you his property Praise the house and build rapport with your seller Notice things that need to be repaired or replaced

o Stop and write them down o Compare what you see with what your seller told you over the phone during the

motivation analysis

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If there are problems with the house “You have a lovely property; however, there are some things we need to address before we can put it into our lease option program.” Rule of Thumb: Only do minimal repairs that will increase the value of the property for every dollar you spend. If the property needs major repairs, negotiate the costs (time and money) with your seller or walk away. Chapter 4: Communications If the property is beautiful: “I’ve got some great news. You have a lovely property that would fit nicely into our lease option program. Let’s sit down so I can discuss with you exactly how the program works. What we do is purchase nice houses just like yours by guaranteeing a long-term lease with an option to purchase on an agreed upon date and at an agreed upon price. This program allows us to pay you much closer to your full-asking price while providing you with solutions for your immediate and future financial needs. We would be responsible for all of the maintenance and management of the property while you get all of the benefits of property ownership. We have a list of carefully selected young families who are looking to own a nice home but unfortunately, they lack the ability to do so without a little help. The families we work with are unable to purchase a home because they either have no credit, some bumps in their credit, or they lack the 20 percent down payment that most conventional lenders require for them to buy a home. What we do is carefully screen these families to make sure they are potential owners and not renters. It is our experience that owners take pride in their home and maintain it at much higher standards than renters, and I am sure that you would agree. The reason why this program has been so successful for us is because it creates a solution where everybody wins.” At this point, you should have a better idea of whether or not the seller is on board with you and your proposal. If they are on board, continue forward. If they have questions or objections, these are also natural and you will see how to handle them shortly.

MEETING WITH THE SELLER: COMING TO TERMS Once a tentative agreement is reached with a seller, you need to close the deal and this means showing them just how easy it is to set up an agreement with your company. Try the following dialogue sequence to get the job done. Mr./Mrs. Seller, there are only three things we need to agree on:

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1. Price - On a terms basis we can pay much closer to asking price. “We can’t pay full price

but we don’t need a huge discount either.”

Rationale: Remember you have the initial “fudge” factor of the amount they would have had to pay a Realtor for commissions.

• The price you can offer your seller will be driven by their mortgage balance, market value of the home and average annual appreciation in the area • If the seller owes more than what the property is worth:

The option to purchase price will be the mortgage balance at the time of option rather than today’ mortgage balance

• If the area is experiencing higher-than-average appreciation, consider an Equity split with the seller • If the area is experiencing lower-than-average appreciation you will need a bigger discount on your option to purchase price

2. Term Length - Now the length of time that we need to pay for the house in full varies on

an individual deal basis. The average time we need to perform on our responsibility to purchase your house is 60 months…how does that sound to you?”*

Rationale: Ask for 60 months but be willing to settle for at least 36 months.

3. Payment Amount and Payment Start Date:

Our monthly payment has to be at or below Sellers monthly PITI to create a monthly spread for cash flow. “We would like to put your property into our program and make our first payment and initial down payment (if discussed) in 60 days.” Rationale: You need time to find a tenant/buyer.

Interacting With Sellers: Handling Objections Sellers will have objections to your proposal but this isn’t necessarily a bad thing. In fact, objections will center on common themes, which are given as examples in this section and are there for you to use as you start putting together your own deals.

1. What if the buyer tears up the house? “I can truly appreciate your fear and concerns, but I can assure you that we take the time to carefully screen each and every one of our buyers. Obviously we aren’t going to be living there so we can’t guarantee it won’t happen. But we can guarantee that if it does, it is our responsibility and we will put it in writing. Is having someone living in your home other than you going to prevent you from

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selling your property to us?” (If, at this point, the seller says YES, then consider an option to purchase without a lease.)

2. Can you guarantee that five years from now you are going to buy my house? “No, but it has been our experience that because we take the time to carefully screen our buyers, most of them will buy the house. However, what you look at to be the worst-case scenario may not be as bad as you think. Five years from now you will have benefited from someone else making your payment, maintaining and managing your property. You have benefited from the principal being paid down by someone else, yet you receive all of the depreciation benefits and write offs. What you haven’t had is the worry and the headaches of making the payment every month.”

3. May we run this by our attorney? “Absolutely, but please understand that they will probably advise you not to do this because they are unfamiliar with how our program works.”

4. This sounds good, but what about references? “We don’t trouble our past sellers for a reference, and when you agree to do this, we won’t trouble you for one either.”

5. This sounds too good to be true… “We’ve found a niche in the market that we are filling. We are experienced real estate investors and we specialize in solutions for sellers and buyers of nice homes just like yours.”

6. What about future equity? “By agreeing to pay you close to your full-asking price, our motivation for the deal is profiting from the appreciation. I am sure you can appreciate the fact that we are in business to make a profit, can’t you?” When running your numbers to structure your deal, consider splitting some of the equity with your seller to overcome the objection of future appreciation.

7. Couldn’t I just do this myself? “Absolutely, but understand we have experience with structuring this type of situation so that it goes smoothly for all parties involved. You are, however, more than welcome to get out your landlord manual and go for it.”

8. Why don’t I just list it with a Realtor? “You definitely have that option if you so choose, but I doubt the Realtor will make your payment for you while they are listing the property. I am offering to make your payment, pay you top dollar for your property, and perform all the maintenance and management. All you have to do is sit back and forget about your property until the closing agent sends you the closing documents and a check. If you do decide to list it with a Realtor and it doesn’t sell, please feel free to contact us in the future. But keep in mind, that might be three-five payments later based on the CONTRACT the Realtor has you sign.”

Debt relief is the major motivating factor for someone allowing you to lease option their home. If the motivation for debt relief is not strong enough, then try an option without a lease.

Role Playing: Deal Making With Sellers Now that you have seen some ways to screen and put deals together with your sellers, you will participate in a couple of role-play scenarios that will help you see what to expect when you start negotiating deals of your own.

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Two volunteers will participate with your trainer in two-different scenarios that represent different levels of seller cooperation in getting the deal done. Take notes on what you observe and you will discuss the results of each, as a group, once finished. Notes Scenario One:

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

Notes Scenario Two:

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

Due Diligence With Sellers Any real estate investment deal worth doing should be able to withstand a little due diligence, and lease options are no different. Due diligence does not have to be a difficult process; in fact, it is usually only challenging when it is not carried out properly to begin with. The bottom line is that you need to protect yourself. It’s just good business. Examples of due diligence you’ll want to perform include: Property Inspection:

______________________________________________________________________________

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______________________________________________________________________________

______________________________________________________________________________

Market Analysis (values, rents, etc.):

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

Title Inspection:

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

Lien Review:

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

Confirmation of Seller’s Mortgage Balance and Payment:

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

Confirmation of “Currency” of Seller’s Mortgage:

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

Mortgage Terms (e.g. fixed or adjustable, prepayment penalties, etc.):

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

As much as good due diligence protects you, it is also important to remember that due diligence on your part now only strengthens the relationship you will carry forward with both your seller and your eventual tenant buyer.

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Poor due diligence, even if you have escape clauses in your agreements to protect you, may expose the other parties in the deal. Even if flaws in the deal are not of your doing (and they rarely are), you are the professed expert and challenges that put a deal in jeopardy are invariably going to make you look like the bad guy. Conversely, good due diligence is transparent, meaning issues will likely never come up, unless before a deal ever gets off the ground. This makes for a much smoother process and will greatly enhance both your perceived professionalism and also the success of your lease option deals.

Interacting With Sellers: Keys To Success 1. Get In Light- Low to No Out-of-Pocket Expense 2. Only Desirable Neighborhoods 3. Give Yourself Plenty of Time to Close (and find a buyer) 4. Check the Title: Preliminary Lien Search 5. No Small Houses (harder to market to buyers) 6. Use Your Company Name on all Paperwork 7. Insurance Must Match Occupancy (shift policy to “non-owner-occupied”) 8. Use An Escrow Account To Make Payments 9. DON’T Do Repair/Maintenance Remember: We are not promising to ____________ the property. Instead, we are promising to ___________

the problem!!

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Chapter 6: Paperwork

with Lease Option

Sellers Learning Objective • Review and practice using the paperwork that is essential to securing a sandwich lease option agreement with a seller The Lease Model Revisited You are now well into the lease option process and it is time to learn how to secure the deals that will help boost your business and provide valuable revenue. Let’s see where you are at in the Model that accompanies the course: The course content centers on the LEASE Model, an acronym that stands for:




Secure the Deal


The Importance Of Paperwork

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Paperwork is a necessary tool for any professional real estate investor. It is as important as it is often feared and, for that reason, it is important that you take some time to review the forms you will need to complete lease option transactions. The better you are at being a master of the paperwork side of the business, the more attention you can give to the needs of your seller, putting you in a better position to negotiate better deals! Paperwork With Sellers: Summary The paperwork you complete has three-primary purposes. First, it puts you in a secure position that protects your interest in your deal. Second, it gives you a certain amount of control over how the deal proceeds. Last, it sets the table for the numerous paydays you will have from a quality sandwich lease option.

1. Property Information Sheet:

Gather as much information from the seller while you have their attention. Purpose:_________________________________________________________________

________________________________________________________________________

2. Authorization To Release Information:

You want to be able to contact the seller’s lender or Insurance Company.

Purpose:_________________________________________________________________

________________________________________________________________________

3. Letter Of Instructions To The Lender/Title/Escrow:

Informs the lender as to why the payments and coupons should be sent to a different entity.

Purpose:_________________________________________________________________

________________________________________________________________________

4. Residential Lease With Option:

Do not record unless your seller is not living up to his/her contractual rights. By recording this document, it may trigger the due on sale clause.

Purpose:_________________________________________________________________

________________________________________________________________________

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5. Memorandum Of Option:

You will record this document to give yourself first right of refusal and prevent your seller from selling out from underneath of you or further encumbering the property. Also protects your equity if the property goes to foreclosure.

Purpose:_________________________________________________________________

________________________________________________________________________

6. Addendum To Lease/Lease Option Agreement:

(Optional) Not notarized, not recorded. Allows changes to be made to the monthly payment based on increases in the taxes, insurance, homeowner’s association fees and any other easements.

Purpose:_________________________________________________________________

________________________________________________________________________

NOTE: Contact your local Real Estate Professional or real estate attorney to research the appropriate documents that are required for all real estate transactions in your state.

Paperwork with Sellers: Samples The best way to become familiar with lease option paperwork is to review samples and then practice filling out the paperwork yourself. Naturally, the samples included in this section are for reference only; you’ll need to have your paperwork reviewed in your own area to make sure it is compliant with your state laws! Once you have reviewed the samples, you’ll have a chance to go through it yourself, giving you valuable practice with both the paperwork itself and the process of presenting it to a client. Contact Information: __________________________ Date: ________

SELLER: ___________________________________________________

SELLER: ___________________________________________________

Home Phone: ______________________________________________

Work Phone: ______________________________________________

Cell Phone: ________________________________________________

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Address: _________________________________________________

_________________________________________________________

E-Mail: ___________________________________________________

Asking Price: ______________________ How Determined: _________

_________________________________________________________

Reason For Sale: ____________________________________________

__________________________________________________________

__________________________________________________________

Vacant Or Occupied: ________________________________________

Moving Date: _______________________________________________

Repairs Needed: ____________________________________________

FIRST MORTGAGE:

Loan Amount __________________ Balance: ___________________

Rate: _________________________ Lender: ____________________

Account Number: _______________ Due Date: __________________

Address: ______________________ PITI: _______________________

PMI: _________________________ Telephone: _________________

Balloon: ______________________ Due Date: __________________

SECOND MORTGAGE:

Loan Amount __________________ Balance: ___________________

Rate: _________________________ Lender: ____________________

Account Number: _______________ Due Date: __________________

Address: ______________________ PITI: _______________________

PMI: _________________________ Telephone: _________________

Balloon: ______________________ Due Date: __________________

PROPERTY INFORMATION:

Beds/Baths: __________ Sq. Ft.: ______________ Lot: _________________

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Construct: ___________ Garage: ______________ Built: _______________

Subdivision: __________ Gate Code: ___________Taxes: _______________

HOA Lstpy: ___________ HOA Nxtpy: __________ HOA Dues: ___________

INSURANCE

Company: _____________ Agent: ___________ Phone: ___________

Premium: _____________ Renewal Date: ______________________

Policy #: _________________________________________________

TANGIBLES

Fridge: _______________ Micro: ___________ Range: ___________

Dishwasher: __________ Washer: __________ Dryer: ____________

Other:

_____________________________________________________________

_____________________________________________________________

_____________________________________________________________

Sample Authorization To Release Information Lender: ABC Lending Borrower Account or Loan #: 123456789 Name: John Seller Borrower SSN: 234567891 Name: Jane Seller Borrower SSN: 987654321 I/We hereby authorize you to release any and all information regarding my loan, including loan status, interest rate, payoff amount, amount of monthly payment, late charges, penalties, and fees (if applicable) and any other information about our account that might otherwise be protected through the Right of Financial Privacy Act of 1978, Fair Credit Reporting Act, or any other federal, state, local or lender regulations to: Your Name, Title, XYZ Home Solutions It is requested that this information be faxed immediately to: 555-123-4567 It is understood that a photocopy of this form or facsimile will also serve as authorization.

_________________________________ _________________

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Borrower’s Signature Date

_________________________________ _________________ Borrower’s Signature Date

John Seller____________________ Jane Seller____________________ Printed Name Printed Name

State of _______________________ County of _____________________

The foregoing instrument was acknowledged before me this ________ day of ________, 20 ___

by John Seller and Jane Seller, who is/are personally known to me or who has/have produced

______________________________________ as identification.

______________________________ Notary My Commission Expires: (Seal)

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Sample Letter of Instructions To Lender

January 10, 2010 ABC Lending Payment Processing P.O. Box 123 Anytown, USA 12345 Re: Loan #123456789 1234 Main St. Anytown, USA 12345 To Whom it May Concern: Please be advised that we have retained a management company to collect the rents and make the loan payments on the above-described property and loan. The company is:

XYZ Home Solutions 1234 Nice Ave. Anytown, USA 12345

Beginning with the check due on July 1, 2010, your check will come directly from XYZ Home Solutions. Please send future statements or notices requiring changes in the amount of the payment directly to them. Thank you for your help. Sincerely, John and Jane Seller, Owner

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Sample Residential Lease With Option THIS AGREEMENT made and entered into on January 10, 2010 by and between John and Jane Seller (landlord/owner), hereinafter referred to as “Lessor,” and XYZ Home Solutions (tenant/buyer), hereinafter referred to as “Lessee.” Lessors lease to Lessees all the goods and chattels detailed in the inventory designated as Schedule “A” annexed hereto and specifically made a part hereof, and also that certain dwelling house situated at and more particularly described as follows: 1234 Main St. Address 1234 Main St. USA 12345 City State Zip Code Legal Description: To Be Attached Together with all appurtenances for a period of one year to commence on April 10, 2010 through April 09, 2011 with the right to four (4) consecutive terms of the original term with Lessee’s notification to Lessor in writing thirty (30) days prior to end of term. 1. RENT. Lessees agree to pay, without demand, to Lessors as monthly rent for the demised premises, the sum of $710.00, in which the payments are due on or before the tenth (10th) day of each month. The first payment will be due on or before March 10, 2010. 2. SECURITY & OPTION. Upon the execution of this lease, the Lessees shall pay unto the Lessors, the first month’s rent as well as the sum of $100.00 as security for the faithful performance by Lessees of the terms hereof, to be returned to Lessees, without interest, on the full and faithful performance by them of the provisions hereof, plus the sum of $1,000.00 as down payment for the option to purchase the aforementioned property. This sum is nonrefundable. 3. USE. The Lessees shall use the premises hereby leased exclusively for a private residence. Lessees shall be permitted to access the above dwelling for the purpose of showing the property to perspective tenants, contractors, and partners. Chapter 6: Paperwork 4. PERSONAL PROPERTY. All personal property placed or moved in the premises above described shall be at risk of the Lessees or owner thereof, and Lessors shall not be liable for any damage to said personal property, or to the Lessees arising from any act of negligence of any co-tenant or occupants of the building or of any other person whomsoever. 5. COMPLIANCE. The Lessees shall promptly execute and comply with all statutes, ordinances, rules, orders, regulations and requirements of the federal, state, and city government and of any and all their departments and bureaus applicable to said premises, for the correction, prevention, and abatement of nuisances or other grievances, in, upon, or connected with said premises during said term.

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6. FIRE. Lessee will not allow any items on or in the dwelling, which will endanger the habitants or the premises. That in the event the premises are destroyed or so damaged by fire or other unavoidable casualty as to be unfit for occupancy or use, then the rent hereby reserved, or a fair and just proportion thereof, according to the nature and extent of the damage sustained, shall, until the said premises shall have been rebuilt or reinstated, be suspended and cease to be payable, or this lease shall, at the election of the Lessor, thereby be determined and ended, provided, however, that this agreement shall not be construed so as to extend the term of this lease or to render the Lessor liable to rebuild or replace the said premises. 7. ACCEPTANCE. Lessees hereby accept the premises in the condition they are in at the time beginning of this lease and agree to maintain said premises in the same condition, order and repair as they are at the commencing of said term, excepting only reasonable wear and tear. Lessee agrees to pay for all repairs costing less than $500.00 per incident arising from the use thereof under this agreement, and to make good to said Lessors immediately upon demand any damage to water apparatus, or electric lights or any fixture, appliances or appurtenances of said premises, or of the building, caused by any act of neglect of Lessees, or of any person or persons in the employ or under the control of the Lessees. In the event of any default by Lessor or then in addition to any other remedies available to Lessee at law or in equity Lessee shall have the option to terminate this lease and all rights by giving written notice of intention to terminate, via certified mail. 8. TERMS OF CONTRACT. It is understood and agreed between the parties hereto that time is of the essence of this contract and this applies to all terms and conditions contained herein. Lessees shall have the unqualified right to sublet and/or assign, sell, transfer, and convey any rights which the Lessee or their administrators, successors, executors and heirs may have in this contract to a third party without written notice. Any assignment will release Lessees from any liability, as new assignee will accept all rights, obligations and responsibilities agreed upon in this agreement between Lessor and Lessees. 9. NOTICE. It is understood and agreed between the parties hereto that written notice by certified mail or delivered to the premises hereunder shall constitute sufficient notice to the Lessees and written notice by certified mail or delivered to the office of the Lessors shall constitute sufficient notice to the Lessors, to comply with the terms of this contract. The Lessor’s mailing address is P.O. Box 123, Anytown, USA 12345. 10. RIGHTS. The rights of the Lessors under the foregoing shall be cumulative, and failure on the part of the Lessors to exercise promptly any given rights hereunder shall not operate to forfeit any of the said rights. 11. UTILITIES. The Lessees shall be responsible for the payment of all utility bills (water, electricity, telephone, etc.) and specifically including, but not limited to glass breakage and all doors and screens. The Lessors will be responsible for all structural repairs, meaning the roof, exterior walls, foundation, and to pay all repairs costing greater than $500.00 per incident. In the event Lessor is delinquent on any payments required under this agreement to include repairs and maintenance, Lessee shall have the right to make such payments as necessary to cure defaults or make said repairs on behalf of the Lessor. Any payments made by Lessee will be credited to Lessee on a two-

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to-one basis (2 to 1). The closing agent will apply said credit toward the purchase price at the time of closing. 12. REPAIRS. The Lessees will permit the Lessors or their agent, at any reasonable time, to enter said premises or any part thereto for the purpose of exhibiting the same or making repairs thereto. 13. RECOVERY. If either party of this agreement shall bring legal action for enforcement of said agreement, the prevailing party shall recover the cost of the proceedings including reasonable attorney fees. Chapter 6: Paperwork 14. EMINENT DOMAIN. If the leased premises, or any part thereof are taken by virtue of eminent domain, this lease shall expire on the date when the same shall be so taken and the rent shall be apportioned as of said date. Lessee shall be entitled to FULL refund of any option consideration money and security deposits. 15. BENEFIT. All covenants and agreements of this lease shall be binding upon and inure to the benefit of the heirs, executors, administrator and assigns of the Lessor and Lessee, without affecting the restrictions imposed by Section 3 hereof. 16. RIGHT TO EXTEND. Lessee shall have the right to extend the agreement for six (6) months, for an additional fee of $1.00. 17. CHATTELS. The said Lessees hereby pledge and assign to the Lessors all the furniture, fixtures, goods and chattels of said Lessees which shall or may be brought or put on said premises as security for the payment of the term herein reserved. 18. VALIDITY. It is expressly agreed between the parties that if any clause of this lease be found unconscionable it shall not affect the validity of the remainder of this lease. 19. ENTIRE AGREEMENT. Neither party has made any representation or promise, except as contained herein. Any and all modifications to this agreement must be in writing and signed by Lessee/Lessor and/ or assigns. 20. INSPECTIONS. Real property taxes on the property, both general and special assessments, if any, for the current fiscal year shall be prorated for the close of escrow and be paid by the Lessor. Also, the Lessors shall provide the Lessees with a certificate from a licensed and bonded exterminator showing that there is no evidence of termite infestation in improvements on said property. Should termite eradication be required, the Lessors shall perform the same at their own expense. The Lessees shall examine the leasehold premises to determine that the premises are in good and inhabitable condition, as are the condition of the electrical, plumbing and heating system, and if they are not, said leasehold period shall not commence until the premises are in such inhabitable condition. In addition, the Lessees shall examine said premises and prepare a list of those items damaged at the commencement of the leasehold period. Lessees agree to notify Lessor immediately upon first discovery any signs of serious dwelling problems to include leaking roof, dysfunctional heating/air conditioning systems, spongy floor, crack in foundation, moisture in ceiling, leaking water heater or evidence of termites.

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21. PURCHASE. Lessees shall have the option to purchase said premises for the purchase price of $85,000.00. This option may be exercised at any time during the lease period upon notice to the Lessors in writing by certified mail. The Lessees shall place with ABC Title Company (title company/attorney), the option payment specified in paragraph (2) above paid by the Lessees to the Lessor in escrow as earnest money towards the purchase of said property. $100.00 (amount) of all rents paid by the Lessee up to the time of the exercise of the option shall be credited to the down payment. Should the Lessee exercise their option, the Lessors shall have ten (10) days to provide Lessees with an updated abstract showing their title to be good, marketable, and insurable. The Lessees shall close the transaction within seven (7) days from the delivery of said abstract. The closing costs incurred with closing escrow shall be paid at the close of escrow as follows: Lessee to pay for their own closing costs; Lessor to pay for their own closing costs. This lease shall terminate upon the closing of the subject property and the Lessee shall not be liable for any rent subsequent to the closing date. All monies put for security shall be returned to the Lessees at that time. 22. CONTEXT. The terms Lessor and Lessee as herein contained shall include singular and/or plural, masculine, feminine, and/or assigns neuter, heirs, successors, personal representatives, and/or assigns wherever the context so requires or admits. 23. AGREEMENT. This agreement constitutes the entire agreement between the Lessee and the Lessor, as written. No further promises have been made to one another whether it is written or verbal. 24. RIGHT OF RESCISSION. Lessee has fourteen (14) business days to cancel this agreement. The purpose of this right to cancel option is to allow Lessee time to properly inspect above said property. In the event that Lessee decides to cancel agreement within the allotted time; all deposits and options, consideration, and monies shall be refunded promptly. Chapter 6: Paperwork 25. DISCLAIMER. Parties in this agreement by their signatures agree not to hold preparer of this document for any error, mistakes, omissions or negligence.

X ____________________________ X __________________________ Lessor: John Seller Date Lessee: Your Name, Title Date

XYZ Home Solutions

X ____________________________ X __________________________ Lessor: Jane Seller Date Lessee:

State of _______________________

County of __________________________________________________

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The foregoing instrument was acknowledged before me this _______ day of _________, 20___

by __________________________________ who is/are personally known to me or who has/have

produced _____________________________________________as identification.


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Sample Memorandum Of Option On this date, the following parties entered into an agreement in which XYZ HOME SOLUTIONS acquired an option to purchase an interest in property owned by John and Jane Seller. The property is described as: 1234 Main St. Address 1234 Main St. USA 12345 City State Zip Code Legal Description: (To be attached.) 1. The term of this agreement is five (5) years, running through midnight April 09, 2015. 2. As part of this agreement, John and Jane Seller agree not to further encumber the property, nor sell any interest in the property during the term of this agreement. Any encumbrance placed on the property after this agreement is properly executed and recorded, including leases will be subordinate to this agreement and will be extinguished by the proper execution of this contract. 3. This agreement will bind heirs, executors, administrators, successors, legal representatives, and assigns of each party to this agreement. 4. In the event of foreclosure, the owners’ equity at the sale and any right of redemption shall transfer to the Optionee without further compensation and this contract shall serve as conveyance without further action. Signed and sealed this 10th day of April, 2010. Chapter 6: Paperwork

X ____________________________ X __________________________ Lessor: John Seller Date Lessee: Your Name, Title Date

XYZ Home Solutions

X ____________________________ X __________________________ Lessor: Jane Seller Date Lessee:

State of ____________________________________________________

County of __________________________________________________

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Sample Assignment Of Option To Purchase Real

Estate For value received, XYZ Home Solutions (Seller), assignor, assigns to Able Investor (Buyer) assignee, all rights and interest of assignor in an agreement, dated April 10, 2010 whereby assignor was given the option from John and Jane Seller (Seller), the following described real estate at a price and under the terms and conditions therein contained: 1234 Main St. Address 1234 Main St. USA 12345 City State Zip Code Legal Description: (To be attached.) Assignor, by virtue of this assignment, grants to assignee the right to exercise or reject the option in good faith and the right to recover any moneys deposited by assignor to receive said option. Dated April 11, 2010 . X ____________________________ X __________________________ Lessor: John Seller Date Lessee: Your Name, Title Date

XYZ Home Solutions X ____________________________ X __________________________ Lessor: Jane Seller Date Lessee: State of ____________________________________________________

County of __________________________________________________





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Sample Addendum To Lease/Lease Option

Agreement Monthly payments are subject to change/increase on an annual basis due to increases in taxes, insurance, HOA or any other easements that are the responsibility of the homeowner. The tenant/buyer will be notified in writing by certified mail with verifiable proof from the landlord/seller 30 days prior to the necessary increase. The tenant/ buyer reserves the right to verify any and all changes to the monthly payment during the 30 days prior to the change. Any increase will be a dollar-for-dollar increase and the landlord/seller will not be experiencing a profit from any all increases to the monthly payment stated in the original agreement. The purpose of this addendum is to prevent the landlord/seller from taking on any future costs that are the responsibility of the occupants.

X ____________________________ __________________________ John Seller Date

X ____________________________ __________________________ John Seller Date

X ____________________________ __________________________ Your Name, Title, XYZ Home Solutions Date

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Activity: Paperwork With Sellers Now that you have reviewed the samples of all paperwork you will need when working with a lease option seller, you have a chance to go through it yourself, giving you valuable practice with both the paperwork itself and the process of presenting it to a client. Your “client” will be another course participant, who you will interview as needed and then walk through the paperwork included in the following pages. Once you are done, change roles so everyone has a chance to participate. Your trainer will be browsing the room throughout the exercise and will be available if you have questions. BLANK PROPERTY INFORMATION SHEET Contact Information: Date: Seller: _____________________________________________________

Seller: _____________________________________________________

Home Phone: _______________________________________________

Work Phone: _______________________________________________

Cell Phone: _________________________________________________

Address: ___________________________________________________

E-mail: _____________________________________________________

Asking Price: __________ How Determined: ______________________

Reason for Sale: _____________________________________________

___________________________________________________________

Vacant or Occupied: _________ Moving Date: _____________________

Repairs Needed: _____________________________________________

___________________________________________________________

FIRST MORTGAGE:

Loan Amount: ____________________ Balance: __________________

Rate: ____________________________ Lender: __________________

Account Number: ________________ Due Date: __________________

Address: _____________________________ PITI: _________________

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PMI: ____________________________Telephone: _________________

Balloon:_________________________ Due Date: __________________

SECOND MORTGAGE:

Loan Amount: ____________________ Balance: __________________

Rate: ____________________________ Lender: __________________

Account Number: ________________ Due Date: __________________

Address: _____________________________ PITI: _________________

PMI: ____________________________Telephone: _________________

Balloon:_________________________ Due Date: __________________

PROPERTY INFORMATION:

Beds/Baths: ____________ SQ. FT.: ____________ Lot: _____________

Construct: _____________ Garage: ___________ Built: _____________

Subdivision: ____________ Gate Code: _________ Taxes: ___________

HOA Last Pay: ___________ HOA Next Pay: ______ HOA Dues: _______

INSURANCE Company: ______________ Agent: _________ Telephone: __________

Premium ___________ Renewal Date: ______ Policy#: _____________

TANGIBLES

Fridge: _________________ Microwave: _____ Range: _____________

Dishwasher: _____________ Washer: _______ Dryer: ______________

Other:

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

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Blank Authorization To Release Information Lender: Account or Loan #: Borrower Name: Borrower SSN: Borrower Name: Borrower SSN: I/We hereby authorize you to release any and all information regarding my loan, including loan status, interest rate, payoff amount, amount of monthly payment, late charges, penalties, and fees (if applicable) and any other information about our account that might otherwise be protected through the Right of Financial Privacy Act of 1978, Fair Credit Reporting Act, or any other federal, state, local or lender regulations to: ___________________________________________________________ It is requested that this information be faxed immediately to: ___________________________________________________________ It is understood that a photocopy of this form or facsimile will also serve as authorization.

__________________________ __________________________ Borrower’s Signature Date

__________________________ __________________________ Borrower’s Signature Date

__________________________ __________________________ Printed Name Printed Name

State of ___________________ County of ______________________

The foregoing instrument was acknowledged before me this ________ day of ________, 20 ___

by ___________________________, who is/ are personally known to me or who has/have

produced ___________________________ as identification.

_________________________________ Notary

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My Commission Expires: (Seal)

Blank Letter Of Instructions To Lender Date: __________________

______________________

______________________

______________________

______________________

Re: Loan # _____________

______________________

______________________

______________________

______________________

Gentlemen: Please be advised that we have retained a management company in _____________ to collect the rents and make the loan payments on the above-described property and loan. The company is: ______________________

______________________

______________________

Beginning with the check due on _________________, your check will come directly from

_________________________. Please send future statements or notices requiring changes in the

amount of the payment directly to them.

Thank you for your help. Sincerely, ________________________, Owner

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Blank Residential Lease With Option THIS AGREEMENT made and entered into on ____________________ by and between

_____________________________________ (landlord/ owner), hereinafter referred to as

“Lessor,” and _________________________________________________________________

(tenant/buyer), hereinafter referred to as “Lessee.” Lessors lease to Lessees all the goods and

chattels detailed in the inventory designated as Schedule “A” annexed hereto and specifically

made a part hereof, and also that certain dwelling house situated at and more particularly

described as follows:

Address ______________________________________________________ City State Zip Code Legal Description: To Be Attached Together with all appurtenances for a period of one year to commence on _________________ through _________________________ with the right to _______________________ consecutive terms of the original term with Lessee’s notification to Lessor in writing thirty (30) days prior to end of term. 1. RENT. Lessees agree to pay, without demand, to Lessors as monthly rent for the demised premises, the sum of $_________, in which the payments are due on or before the _____________ day of each month. The first payment will be due on or before __________________. 2. SECURITY & OPTION. Upon the execution of this lease, the Lessee’s shall pay unto the Lessors, the first month’s rent as well as the sum of $_________ as security for the faithful performance by Lessees of the terms hereof, to be returned to Lessees, without interest, on the full and faithful performance by them of the provisions hereof, plus the sum of $____________as down payment for the option to purchase the aforementioned property. This sum is nonrefundable. 3. USE. The Lessees shall use the premises hereby leased exclusively for a private residence. Lessees shall be permitted to access the above dwelling for the purpose of showing the property to perspective tenants, contractors, and partners. 4. PERSONAL PROPERTY. All personal property placed or moved in the premises above described shall be at risk of the Lessees or owner thereof, and Lessors shall not be liable for any damage to

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said personal property, or to the Lessees arising from any act of negligence of any co-tenant or occupants of the building or of any other person whomsoever. 5. COMPLIANCE. The Lessees shall promptly execute and comply with all statutes, ordinances, rules, orders, regulations and requirements of the federal, state, and city government and of any and all their departments and bureaus applicable to said premises, for the correction, prevention, and abatement of nuisances or other grievances, in, upon, or connected with said premises during said term. 6. FIRE. Lessee will not allow any items on or in the dwelling, which will endanger the habitants or the premises. That in the event the premises are destroyed or so damaged by fire or other unavoidable casualty as to be unfit for occupancy or use, then the rent hereby reserved, or a fair and just proportion thereof, according to the nature and extent of the damage sustained, shall, until the said premises shall have been rebuilt or reinstated, be suspended and cease to be payable, or this lease shall, at the election of the Lessor, thereby be determined and ended, provided, however, that this agreement shall not be construed so as to extend the term of this lease or to render the Lessor liable to rebuild or replace the said premises. 7. ACCEPTANCE. Lessees hereby accept the premises in the condition they are in at the time beginning of this lease and agree to maintain said premises in the same condition, order and repair as they are at the commencing of said term, excepting only reasonable wear and tear. Lessee agrees to pay for all repairs costing less than $500.00 each month arising from the use thereof under this agreement, and to make good to said Lessors immediately upon demand any damage to water apparatus, or electric lights or any fixture, appliances or appurtenances of said premises, or of the building, caused by any act of neglect of Lessees, or of any person or persons in the employ or under the control of the Lessees. In the event of any default by Lessor or then in addition to any other remedies available to Lessee at law or in equity Lessee shall have the option to terminate this lease and all rights by giving written notice of intention to terminate, via certified mail. 8. TERMS OF CONTRACT. It is understood and agreed between the parties hereto that time is of the essence of this contract and this applies to all terms and conditions contained herein. Lessees shall have the unqualified right to sublet and/or assign, sell, transfer, and convey any rights which the Lessee or their administrators, successors, executors and heirs may have in this contract to a third party without written notice. Any assignment will release Lessees from any liability, as new assignee will accept all rights, obligations and responsibilities agreed upon in this agreement between Lessor and Lessees. 9. NOTICE. It is understood and agreed between the parties hereto that written notice by certified mail or delivered to the premises hereunder shall constitute sufficient notice to the Lessees and written notice by certified mail or delivered to the office of the Lessors shall constitute sufficient notice to the Lessors, to comply with the terms of this contract. The Lessor’s mailing address is ______________________________.

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10. RIGHTS. The rights of the Lessors under the foregoing shall be cumulative, and failure on the part of the Lessors to exercise promptly any given rights hereunder shall not operate to forfeit any of the said rights. 11. UTILITIES. The Lessees shall be responsible for the payment of all utility bills (water, electricity, telephone, etc.) and specifically including, but not limited to glass breakage and all doors and screens. The Lessors will be responsible for all structural repairs, meaning the roof, exterior walls, foundation, and to pay all repairs costing greater than $500.00 per incident. In the event Lessor is delinquent on any payments required under this agreement to include repairs and maintenance, Lessee shall have the right to make such payments as necessary to cure defaults or make said repairs on behalf of the Lessor. Any payments made by Lessee will be credited to Lessee on a two-to-one basis (2 to 1). The closing agent will apply said credit towards the purchase price at the time of closing. 12. REPAIRS. The Lessees will permit the Lessors or their agent, at any reasonable time, to enter said premises or any part thereto for the purpose of exhibiting the same or making repairs thereto. 13. RECOVERY. If either party of this agreement shall bring legal action for enforcement of said agreement, the prevailing party shall recover the cost of the proceedings including reasonable attorney fees. 14. EMINENT DOMAIN. If the leased premises, or any part thereof are taken by virtue of eminent domain, this lease shall expire on the date when the same shall be so taken and the rent shall be apportioned as of said date. Lessee shall be entitled to FULL refund of any option consideration money and security deposits. 15. BENEFIT. All covenants and agreements of this lease shall be binding upon and inure to the benefit of the heirs, executors, administrator and assigns of the Lessor and Lessee, without affecting the restrictions imposed by Section 3 hereof. 16. RIGHT TO EXTEND. Lessee shall have the right to extend the agreement for ________ months, for an additional fee of $_________. 17. CHATTELS. The said Lessees hereby pledge and assign to the Lessors all the furniture, fixtures, goods and chattels of said Lessees which shall or may be brought or put on said premises as security for the payment of the term herein reserved. 18. VALIDITY. It is expressly agreed between the parties that if any clause of this lease be found unconscionable it shall not affect the validity of the remainder of this lease. 19. ENTIRE AGREEMENT. Neither party has made any representation or promise, except as contained herein. Any and all modifications to this agreement must be in writing and signed by Lessee/Lessor and/ or assigns. Chapter 6: Paperwork 20. INSPECTIONS. Real property taxes on the property, both general and special assessments, if any, for the current fiscal year shall be prorated for the close of escrow and be paid by the Lessor.

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Also, the Lessors shall provide the Lessees with a certificate from a licensed and bonded exterminator showing that there is no evidence of termite infestation in improvements on said property. Should termite eradication be required, the Lessors shall perform the same at their own expense. The Lessees shall examine the leasehold premises to determine that the premises are in good and inhabitable condition, as are the condition of the electrical, plumbing and heating system, and if they are not, said leasehold period shall not commence until the premises are in such inhabitable condition. In addition, the Lessees shall examine said premises and prepare a list of those items damaged at the commencement of the leasehold period. Lessees agree to notify Lessor immediately upon first discovery any signs of serious dwelling problems to include leaking roof, dysfunctional heating/air conditioning systems, spongy floor, crack in foundation, moisture in ceiling, leaking water heater or evidence of termites. 21. PURCHASE. Lessees shall have the option to purchase said premises for the purchase price of $________________. This option may be exercised at anytime during the lease period upon notice to the Lessors in writing by certified mail. The Lessees shall place with _____________________ (title company/attorney), the option payment specified in paragraph (2) above paid by the Lessees to the Lessor in escrow as earnest money towards the purchase of said property. $_____________ (amount) of all rents paid by the Lessee up to the time of the exercise of the option shall be credited to the down payment. Should the Lessee exercise their option, the Lessors shall have ____________ days to provide Lessees with an updated abstract showing their title to be good, marketable, and insurable. The Lessees shall close the transaction within ______________ days from the delivery of said abstract. The closing costs incurred with closing escrow shall be paid at the close of escrow as follows: Lessee to pay for _____________ closing costs; Lessor to pay for their own closing costs. This lease shall terminate upon the closing of the subject property and the Lessee shall not be liable for any rent subsequent to the closing date. All monies put for security shall be returned to the Lessees at that time. 22. CONTEXT. The terms Lessor and Lessee as herein contained shall include singular and/or plural, masculine, feminine, and/or assigns neuter, heirs, successors, personal representatives, and/or assigns wherever the context so requires or admits. 23. AGREEMENT. This agreement constitutes the entire agreement between the Lessee and the Lessor, as written. No further promises have been made to one another whether it is written or verbal. 24. RIGHT OF RESCISSION. Lessee has _______________ business days to cancel this agreement. The purpose of this right to cancel option is to allow Lessee time to properly inspect above said property. In the event that Lessee decides to cancel agreement within the allotted time; all deposits and options, consideration, and monies shall be refunded promptly. 25. DISCLAIMER. Parties in this agreement by their signatures agree not to hold preparer of this document for any error, mistakes, omissions or negligence.

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X ____________________________ X __________________________ Lessor: Date Lessee:

X ____________________________ X __________________________ Lessor: Date Lessee:

State of ____________________________________________________

County of __________________________________________________





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Blank Memorandum Of Option THIS AGREEMENT made and entered into on ____________________ On this date, the following

parties entered into an agreement in which ______________________ acquired an option to

purchase an interest in property owned by _________________________.

The property is described as: _______________________________________________________ Address _______________________________________________________ City State Zip Code Legal Description: (To be attached.)

1. The term of this agreement is _______ years, running through midnight __________. 2. As part of this agreement, ____________________ agree not to further encumber the property, nor sell any interest in the property during the term of this agreement. Any encumbrance placed on the property after this agreement is properly executed and recorded, including leases will be subordinate to this agreement and will be extinguished by the proper execution of this contract. 3. This agreement will bind heirs, executors, administrators, successors, legal representatives, and assigns of each party to this agreement. 4. In the event of foreclosure, the owners’ equity at the sale and any right of redemption shall transfer to the Optionee without further compensation and this contract shall serve as conveyance without further action. Chapter 6: Paperwork

Signed and sealed this _____ day of _________, 20____.

X___________________________ X____________________________ Seller Buyer

X___________________________ X____________________________ Seller Buyer

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State of _________________ County of _________________ The foregoing instrument was acknowledged before me this ________ day of _________,

20________by ______________________________, who is/are personally known to me or who

has/have produced _______________________________________ as identification.

____________________________________ Notary My Commission Expires: (Seal)

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Blank Assignment Of Option To Purchase Real Estate For value received, ___________________ (Seller), assignor, assigns to __________________

(Buyer) assignee, all rights and interest of assignor in an agreement, dated _________________

whereby assignor was given the option from ________________________ (Seller), the following

described real estate at a price and under the terms and conditions therein contained:

_______________________________________________________ Address _______________________________________________________ City State Zip Code Legal Description: (To be attached.) Assignor, by virtue of this assignment, grants to assignee the right to exercise or reject the option in good faith and the right to recover any moneys deposited by assignor to receive said option. Dated ___________________ .

X___________________________ X____________________________ Seller Buyer

X___________________________ X____________________________ Seller Buyer

State of __________________

County of _________________

The foregoing instrument was acknowledged before me this ________day of _________,

20________by ______________________________,who is/are personally known to me or who

has/have produced _______________________________________ as identification.

____________________________________ Notary My Commission Expires: (Seal)

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Blank Addendum To Lease/Lease Option Agreement Monthly payments are subject to change/increase on an annual basis due to increases in taxes, insurance, HOA or any other easements that are the responsibility of the homeowner. The tenant/buyer will be notified in writing by certified mail with verifiable proof from the landlord/seller 30 days prior to the necessary increase. The tenant/ buyer reserves the right to verify any and all changes to the monthly payment during the 30 days prior to the change. Any increase will be a dollar for dollar increase and the landlord/seller will not be experiencing a profit from any all increases to the monthly payment stated in the original agreement. The purpose of this addendum is to prevent the landlord/seller from taking on any future costs that are the responsibility of the occupants.

X___________________________ ____________________________ Seller Date

X___________________________ ____________________________ Seller Date

X___________________________ ____________________________ Buyer Date

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Paperwork With Tenant/Buyers Learning Objective • Review and practice using the paperwork that is essential to securing a qualified-tenant buyer Paperwork is as necessary with buyers as it is with sellers, and this is especially true with a creative-financing arrangement like a lease option. For that reason, it is important that you take some time to review the forms you will need to complete lease option transactions by properly completing paperwork with your tenant/buyers. The better you are at being a master of the paperwork side of the business, the better position you are in to negotiate better deals! As a fundamental, remember that you are offering a great way for a buyer to get their so-called foot in the door, when you extend opportunities for tenant/buyers. By virtue of this, you are in the driver’s seat and shouldn’t feel obligated to negotiate or let the tenant/buyer dictate terms. This will make the paperwork process easier and one that you can feel you are in command of throughout the process. Customer Poll Are you more comfortable now with lease option paperwork?

Paperwork With Tenant/Buyers: Summary The paperwork you complete with a tenant/buyer has the same three-primary purposes as the paperwork with sellers. Just to recap, first, it puts you in a secure position that protects your interest in your deal. Second, it gives you a certain amount of control over how the deal proceeds. Last, it sets the table for the numerous paydays you will have from a quality sandwich lease option. 1. Rental Application: Not notarized, not recorded. Gather as much information as you can to start to qualify the buyer to determine if they are going to be able to qualify for the property. (Keep on file.)

Purpose: _______________________________________________

_______________________________________________________ 2. Authorization to Release Information: Not notarized, not recorded.

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You need this document filled out to be able to check their credit. This information will tell you what the buyer needs to do and how long it will take for them to qualify for financing on the property.

Purpose: _______________________________________________

_______________________________________________________

Once you qualify the buyer, you move forward with additional documents. 3. Residential Lease Agreement: Not notarized or recorded. (Must get a deposit because you want to maintain the Landlord/Tenant relationship.)

Purpose: ___________________________________________________

___________________________________________________________ 4. Option to Purchase Real Estate: Not notarized, not recorded. (Do not include the legal description so the document cannot be recorded.) Lease agreement supersedes the Option to Purchase and must be adhered to or the Option Purchase becomes null and void.

Purpose: ___________________________________________________

___________________________________________________________ 5. Option to Purchase Disclosure: Not notarized, not recorded.

Purpose: ___________________________________________________

___________________________________________________________ 6. Addendum to Option to Purchase Real Estate: (Optional) Not notarized, not recorded.

Purpose: ___________________________________________________

__________________________________________________________

As with any rental agreement, you will also want to convey a Lead Based Paint disclosure to Tenant/Buyer.

PAPERWORK WITH TENANT/ BUYERS: SAMPLES

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Just as was the case with seller paperwork, the best way to become familiar with lease option tenant/buyer paperwork is to review samples and then practice filling out the paperwork yourself. The samples included in this section are also for reference only; you’ll need to have your paperwork reviewed in your own area to make sure it is compliant with your state laws!

Sample Rental Application Name _____________________________________________________

Date of Birth ________________________________________________

Home Phone ______________________Work Phone ______________

Social Security # ____________________________________________

Driver’s License # ___________________________________________

Present Address ____________________________________________

How long at this address? ____________________Rent $__________

Reason for moving ___________________________________________

Owner/Manager_____________________________________________

Previous Address ___________________________________________

___________________________________________________________

How long at this address? ____________________Rent $__________

Reason for moving ___________________________________________

Owner/Manager_____________________________________________

Name, relationship and age of every person to live with you:

___________________________________________________________

___________________________________________________________

___________________________________________________________

___________________________________________________________

___________________________________________________________

___________________________________________________________

___________________________________________________________

___________________________________________________________

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Any pets? _____ Describe _____________________________________

___________________________________________________________

___________________________________________________________

___________________________________________________________

Waterbed? _________

Present Occupation __________________________________________

Employer Phone _____________________________________________

Supervisor Phone ____________________________________________

How long with this employer? _________________________________

Previous Occupation _________________________________________

Employer Phone ____________________________________________

Supervisor Phone ___________________________________________

How long with this employer? _________________________________

Current gross income per month (before deductions) $____________

Amount of alimony or child support you pay: $ _____receive: $_____

Savings Account Bank ______________________________________

Branch ____________________________________________________

Account No. ________________________________________________

Checking Account Bank ______________________________________

Branch ____________________________________________________

Account No. ________________________________________________

Major Credit Card ___________________________________________

Account No. ________________________________________________

Credit Reference ____________________________________________

Account No. _______________________________________________

Balance Owed ______________________________________________

Payment ___________________________________________________

Have you ever filed bankruptcy? ___________________

Have you ever been evicted? ______________

Vehicle(s):

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Make _______________Model _______________________Year______

Make _______________Model _______________________Year______

Personal Reference:

Name _____________________________________________________

Address ___________________________________________________

Phone _____________________________________________________

Contact in Emergency:

Name _____________________________________________________

Address ___________________________________________________

Phone _____________________________________________________

I declare that the statements above are true and correct, and I hereby authorize verification of references given and a credit check.

_________________ _________________________________ Date Signature

Sample Rental Application Deposit Receipt This deposit of $______________ is refundable upon the following conditions:

1. Prospective tenant is not approved. 2. If approved, it may be applied to rent.

If the prospective tenant cancels after landlord has taken the time, expense and trouble to check the tenant out, the deposit is NOT refunded; landlord will keep the deposit to pay for time and trouble. Prospective Tenant __________________________________________

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Landlord/Agent _____________________________________________

(Date Refunded) ____________________________________________

Prospective’s Signature ______________________________________

Money Received ____________________________________________

Sample Rental Application Authorization Dated: _________________________________________

Tenant: _____________________________________________________

Name: _____________________________________________________

Address: ____________________________________________________

Phone: _____________________________________________________

Social Security#: _____________________________________________

Date of Birth: ________________________________________________

Landlord: ___________________________________________________

Name: _____________________________________________________

Address: ___________________________________________________

Phone: _____________________________________________________

Property: ___________________________________________________

Address: ___________________________________________________

Legal Description: ______________________________________________

____________________________________________________________

____________________________________________________________

I/We, _______________________________________________________, being the tenant of

the above described property do hereby authorize and grant permission to

__________________________________, being the landlord of the above described property,

to contact a/our lender or lenders or any of their agents for the purpose of gathering the

necessary information concerning the successful performance of our option to purchase on the

above described property.

________________________________________ ______________

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Tenant/Optionee Date ________________________________________ ______________ Tenant/Optionee Date

Sample Residential Lease Agreement THIS AGREEMENT made and entered into on January 24, 2010, by and between XYZ Home Solutions (landlord), hereinafter referred to as “Lessor;” and Cliff and May Newlywed (tenant), hereinafter referred to as “Lessee.” PROPERTY: Lessor leases to the Lessee that certain residence described as:

1234 Main St _____________________________ Address Anytown, USA 1 2345 City State Zip Code 1. TERM: The term of this lease shall be for a period of one (1) year, commencing February 1, 2010, and ending April 30, 2011. This lease can be extended for one (1) additional year(s). 2. RENTAL: Lessee shall pay unto the Lessor the sum of $995.00 on the above described day of each month during the term of this lease, said sums being delivered to Lessor at the address so designated by Lessor. 3. SECURITY: Lessee has deposited with the Lessor the sum of $100.00 as security for the full and faithful performance by the Lessee of all terms and covenants contained herein. 4. USE: The property shall be occupied by Lessee and family, consisting of two (2) adults and two (2) children. Lessee agrees to use the property for residential purposes only. No animals or pets shall be permitted upon the subject property. 5. BROKERAGE: No real estate agents are involved in this transaction, nor are any entitled to brokerage commission as a result of this Lease Agreement. 6. DAMAGE TO PROPERTY: Should the property be partially damaged by casualty not due to the negligence of Lessee, or person having the consent of Lessee, the property shall be repaired immediately by Lessor and any rentals for the period that the property is untenantable shall be abated. However, should the property suffer substantial damages, Lessor may elect to terminate this lease, and rentals shall be adjusted up to the date of casualty.

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7. CONDEMNATION: Should the subject property, or part thereof, be taken by the of exercise of condemnation, eminent domain, or other governmental action, this lease shall terminate. 8. LESSEE’S OBLIGATIONS:

a. Maintain the subject property in the same condition as when leased, excepting only the reasonable use of said property. b. Comply with all applicable housing, building and health codes. c. Pay for all utilities utilized, including electricity, gas, water, sewer, and telephone. d. Keep the property clean and sanitary. e. Keep all plumbing fixtures in repair. f. Remove all garbage from the property. g. Use the facilities and appliances in a reasonable manner. h. Refrain from damaging Lessor’s property. i. Conduct himself, and others on the property with his consent, in a reasonable manner. j. Provide Lessor with a key and access to the property. k. To pay for all repairs under $500.00 not covered by the owner’s insurance policy.

9. LESSOR’S OBLIGATION:

a. Comply with all applicable housing, building, and health codes. b. Maintain all basic structural and service components of the property so that same are capable of resisting normal forces and loads.

10. RIGHT OF ENTRY: Lessor shall have the right of entry upon the property to inspect the same, make repairs and exhibit the property to others, provided that such entry is at reasonable times. 11. LIABILITY: Lessee accepts the condition of the subject property, waiving inspection of same by Lessor, and repair of defects, if any. Lessee further agrees to indemnify Lessor against any loss or liability arising out of Lessee’s use of the property, including those using the property with Lessee’s consent. However, such indemnification shall only be applicable to the extent that Lessor’s loss is not covered by insurance proceeds.

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12. TAXES: Any Taxes that may be imposed by governmental authority, whether they be sales, use, or resort taxes, shall be the obligation of Lessee. 13. ASSIGNMENT: Lessee may not make an assignment of this lease, nor sublet any part of the subject property, without prior written consent, which consent shall not be unreasonably refused by Lessor. 14. DEFAULT: In the event of a default, by either party, of any of the terms herein contained, the non-defaulting party shall be entitled to all remedies under law, reasonable attorney’s fees and court costs. Should it become necessary for Lessor to apply any part of the security to correct a default, Lessee agrees to restore the security to its original amount. 15. PERSONAL PROPERTY: Lessee shall be responsible for insuring his own personal property. Any personal property placed upon the subject property shall be at the sole risk of Lessee. Any property of Lessee remaining upon the leased premises after the termination of this lease shall be presumed abandoned, and may be disposed of by Lessor. 16. FURNISHED PROPERTY: If the subject premises are rented furnished, Lessee acknowledges receipt of inventoried furnishings in good condition. A copy of said inventory shall be attached hereto. 17. HOUSE: If subject property is a house or townhouse, then Lessee shall be responsible for waste removal, exterminating service, yard and pool maintenance. Chapter 7: Paperwork 18. ALTERATIONS AND IMPROVEMENTS: Lessee shall make no alterations to the subject property without Lessor’s prior written consent. Any improvements made by Lessee shall become the property of Lessor at the conclusion of the lease. 19. WAIVER AND SEPARABILITY: The waiver of any one breach of any provisions in this lease shall not be considered a waiver of that or any other provision herein. Should any portion of this lease be adjudged invalid, such invalidation shall not operate to invalidate the remaining provisions hereof. 20. BINDING EFFECT: This agreement shall be binding upon the parties hereto, their heirs, successors, assigns and legal representatives. 21. ENTIRE AGREEMENT: This lease constitutes the entire agreement between the parties, and may not be modified, unless in writing and executed by the parties. IN WITNESS WHEREOF the parties hereto have executed the foregoing Lease Agreement the day and year first above written.

WITNESS: ___________________ LESSOR:____________________ __ Your Name, Title, XYZ Home Solutions

LESSOR:______________________

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Your Name, Title, XYZ Home Solutions

WITNESS: ___________________ LESSEE:____________________ __ Cliff Newlywed

LESSEE:______________________ May Newlywed

Sample Option To Purchase Real Estate THIS AGREEMENT, made April 24, 2010, by and between the seller, XYZ Home Solutions (hereinafter called Optionor), and Cliff and May Newlywed, the buyer, (hereinafter called Optionee). WITNESSETH, that for and in consideration of the sum of $5,000.00 paid by Optionee to Optionor, the receipt whereof is hereby acknowledged, the Optionor hereby gives and grants unto the Optionee, his heirs, personal representatives, and assigns, the right of purchasing, on or before April 30, 2012 , the following described real estate: Address: 1234 Main St., Anytown, USA 12345 For the total purchase price of $105,000.00 of which the sum of $5,000.00 shall be paid in cash and the balance of $100,000.00 shall be paid as follows: See Below. If the Optionee elects to purchase the said real estate pursuant to this Option, Optionee shall give written notice of such to Optionor, by registered or certified mail to: XYZ Home Solutions, 1234 Nice Ave., Anytown, USA 12345, on or before April 1, 2012. All of the terms of the residential lease agreement must be complied with in order for this Option To Purchase Real Estate to be valid. If the Optionee shall so elect to purchase said real estate, and shall mail a written notice of such election as herein provided within the time required, and shall tender the required amount of cash and deliver a promissory note for the balance, properly executed and payable in accordance with the terms agreed to herein, together with a real estate mortgage or deed of trust, real estate contract or other security acceptable to Optionor, securing said note, on the real estate herein above particularly described, then Optionor agrees to convey the real estate to Optionee, by warranty deed, free and clear of all liens, encumbrances, or taxes, to the date of closing of the purchase. Chapter 7: Paperwork

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Optionor further agrees, that upon such election by Optionee, to deliver to Optionee, within thirty (30) days after receipt of such written notice of election to purchase, an abstract of title or a policy of title insurance in the full sum of $105,000.00 showing merchantable title to said real estate, and Optionee shall have a reasonable time, not to exceed five days, to examine the title insurance and to complete and close said purchase. If the Optionee does not exercise the privilege of purchase herein given and does not fully perform the conditions herein within the time herein stated, the privilege shall wholly cease and terminate and the sum herein paid by Optionee shall be retained by Optionor as nonrefundable. This property is to be sold as is, where is, how is, and the buyers acknowledge that they have inspected the property and accept it in current condition. The Optionees are responsible for all repairs to the property during the term of this agreement. This agreement may be extended for one year for an additional fee of $ 1,000.00. This fee will not be credited towards the purchase price.

_________________________________ April 24, 2010 Optionee: Cliff Newlywed Date

_________________________________ April 24, 2010 Optionee: May Newlywed Date

_________________________________ April 24, 2010 Optionee: Your Name, Title, XYZ Home Solutions Date

_________________________________ ________________________ Optionee: Date

Sample Option To Purchase Disclosure Property Address: 1234 Main St., Anytown, USA 12345 Date: April 24, 2010 I/We, the undersigned Lessee execute this disclosure form after having read and been given (or voluntarily waived) the opportunity to seek advice as to the legal and financial implications of the attached residential lease agreement and option to purchase real estate agreement. Specifically, we agree and understand that this arrangement is essentially a landlord-lessee relationship, and that we have an option to purchase the property under the terms stated in the attached option to purchase agreement. We agree and understand that should we default on the residential lease agreement by failing to make timely payments, failing to keep the property in good repair or any other reason, that we will no longer option to purchase will become void. In that event we understand that we will no longer have the option to purchase the property, nor do we have any rights, interests or claims to it.

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I/We have read the attached residential lease agreement and option to purchase real estate agreement and they have been thoroughly explained to us. Specifically, we agree and understand that should we fail to purchase the property for any reason, we are not entitled to any money back (except our security deposit, if all rent is paid and the property is left in good condition after we leave). The landlord and/or his agent have not made any representations not contained in this disclosure or the attached residential lease agreement and option to purchase real estate agreement as to the property, its ownership, the condition, the neighborhood or the value of the property. Lessee agrees and understands that Landlord is not acting as a real estate broker or agent in this transaction. I/We understand that landlord is not the titled owner, but rather is acting as a principal/owner or principal/optionee under an agreement of sale or lease/option with the owner of the property, and that our estate of possession is subordinate to a master lease between landlord and the titled owner.


_________________________________ April 24, 2010 Optionee: May Newlywed Date

_________________________________ April 24, 2010 Optionee: Your Name, Title, XYZ Home Solutions Date

_________________________________ ________________________ Optionee: Date

Sample Option To Purchase Disclosure Monthly payments are subject to change/increase on an annual basis, due to increases in taxes, insurance, HOA or any other easements that are the responsibility of the homeowner. The tenant/ buyer will be notified in writing by certified mail with verifiable proof from the landlord/seller 30 days prior to the necessary increase. The tenant/buyer reserves the right to verify any and all changes to the monthly payment during the 30 days prior to the change. Any increase will be a dollar-for-dollar increase and the landlord seller will not be experiencing a profit from any and all increases to the monthly payment stated in the original agreement. The purpose of this addendum is to prevent the landlord/seller from taking on any future costs that are the responsibility of the occupants.


_________________________________ April 24, 2010

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Optionee: May Newlywed Date

Activity: Paperwork With Tenant/Buyers Now that you have reviewed the samples of all paperwork you will need when working with a lease option tenant/buyer, you have a chance to go through it yourself, giving you valuable practice with both the paperwork itself and the process of presenting it to a client. Your “client” will be one of your classmates, who you will interview as needed and then walk through the paperwork included in the following pages. Once you are done, change roles so everyone has a chance to participate. Your trainer will again be browsing the room throughout the exercise and will be available if you have questions.

Blank Rental Application Name __________________________________ Date of Birth_________ Home Phone ___________________Work Phone __________________ Social Security # __________________________ Driver’s License # _________________________ Present Address _____________________________________________ How long at this address? ________________________Rent $ _______ Reason for moving ___________________________________________ ____________________________________________________________ Owner/Manager _____________________________________________ Previous Address ____________________________________________ How long at this address? ________________________Rent $ _______ Reason for moving ___________________________________________ ___________________________________________________________ Owner/Manager______________________________________________ Name, relationship and age of every person to live with you ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ Any pets? _____ Describe _____________________________________ ____________________________________________________________ ____________________________________________________________ Waterbed? _________ Present Occupation __________________________________________ Employer Phone _____________________________________________ Supervisor Phone ____________________________________________

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How long with this employer? __________________________________ Previous Occupation _________________________________________ Employer Phone _____________________________________________ Supervisor Phone ____________________________________________ How long with this employer? __________________________________ Current gross income per month (before deductions) $______________ Amount of alimony or child support you pay: $ ______receive: $______ Savings Account Bank ________________________________________ Branch _____________________ Account No. ____________________ Checking Account Bank _______________________________________ Branch _____________________ Account No. ____________________ Major Credit Card _________Account No.________________________ Credit Reference __________Account No. _______________________ Balance Owed ____________________Payment___________________ Have you ever filed bankruptcy? ___ Have you ever been evicted? ____ Vehicle(S): Make ________________Model __________________________Year___ Make ________________Model __________________________Year___ Personal Reference: Name ______________________________________________________ Address ____________________________________________________ Phone ______________________________________________________ Contact In Emergency: Name ______________________________________________________ Address ____________________________________________________ Phone _____________________________________________________ I declare that the statements above are true and correct, and I hereby authorize verification of references given and a credit check.

____________________________ ___________________________ Date Signature

Rental Application Deposit Receipt This deposit of $______________ is refundable upon the following conditions:

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1. Prospective tenant is not approved. 2. If approved, it may be applied to rent.

If the prospective tenant cancels after landlord has taken the time, expense and trouble to check the tenant out, the deposit is NOT refunded; landlord will keep the deposit to pay for time and trouble. Prospective Tenant __________________________________________ Landlord/Agent _____________________________________________ (Date Refunded) ____________________________________________ Prospective’s Signature ______________________________________ Money Received ____________________________________________

Blank Authorization To Release Information Authorization Dated: ___________________________________________ Tenant: Name: _____________________________________________________ Address: ___________________________________________________ ___________________________________________________________ Phone: _____________________ Social Security#: ________________ Date of Birth: _______________________________________________ Landlord: Name: _____________________________________________________ Address: __________________________________________________ Phone: ____________________________________________________ Property: Address: __________________________________________________ Legal Description: _______________________________________________________ ___________________________________________________________ ___________________________________________________________ I/We, ___________________________________________, being the tenant of the above described property do hereby authorize and grant permission to _________________________, being the landlord of the above described property, to contact a/our lender or lenders or any of

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their agents for the purpose of gathering the necessary information concerning the successful performance of our option to purchase on the above described property.

____________________________ ___________________________ Tenand/Optionee Date

____________________________ ___________________________ Tenand/Optionee Date

Blank Residential Lease Agreement THIS AGREEMENT made and entered into on ___________, by and between _______________

(landlord), hereinafter referred to as “Lessor”; and ____________________(tenant), hereinafter

referred to as “Lessee.

PROPERTY: Lessor leases to the Lessee that certain residence described as: ____________________________________________

____________________________________________

1. TERM: The term of this lease shall be for a period of ________ year, commencing ______________, and ending ______________. This lease can be extended for _______ additional year(s). 2. RENTAL: Lessee shall pay unto the Lessor the sum of $_________ on the above described day of each month during the term of this lease, said sums being delivered to Lessor at the address so designated by Lessor. 3. SECURITY: Lessee has deposited with the Lessor the sum of $__________ as security for the full and faithful performance by the Lessee of all terms and covenants contained herein. 4. USE: The property shall be occupied by Lessee and family, consisting of ________adults and _______ children. Lessee agrees to use the property for residential purposes only. No animals or pets shall be permitted upon the subject property. 5. BROKERAGE: No real estate agents are involved in this transaction, nor are any entitled to brokerage commission as a result of this Lease Agreement. 6. DAMAGE TO PROPERTY: Should the property be partially damaged by casualty not due to the negligence of Lessee, or person having the consent of Lessee, the property shall be repaired immediately by Lessor and any rentals for the period that the property is untenantable shall be

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abated. However, should the property suffer substantial damages, Lessor may elect to terminate this lease, and rentals shall be adjusted up to the date of casualty. 7. CONDEMNATION: Should the subject property, or part thereof, be taken by the of exercise of condemnation, eminent domain, or other governmental action, this lease shall terminate. 8. LESSEE’S OBLIGATIONS:

a. Maintain the subject property in the same condition as when leased, excepting only the reasonable use of said property. b. Comply with all applicable housing, building and health codes. c. Pay for all utilities utilized, including electricity, gas, water, sewer, and telephone. d. Keep the property clean and sanitary. e. Keep all plumbing fixtures in repair. f. Remove all garbage from the property. g. Use the facilities and appliances in a reasonable manner. h. Refrain from damaging Lessor’s property. i. Conduct himself, and others on the property with his consent, in a reasonable manner. j. Provide Lessor with a key and access to the property. k. To pay for all repairs not covered by the owner’s insurance policy.

9. LESSOR’S OBLIGATION:

a. Comply with all applicable housing, building, and health codes. b. Maintain all basic structural and service components of the property so that same are capable of resisting normal forces and loads.

10. RIGHT OF ENTRY: Lessor shall have the right of entry upon the property to inspect the same, make repairs and exhibit the property to others, provided that such entry is at reasonable times. 11. LIABILITY: Lessee accepts the condition of the subject property, waiving inspection of same by Lessor, and repair of defects, if any. Lessee further agrees to indemnify Lessor against any loss or liability arising out of Lessee’s use of the property, including those using the property with Lessee’s consent. However, such indemnification shall only be applicable to the extent that Lessor’s loss is not covered by insurance proceeds.

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12. TAXES: Any taxes that may be imposed by governmental authority, whether they be sales, use, or resort taxes, shall be the obligation of Lessee. 13. ASSIGNMENT: Lessee may not make an assignment of this lease, nor sublet any part of the subject property, without prior written consent, which consent shall not be unreasonably refused by Lessor. 14. DEFAULT: In the event of a default, by either party, of any of the terms herein contained, the non-defaulting party shall be entitled to all remedies under law, reasonable attorney’s fees and court costs. Should it become necessary for Lessor to apply any part of the security to correct a default, Lessee agrees to restore the security to its original amount. 15. PERSONAL PROPERTY: Lessee shall be responsible for insuring his own personal property. Any personal property placed upon the subject property shall be at the sole risk of Lessee. Any property of Lessee remaining upon the leased premises after the termination of this lease shall be presumed abandoned, and may be disposed of by Lessor. 16. FURNISHED PROPERTY: If the subject premises are rented furnished, Lessee acknowledges receipt of inventoried furnishings in good condition. A copy of said inventory shall be attached hereto. 17. HOUSE: If subject property is a house or townhouse, then Lessee shall be responsible for waste removal, exterminating service, yard and pool maintenance. 18. ALTERATIONS AND IMPROVEMENTS: Lessee shall make no alterations to the subject property without Lessor’s prior written consent. Any improvements made by Lessee shall become the property of Lessor at the conclusion of the lease. 19. WAIVER AND SEPARABILITY: The waiver of any one breach of any provisions in this lease shall not be considered a waiver of that or any other provision herein. Should any portion of this lease be adjudged invalid, such invalidation shall not operate to invalidate the remaining provisions hereof. 20. BINDING EFFECT: This agreement shall be binding upon the parties hereto, their heirs, successors, assigns and legal representatives. 21. ENTIRE AGREEMENT: This lease constitutes the entire agreement between the parties, and may not be modified, unless in writing and executed by the parties. IN WITNESS WHEREOF the parties hereto have executed the foregoing Lease Agreement the day and year first above written.

___________________________________ ____________________ Optionee: Date

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___________________________________ ____________________ Optionee: Date

___________________________________ ____________________ Optionee: Date

___________________________________ ____________________ Optionee: Date

Blank Option To Purchase Disclosure Property Address: __________________________________________ Date: ___________________ I/We, the undersigned Lessee execute this disclosure form after having read and been given (or voluntarily waived) the opportunity to seek advice as to the legal and financial implications of the attached residential lease agreement and option to purchase real estate agreement. Specifically, we agree and understand that this arrangement is essentially a landlord-lessee relationship, and that we have an option to purchase the property under the terms stated in the attached option to purchase agreement. We agree and understand that should we default on the residential lease agreement by failing to make timely payments, failing to keep the property in good repair or any other reason, that our option to purchase will become void. In that event we understand that we will no longer have the option to purchase the property, nor do we have any rights, interests or claims to it. I/We have read the attached residential lease agreement and option to purchase real estate agreement and they have been thoroughly explained to us. Specifically, we agree and understand that should we fail to purchase the property for any reason, we are not entitled to any money back (except our security deposit, if all rent is paid and the property is left in good condition after we leave). The landlord and/or his agent have not made any representations not contained in this disclosure or the attached residential lease agreement and option to purchase real estate agreement as to the property, its ownership, the condition, the neighborhood or the value of the property. Lessee agrees and understands that Landlord is not acting as a real estate broker or agent in this transaction. I/We understand that landlord is not the titled owner, but rather is acting as a principal/owner or principal/optionee under an agreement of sale or lease/option with the owner of the property, and that our estate of possession is subordinate to a master lease between landlord and the titled owner.

_______________________________ ___________________________ Lessee: Lessee

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________________________________ ____________________________ Date Date

________________________________ ___________________________ Lessee: Lessee

________________________________ ___________________________ Date Date

Blank Addendum To Lease/Lease Option Agreement Monthly payments are subject to change/increase on an annual basis, due to increases in taxes, insurance, HOA or any other easements that are the responsibility of the homeowner. The tenant/ buyer will be notified in writing by certified mail with verifiable proof from the landlord/seller 30 days prior to the necessary increase. The tenant/buyer reserves the right to verify any and all changes to the monthly payment during the 30 days prior to the change. Any increase will be a dollar-for-dollar increase and the landlord seller will not be experiencing a profit from any and all increases to the monthly payment stated in the original agreement. The purpose of this addendum is to prevent the landlord/seller from taking on any future costs that are the responsibility of the occupants.

X ________________________ ______________________ Tenant/Optionee Date

X ________________________ ______________________ Tenant/Optionee Date

BLANK ADDENDUM TO LEASE/LEASE OPTION AGREEMENT I understand that the option consideration provided is nonrefundable. If I, as Lessee, do all of the following, $_______________ will be refunded:

• Provide landlord with 60 days notice to vacate • All rents are paid in full through date vacated • Allow landlord to show property to new prospective Lessee’s during the 60 days notice to vacate • Keep property in show condition • Clean property out of all my possessions • Property is left in good condition except for normal wear and tear • Hand keys to landlord upon inspection and departure • Provide landlord with a paid receipt for all utilities

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_______________________________ ___________________________ Lessee: Date

________________________________ ____________________________ Lessee: Date

________________________________ ___________________________ Landlord Date

_________________________________ as identification. _______________________________ Notary My Commission Expires (Seal)

BLANK ADDENDUM TO LEASE/LEASE OPTION AGREEMENT Monthly payments are subject to change/increase on an annual basis due to increases in taxes, insurance, HOA or any other easements that are the responsibility of the homeowner. The tenant/buyer will be notified in writing by certified mail with verifiable proof from the landlord/seller 30 days prior to the necessary increase. The tenant/ buyer reserves the right to verify any and all changes to the monthly payment during the 30 days prior to the change. Any increase will be a dollar-for-dollar increase and the landlord/seller will not be experiencing a profit from any all increases to the monthly payment stated in the original agreement. The purpose of this addendum is to prevent the landlord/seller from taking on any future costs that are the responsibility of the occupants.

X ________________________ ______________________ Seller Date

X ________________________ ______________________ Seller Date

X ________________________ ______________________ Buyer Date

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Chapter 7: The Closing

Process for Lease

Options Learning Objectives • Review and be able to explain the simultaneous closing process that is used to exit a sandwich

lease option transaction • Identify the specific need for business capital in some lease option transactions and how

private lenders can fill this critical need THE LEASE MODEL REVISITED You are now through much of the lease option process and it is time to learn how to close your deals, so you can move on to others and also get paid in the process. Let’s see where you are at in the Model that accompanies the course: The course content centers on the LEASE Model, an acronym that stands for:


Evaluating Profit Potential


Secure the Deal

Exiting the transaction

The Closing Process For Lease Options Even though there are multiple profit centers in a sandwich lease option, the largest is typically the margin from the final closing of the property with the tenant/buyer. This leads to a common question, given your unusual positioning in the deal:

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“How does the investor get paid from the closing, given that they are neither the seller nor the buyer in the deal?” Chapter 8: The Closing This is a great question and naturally one that is worth addressing. There are two common ways to get the job done here. One you may be familiar with and the other you may not. These closing options are:

1. ____________________________________ 2. ____________________________________

The process of contract assignment is similar to that for a traditional wholesale deal. You simply assign your option to purchase the property to the tenant/buyer, designating the expected profit margin for the deal as the so-called assignment fee. As with some assignments, the higher profit margins with many lease options could be a red flag to other parties in the deal, creating the need for a second option to close your deals. This second option is a simultaneous or double closing, the steps for which are shown in the next few pages. Whether you close your deals via assignment or via the double close, one thing remains consistent. You need to have your Power Team on board to make sure the process flows as smoothly as it possibly can. For this reason, you’ll also be reviewing team members you’ll need to make your closings a smooth process.

Setting Up A Double Close SAMPLE DEAL WITH THE SELLER

Term: 60 Months Current Value: $100K Agreed Price: $ 85K Appreciation Rate: 9 Percent Monthly Payment: $710.00 PITI

SAMPLE DEAL WITH TENANT/BUYER (T/B)

Term: 24 Months Current Value: $118,810 Agreed Price: $ 112,870 Appreciation Rate: 9 Percent Monthly Payment: $995.00

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THE SPECIFICS OF THE DOUBLE CLOSING PROCESS Title Company schedules the two following closings:

10:00 am – Tenant/Buyer from you, room #1

T/B Has The Cash To Close Contract #2 $112,870 Purchase Price $5,000 Option Consideration $107,870 Paid At Closing They Get Deed #2

10:15 am – Seller to you, room #2 Seller has Deed #1

Contract #1 $85,000 Sales Price $1,000 Option Consideration $84,000 Paid To Seller At Closing Less Payoffs

Time course:

10:00 Am T/B Arrives And Brings $107,870 In Certified Funds 10:15 Am Seller Arrives And Has The Deed 10:20 Am Seller Signs Deed And Gets $16,528.64. $85,000 - $68,471.36 = $16,528.64 10:25 Am You Get $22,870 + $5,000 OC 10:45 Am Record Deed #1 From Seller To You 10:50 Am Record Deed #2 You To T/B

Overcoming Challenges In The Closing

Process As with any aspect of the real estate business, lease options also have their occasional challenges and many are tied in with the closing process, as this is what brings the deal to its end and may often be unfamiliar to the parties involved. Common challenges that accompany the lease option closing process include:

• Parties who don’t show up for the closing • Uncooperative team members • Unanticipated liens • Inability for the buyer to obtain financing

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• Inability to fill out a deposit slip for your closing proceeds Four out of the five challenges mentioned above are real and one is hopefully not. Let’s discuss briefly ways to handle the primary closing issues you may face. CLOSING NO SHOWS One of the most common fears (especially with double closings) is the seller or buyer “no show.” Yes, this can happen and it occasionally does, forever appearing on the FEAR radar screen of novice investors. That said, given that all parties want the deal to get closed, how often do you really think this sort of things happens? As you might expect, less often than you might fear. Good communication with the parties who are set to appear, confirmation calls, and the like can all do wonders to avoid this potential challenge. POWER TEAM DIFFICULTIES While your Power Team may be initially unfamiliar with doing either assignments or double closings, these things can and should be cleared up before any scheduled closing. This type of situation is most common with a title company or closing agent, as they are most directly involved in the closing process. A good interview, followed by meetings to make sure the team member in question is fully aware of what they need to do, should help alleviate any closing table woes that trace back to your Power Team. LIENS Not to sound too much like a broken record, but this is not something that should surprise you at a closing. True, liens do sometimes surface during the term of a lease option and may even necessitate the assistance of an attorney or other remedial actions. That said, part of your role in the process is to be and remain aware of what is happening with your deal and this is something that can be avoided in most all cases. BUYER FINANCING (OR LACK THEREOF) While there is never an absolute guarantee that your tenant/buyer will be able to secure financing, this should not be something that you are blind-sided by at the closing table. Any challenges with your buyer obtaining financing should be “diagnosed” during their tenancy and regular reports from your buyer’s mortgage broker can keep you in the loop during the process. Chapter 8: The Closing

Team Members Needed For Lease Option

Closings You’ve all been encouraged to develop your Power Team so here are some of the key roles of Power Team members for closing your lease option deals.

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Real Estate Attorney: • Do not underestimate the value of a good attorney, and do not always go for the least expensive

one. Get some referrals from other successful investors and business people in your area and interview the attorneys carefully.

• It is a good idea that your attorney has a good understanding of accounting as it applies to real

estate as well. The reason being is that most litigation today involves the financial side of the investment business.

• Also, keep in mind that your attorney needs to do what you want him to do and when; you must

be in control. • Three keys your attorney must have is knowledge of the law, solid real estate experience, and a

good reputation. • Make sure you understand how your attorney charges you and how you are billed. Do not be

shy about negotiating here if you feel your attorney is charging too much. • Some states require attorneys to close and others do not. If you are in a state that uses attorneys

to close, make sure he is well versed in the straight option close technique. As with any contracts involving the real estate transaction, you will need to have your attorney look at and tweak the documents to the specific rules of your state.

• In terms of private money, explain to him what your plans are. He may be interested or know

someone who is interested in investing with you. Be careful that this is not viewed as a solicitation. Again, you will need him to look over the documentation that you use for your private money projects.

ATTORNEY INTERVIEW QUESTIONS: Opening phone call: “I am a REI looking for a RE Attorney to handle my affairs. Are you a RE Attorney or can you recommend one to me?” If Yes, “Do you invest in RE yourself?” If Yes, set appointment. At appointment:

• How many years have you been a RE Attorney? • What type of property do you invest in? • Why do I need a RE Attorney? (this will really let you know if he is on the ball) • How do you get paid and when do you get paid? • What other resources does your Firm offer? • Can you offer any asset protection advice? • Can you offer any entity creation advice?

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• What are the top three behaviors that land REIs in court? • Do you sit on the board of any Banks? If Yes, Can you make an introduction for me?

Mortgage Broker:

• It is crucial that you have a mortgage broker that specializes in investor loans, and subprime lending

• It is critical that your broker can help qualify your tenant/ buyers as well as understand the

closing process that you will be using • Watch out for unethical brokers who are eager to refinance you just so they can make a buck.

Ensure the refinance is to your advantage and not just saving a couple of points on your rate • A good broker will teach you everything you need to know about creative financing and

lenders Chapter 8: The Closing Process for Lease Options • When interviewing brokers, ask them what percentage of their business is subprime. If it is

not a majority, he/she may not be the right broker for you • Also ask about interest only loan products for your area and his opinion on them. As a rule of

thumb, interest only loan products are better for the higher appreciating markets or for properties you are going to do a buy fix and sell on

• Also ask the broker how many lenders he has access to and how many does he prefer to do

business with • It can also be extremely beneficial if your broker is connected to a national bank so loans can

be underwritten in house. In other words, is your broker also a mortgage banker? • “How many investors do you work with?” and “How many loans per month do you

complete?” are also excellent questions.

MORTGAGE BROKER INTERVIEW QUESTIONS:

Opening phone call: “Does your company specialize in B, C, D paper and non- conforming loans? (must be a YES to continue). Do you work with REIs? (must be a YES to continue). How many investors do you work with? If Yes to the first two questions, set an appointment. At appointment: For all of the following questions, we want to know what is your best/ highest Loan to Value (LTV) available for:

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(Notice we are not asking about interest rate) LTV and Loan Product Owner Occupied:

Single Units Duplexes Triplex’s/Quads 5+ units

Vacant:

Single Units Duplexes Triplex’s/Quads 5+ units

• Is second mortgage money available? • how much? • Do you have hard money? If NO, do you know who does? • Do you have Stated Income, no Documentation loans? • Do you have NENA, no employment, no Assets loans? • What areas of town are appreciating? • What areas of town are rents increasing? • What are the investors working with you doing? And where are they doing it? • how can I make your work easier? • What paperwork do you need from me? • Are you a corresponding lender? • Would you like me to bring you FHA buyers?

Title Company/Closing Agent Opening phone call: “Does your company work with REIs? (must be YES to continue). How many do you work with? (must be a good number 20-30 at least). If satisfied, set appointment. Chapter 8: The Closing At appointment:

• What is your fee schedule? • How much lead time do you require? • What documentation will you need? • Do you work with assignments and simultaneous closings? If not, would you be willing to sit

down with us so we can explain the process to you?

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• Do you have pre-foreclosure information that we can access to help those folks? • What areas are your investors in? • When deals fail to close, can you forward the sellers contact information to us? We will

close. • What paperwork do you need from me and when? • What can I do to make your life easier? • Do you sit on the boards of any Banks? If Yes, Can you make an introduction for me?

For this last team member, a volunteer will perform a brief role play with your trainer, so you can get a better feel for the interview process and also what you might expect in a live scenario. Notes: ______________________________________

_______________________________________

_______________________________________

Funding Your Lease Option Business With

Private Money Private money represents the next level when it comes to real estate investing. It can dramatically increase the cash and credit leverage you have when purchasing real estate and it is a nice win-win situation for all parties involved. Investors have access to moneymaking opportunities that are secured by real property. While this may seem logical and exciting, many new investors find this topic a little intimidating and are often unsure as to how to go about building a working relationship with private investors and properly setting up the deals. This section covers some of the basics of private lending, even though it may only be a necessary resource for other types of options purchases, like purchase lease options. Despite this, access to capital is an empowering aspect of any business, so building private money bases is an excellent pursuit, even if you start your business with lowcapital deals like wholesale or sandwich lease option transactions.

What Private Money Is And How It Works Why use Private Money? The use of private money requires:

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NO personal money NO job NO credit

Private Money vs. Hard Money

• Interest rates • Closing costs • Length of loan • Payments (interest only) ______________________________ • LTV • Extra • Purchase Lease Options • Rehabs • Buy & Hold • Buy Fix & Sell • Pre-foreclosures and Foreclosures • Land Acquisition and Development • Tax Liens and Tax Deeds

Private Money Guidelines What does an investor look for?

1. Safety 2. An investment they are familiar with 3. An investment that can be explained on the back of a business cards. 4. An investment that provides the largest profit while keeping them at the lowest-tax bracket

possible. 5. The availability of TAX FREE investment income 6. The dollar amount that fits them

Rules Of The Road

• Never use more than one investor per deal • Do your due diligence • Find investors who can afford to fund more than one deal • When you’re ready to close and pay the investor, have another deal ready • Have your attorney write up the contract so everything is disclosed as to who gets what;

example: joint venture. Make the agreement so simple to understand any fourth grader could understand it

• Only do deals with people you trust • Only invest in deals you understand and can profit from

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Take Home Message: Don’t Get Greedy! Remember:

Pigs Get Fed, Hogs Get Slaughtered

Where To Find Private Money Investors

• Accountant • Attorney • Friends • Family • Investor club • Airplanes • Dentist • Social gatherings • Everyone knows someone, who knows someone, who knows someone who has cash

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Chapter 8: Review of

the Lease Option

Process Learning Objective • Evaluate their own improvement as a creative investor through participation in practical role-playing exercises pertinent to lease options.

Activity: Practicing With The Triad Role

Play To refine your approach to doing more lease option deals, it is important to practice your technique. One way to practice is through role playing, typically where a small number of people participate and the rest observe. You are going to take it to another level now, and get you more involved in the role-playing process in doing so. Role-Play Scenario: ___________________________________________ 1) Overall Issues- Why are you meeting with the client? What topics need to be covered?

_________________________________________________________

_________________________________________________________

_________________________________________________________

2) Your Objectives- What are your goals? Are they likely to promote a win-win outcome with the client?

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_________________________________________________________

_________________________________________________________

_________________________________________________________

3) Needs and Interests- What circumstances are affecting the client and their stance?

_________________________________________________________

_________________________________________________________

_________________________________________________________

4) Concessions- What are you prepared to give up or concede to make the process move forward? _________________________________________________________

_________________________________________________________

_________________________________________________________

5) Settlement Options- What do you see as a possible deal that would work for both parties? _________________________________________________________

_________________________________________________________

_________________________________________________________

Presentation Needs: _______________________________________

_________________________________________________________

_________________________________________________________

Likely Objections: _________________________________________

_________________________________________________________

_________________________________________________________

One of your team of three will serve as the evaluator and each of you will have the chance to play this role for each scenario. This gets you thinking about whether or not the objectives were achieved and also will provide important feedback to the person serving as the presenter. For each scenario, you will use the worksheet provided.

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Remember, evaluation is an important part of the process so take this role seriously and provide good feedback to your classmates by giving them your completed evaluation forms. They’ll in turn do the same for you! Once you’ve played each role for a scenario, we will briefly discuss the results as a group.

Practicing Your Technique Role Play #1 Role-Play Scenario: Having ignored all practical advice to sell the marital home after a divorce, a seller now finds making payments to be increasingly difficult. The ex-spouse believes she has a stake in the proceeds from any sale so this only compounds the need to do something and do it quickly to avoid a bad situation getting even worse. 1) Overall Issues- Why are you meeting with the client? What topics need to be covered? _________________________________________________________

_________________________________________________________

_________________________________________________________

2) Your Objectives- What are your goals? Are they likely to promote a win-win outcome with the client? ___________________________________________________________

_________________________________________________________

_________________________________________________________

3) Needs and Interests- What circumstances are affecting the client and their stance? _________________________________________________________

_________________________________________________________

_________________________________________________________

4) Concessions- What are you prepared to give up or concede to make the negotiation move forward? _________________________________________________________

_________________________________________________________

_________________________________________________________

5) Settlement Options- What do you see as a possible deal that would work for both parties?

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_________________________________________________________

_________________________________________________________

_________________________________________________________

Presentation Needs: _________________________________________________________

_________________________________________________________

_________________________________________________________

Likely Objections: _________________________________________________________

_________________________________________________________

_________________________________________________________

ROLE-PLAY EVALUATION WORKSHEET Role-Play Scenario: _________________________________________

Role-Play Presenter: ________________________________________

1. Did the presenter indicate his/her preparation by having a price or stance in mind?

__________________________________________

2. If so, when did he/she introduce it, before or after the other party had indicated their

position? ________________________________

3. Did the presenter seek to determine the position of the other party by asking good questions?

________________________________

4. List one of the key questions you heard him/her ask.

_________________________________________________________

_________________________________________________________

_________________________________________________________

5. Did the presenter seem like they had a certain outcome in mind and willing to accept certain concessions? ________________________________________________________

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6. If you were the other party, would you have found the presenter’s approach persuasive and

promoting a Win-Win outcome?

________________________________________________________

7. What were some things the presenter did well?

_________________________________________________________

_________________________________________________________

_________________________________________________________

8. What were some areas where he/she could use improvement (constructive comments only)?

_________________________________________________________

_________________________________________________________

_________________________________________________________

Practicing Your Technique: Role Play #2 Role-Play Scenario: You acquire a lease option that is in an upscale neighborhood. The general class of buyer, you are now dealing with when trying to find a tenant/buyer, is entirely different. Practice an approach to dealing with “upscale” tenant/buyers, making note of any changes to your approach, if any, that need to be made? 1) Overall Issues- Why are you meeting with the client? What topics need to be covered? _________________________________________________________

_________________________________________________________

_________________________________________________________

2) Your Objectives- What are your goals? Are they likely to promote a win-win outcome with the client? _________________________________________________________

_________________________________________________________

_________________________________________________________


_________________________________________________________

_________________________________________________________

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_________________________________________________________

_________________________________________________________


_________________________________________________________

_________________________________________________________

Presentation Needs: _________________________________________________________

_________________________________________________________

_________________________________________________________

Likely Objections: _________________________________________________________

_________________________________________________________

_________________________________________________________

Role-Play Evaluation Worksheet Role-Play Scenario: _________________________________________

Role-Play Presenter: ________________________________________

1. Did the presenter indicate his/her preparation by having a price or stance in mind?

__________________________________________

2. If so, when did he/she introduce it, before or after the other party had indicated their

position? ________________________________

3. Did the presenter seek to determine the position of the other party by asking good questions?

________________________________

4. List one of the key questions you heard him/her ask.

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_________________________________________________________

_________________________________________________________

_________________________________________________________

5. Did the presenter seem like they had a certain outcome in mind and willing to accept certain concessions? ________________________________________________________ 6. If you were the other party, would you have found the presenter’s approach persuasive and

promoting a Win-Win outcome?

________________________________________________________

7. What were some things the presenter did well?

_________________________________________________________

_________________________________________________________

_________________________________________________________

8. What were some areas where he/she could use improvement (constructive comments only)?

_________________________________________________________

_________________________________________________________

_________________________________________________________

Lease Option Overview Scenario Analysis For each of the scenarios below, you are going to walk through the entire lease option process. First, you will determine the profitability of the deal and run your numbers. Then, you will plan out your strategy for working with both the seller and a tenant/buyer, leaving nothing left to do but actually execute the deal. When you can think through the process this comprehensively, you should be more than ready to take your skills to the field and start working your own deals. Scenario #1 Based upon some equity in a property that a seller is willing to give up to be able to walk away quickly, you are in a position to get a better deal on a property than for a normal sandwich lease option. The catch: you need to be able to purchase the property outright. Fortunately, you have a private lender who may be able to fulfill this need. Determine how you would go about this, as a purchase lease option, factoring in needs of a standard tenant/buyer but also factoring in the expense of using borrowed funds to get into the deal. Basic Numbers

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Property Value: $150,000 Mortgage Balance: $89,000 Payment: $750/month Asking Price: $100,000 Appreciation Rate (estimated): 5 percent Market Rents: $1,250 Private Lender Interest Rate: 8 percent

Evaluation Worksheet 1

PROPERTY: _______________________________________________

Value: $ ___________________ Mortgage Balance: $ ____________

P.I.T.I.: $ ______________ /mo. Appreciation Rate: % _____________

Asking Price: ______________ Three Area Comps.

Market Rents: _____________ 1. __________________________

2. __________________________

3. __________________________

Deal With The Seller:

Purchase Price: $ _____________ Term: ______ yrs (3-5 years)

Monthly Pmt.: $ ______________ Purchase Deposit: $ __________

PROPERTY APPRECIATION:

___% (Appreciation rate) x $_________ (Market value) = _________ yr 1

___% (Appreciation rate) x $_________ (year 1 value) = _________ yr 2




DEAL WITH THE TENANT BUYER:

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Purchase Price: $ ______________* Term: ______yrs (2-3 years)

Monthly Pmt.: $ _______________ Option Consideration: $_________

* Purchase price with the Tenant/Buyer is determined by taking the of the Lease Option Process

appreciated value x 95%. (yr 2 value of _____k x 95%= $______k)

Profit Amounts

Purchase price with the tenant/buyer: $ ____________

Purchase price with the seller owner: $ ____________ $ _____________

Private lender interest (2 years @ ___%) $ ____________

Tenant/buyer monthly payment: $ ________________

Owner seller monthly payment: $ ________________

$ ________________ $ ________________

x 12/24/36

TOTAL PROFIT: $ ________________

Planning the Deal 1) Overall Issues- Why are you meeting with the client? What topics need to be covered? _________________________________________________________

_________________________________________________________

_________________________________________________________


_________________________________________________________

_________________________________________________________


_________________________________________________________

_________________________________________________________

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_________________________________________________________

_________________________________________________________


_________________________________________________________

_________________________________________________________

6) Tenant/Buyer Needs: _________________________________________________________

_________________________________________________________

_________________________________________________________

7) Likely Deal with Tenant/Buyer: _________________________________________________________

_________________________________________________________

_________________________________________________________

Scenario #2 A seller owns a home in a high-priced market and, due to being downsized out of a good paying job, now needs to adjust their choice of housing accordingly. They have some equity but are finding that getting buyers qualified for a traditional purchase, in this price range, is tough in the current economy. Plan how you will work with both the seller and prospective buyers. Basic Numbers

Property Value: $450,000 Mortgage Balance: $379,000 Payment: $3,200/month Asking Price: negotiable Appreciation Rate (estimated): 4 percent Market Rents: $2,250

Evaluation Worksheet 1

PROPERTY: _______________________________________________

Value: $ ___________________ Mortgage Balance: $ ____________

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P.I.T.I.: $ ______________ /mo. Appreciation Rate: % _____________

Asking Price: ______________ Three Area Comps.

Market Rents: _____________ 1. __________________________

2. __________________________

3. __________________________

DEAL WITH THE SELLER:

Purchase Price: $ _____________ Term: ______ yrs (3-5 years)

Monthly Pmt.: $ ______________ Purchase Deposit: $ __________

PROPERTY APPRECIATION:

___% (Appreciation rate) x $_________ (Market value) = _________ yr 1





DEAL WITH THE TENANT BUYER:

Purchase Price: $ ______________* Term: ______yrs (2-3 years)

Monthly Pmt.: $ _______________ Option Consideration: $_________

* Purchase price with the Tenant/Buyer is determined by taking the of the Lease Option Process

appreciated value x 95%. (yr 2 value of _____k x 95%= $______k)

Profit Amounts

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Purchase price with the tenant/buyer: $ ____________

Purchase price with the seller owner: $ ____________ $ _____________

Private lender interest (2 years @ ___%) $ ____________

Tenant/buyer monthly payment: $ ________________

Owner seller monthly payment: $ ________________

$ ________________ $ ________________

x 12/24/36

TOTAL PROFIT: $ ________________

Planning the Deal 1) Overall Issues- Why are you meeting with the client? What topics need to be covered? _________________________________________________________

_________________________________________________________

_________________________________________________________


_________________________________________________________

_________________________________________________________


_________________________________________________________

_________________________________________________________


_________________________________________________________

_________________________________________________________


_________________________________________________________

_________________________________________________________

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6) Tenant/Buyer Needs: _________________________________________________________

_________________________________________________________

_________________________________________________________

7) Likely Deal with Tenant/Buyer: _________________________________________________________

_________________________________________________________

_________________________________________________________

Action Plan HIT THE GROUND RUNNING WHEN YOU GET HOME!

90-day action Plan steps

• Identify three-key advantages of lease options, over other types of real estate investments you may have considered. Date to Complete: _____________________ • Review and commit to memory the important terms that relate to the completion of lease option transactions. Date to Complete: _____________________ • Select two to three types of options purchases that will likely be integral parts of your real estate business. Date to Complete: _____________________ • Review and commit to memory the characteristics of the primary types of sellers and buyers you will face when working with lease options. Date to Complete: _____________________ • List three-five motivating circumstances that might lead a client to a sandwich lease option and document the ideal ways to match their needs with a lease option exit strategy. Date to Complete: _____________________

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• Prepare marketing pieces you can use to attract either lease option sellers or tenant buyers to your business. Date to Complete: _____________________ • Review the Five-D profit centers of a sandwich lease option and identify each for each potential deal you encounter. Date to Complete: _____________________ • Practice calculating the profit potential for each lease option deal you encounter in your business. Date to Complete: _____________________ • Prepare an interview questionnaire you can use when testing the motivation for possible lease option sellers. Date to Complete: _____________________ • Prepare a master list of common topic points and objections with lease option sellers and practice how you will handle each. Date to Complete: _____________________ • Create a checklist for due diligence items you will need to perform before finalizing agreements with lease option sellers. Date to Complete: _____________________ • Create a basic-screening checklist for the approval process for tenant/buyers. Date to Complete: _____________________ • Prepare a master list of common topic points and objections with tenant/buyers and practice how you will handle each. Date to Complete: _____________________ • Prepare, print, and practice filling out the paperwork package that is essential to securing a sandwich lease option agreement with a seller. Date to Complete: _____________________ • Prepare, print, and practice filling out the paperwork package that is essential to securing a qualified tenant/buyer.

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Date to Complete: _____________________ • Interview and select a title company or closing attorney that you can work with to perform assignments or simultaneous closings to exit your sandwich lease option transactions. Date to Complete: _____________________ • Prepare a basic-credibility portfolio that you can use to attract potential private investors to your business. Date to Complete: _____________________ • Assess your own improvement as a creative investor by completing evaluation worksheets for each phone call and/ or face-to-face meeting you have with potential lease option clients.

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Glossary

A Abandon - To choose not to exercise or sell an option before it expires. To voluntarily relinquish the rights of property ownership. Abstract (of title) - A historical summary of all the recorded transactions that affect the title to the property. An attorney or a title company will review an abstract of title to determine if there are any problems affecting the title to the property. All such problems must be cleared before the buyer can be issued a clear and insurable title. Acceleration Clause - A provision in a loan contract that allows the lender to demand full and immediate repayment of the entire loan balance if the contract is breached or conditions for repayment occur. Addendum - Clauses that are added to the end of a contract which supersede what is written in the contract. Adjustable Rate Mortgage (ARM) - Also known as a variable rate mortgage. A mortgage with an interest rate that may change, usually in response to changes in the Treasury Bill rate or the prime rate. Adjustment Period - This is the length of time for which the interest rate is fixed on an adjustable rate mortgage. Therefore, if the adjustment period is six months, then the interest rate will remain fixed for six months, after which time it will adjust. Agent - Generally, someone who acts on behalf of another for a fee. In real estate, the term refers to a person with a real estate license who works under the authority of a real estate broker. Agreement of Sale - A written signed agreement between the seller and the purchaser in which the purchaser agrees to buy certain real estate and the seller agrees to sell upon terms of the agreement. Also known as contract of purchase, purchase agreement, offer and acceptance, earnest money contract or sales agreement. Amortization - A gradual paying off of a debt by regular periodic installments, which pay principal and interest over a specified period of time

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Annual Percentage Rate (APR) - The effective rate of interest for a loan per year. This rate is typically higher than the note rate because it takes into account closing costs. This is one way to compare loan programs offered by different lenders. Caution: the APR is sometimes computed differently by different lenders and can be misleading. Appraisal - An opinion or estimate of the value of a property at a given date. Appreciation - Increase in value of a property. Arm’s Length Transaction - Typically, a transaction between two related or affiliated parties that is conducted as if they were unrelated, so that there is no question of a conflict of interest. Arrears - The amount of debt that is overdue or unpaid. A payment that is made past its due date. Assessment - A local tax levied against a property for a specific purpose such as streetlights. Asset - Anything of value that can be converted into cash or used to pay a debt. Assign - To transfer interest. Assignee - Individual to whom a title, claim, property, interest, or right has been transferred. Assignor - The one who transfers a title, claim, property, interest, or right to another person. Assignment Clause - A sales contract with an assignment clause allows the buyer to transfer interest in the property (e.g. the right to buy it at the given rates and terms) to another party. Assumable Mortgage - A mortgage loan which allows a new home buyer to take over the obligation of making loan payments with no change in the terms of the loan. Assumable loans do not have a due-on-sale clause. The lender has to be notified and agree to the assumption. The lender may require the buyer to qualify for the loan and may charge an assumption fee. The seller should obtain a written release from the lender stating clearly that he/she is no longer liable to make mortgage payments. Assumption - To assume a mortgage means to take over the repaying of that debt from the seller.

B Balloon (payment) Mortgage - Usually a short-term fixed-rate loan which involves small payments (such as if it were amortized for a traditional 30-year period) for a certain period of time, followed by one large payment for the remaining amount of the principal at a time specified in the contract. Example: A balloon mortgage for $25,000 has interest only payments

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for 5 years at 12% ($250 per month), with the full principal of $25,000 due and payable after 5 years. Bankruptcy - The legal process of declaring one’s financial inability to pay one’s debts when due. The debtor surrenders his assets to the bankruptcy court in order to help satisfy existing debts. Beneficiary - The person who receives or is eligible to receive the benefits resulting from certain acts. Bid - An offer of a specific amount of money in exchange for products and services, as in an auction. Bi-Weekly Mortgage - A mortgage which requires 1/2 the normal monthly payment every two weeks. Over the course of the year, 26 half-payments are made which is equivalent to 13 full-mortgage payments. As a result of this extra payment, the loan amortizes much faster than a loan with normal monthly payments. Blanket Mortgage - A mortgage covering more than one piece of property. Example: A developer subdivides a tract of land into lots and obtains a blanket mortgage on the whole tract. Book Value - The value of an asset as shown in the financial records of an individual or corporation. Book Value may differ substantially from Market Price. Borrower (mortgagor) - One who applies for a loan secured by real estate and is responsible for repaying the loan (mortgage). Broker - An individual or firm that acts as an intermediary between a buyer and seller, usually charging a commission. Buy-back Agreement - An agreement specifying conditions under which a seller agrees to repurchase a property from whom they sold it to, usually for a stated price and within a stated time limit. Buy Down - Obtaining a lower interest rate (buying down the rate) by paying additional points (fees) to the lender. The lower rate may apply for the full duration of the loan or for just the first few years. A buy down may be used to qualify a borrower who would otherwise not qualify. This is because a buy down results in lower payments that are easier to qualify for. Buyers Broker - An agent hired by a buyer to locate a property for purchase. The broker represents the buyer and negotiates with the seller’s broker for the best possible deal for the buyer. Buyers Market - Market conditions that favor buyers i.e. there are more sellers than buyers in the market. As a result, buyers have ample choice of properties and may negotiate lower prices. Buyers markets may be caused by an economic slump or overbuilding.

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C Capital - Money used to generate income or pay for operating expenses. Capital Gains - Profit earned from the sale of real estate or the amount by which an asset’s selling price exceeds its initial purchase price. Capitalization Rate - The rate used to determine the present value of property with future earnings. CAPS (interest) - Consumer safeguards, which limit the amount, the interest rate on an adjustable rate mortgage may change per year and/or over the life of the loan. CAPS (payment) - Consumer safeguards, which limit the amount monthly payments on an adjustable rate mortgage, may change. Cash Flow - The amount of cash derived over a certain period of time from an income-producing property. Cash receipts minus cash payments over a given period of time. The cash flow should be large enough to pay the expenses of the income-producing property (mortgage payment, maintenance, utilities, etc.). Caveat Emptor - A legal term meaning “let buyer beware.” The buyer must examine the property and buy at his/her own risk. Example: A property may be offered in an “as is” condition with no expressed or implied guarantee of quality or condition. Certificate of occupancy - Document issued by a local governmental agency that states a property meets the local building standards for occupancy and is in compliance with public health and building codes. This document is normally required by a lender prior to closing the loan. Certificate of Title - An opinion rendered by an attorney as to the status of title to a property, according to the public records. This certificate does not hold the same level of protection as title insurance. Chain of title - Chronological order of conveyance of a parcel of land from the original owner to the present owner. An abstractor can research title to property going back to the date that the property was granted to the United States. Clear Title - A marketable title, free of liens and legal questions as to the ownership of the property. Most lenders require a clear title prior to closing. Closing - 1. The act of transferring ownership of a property from seller to buyer in accordance with a sales contract. 2. The time when a closing takes place. 3. The process of signing the documents to transfer property.

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Closing Costs - Expenses incurred by the buyer and seller in a real estate or mortgage transaction over and above the price of the property. There are two types of costs: recurring and non-recurring. Non-recurring costs are one-time transactional costs, which include: discount and origination points, lender fees (underwriting, processing, document preparations, flood certificate, tax service, wire transfer, courier, etc.), title insurance fees, escrow, attorney, or closing agent fees, recording fees, inspection and appraisal fees, and real estate brokerage commissions. Recurring fees are costs associated with owning the property and they recur month after month. These costs may include hazard insurance, interest, property taxes, mortgage insurance (PMI), and association fees. A pro-rated amount of these fees may have to be paid at closing, including prepaid interest (interest charges from the date of closing to the end of the month), property taxes if due, hazard insurance, fire insurance or homeowner’s insurance (has to be paid for one year). Mortgage insurance (PMI) - may be required if the loan amount is more than 80% of the value of the property. In the past a whole year of PMI had to be paid up front; however, in recent years many PMI companies only require 1-2 months up front. Mortgage insurance premiums are normally paid every month with the loan payment. Closing Statement - The settlement statement (usually called a HUD1) that discloses all of the financial details of the transaction between the buyer and seller, including all costs. Cloud on Title - An outstanding claim or encumbrance that, if valid, would affect or impair the owner’s title. Compare to clear title. Collateral - Assets pledged by a borrower to secure a loan or other credit, and subject to seizure in the event of default. Commission - The fee charged by a broker or agent when selling real estate. Comparative Market Analysis (CMA) - A comparison of sales prices of similar properties in a given area for the purpose of determining the fair market value of a property. Also referred to as “Comps.” Conditional Commitment - A written document provided by a lender agreeing to make a loan provided certain conditions are met by the borrower prior to closing. Consideration - Anything of value given to induce another to enter into a contract. An earnest money deposit on a sales contract is consideration. Construction Loan - A short-term loan to pay for the construction of buildings or homes. These loans typically provide periodic disbursements to the builder as each stage of the building is completed. When construction is completed a “take-out” or permanent loan is used to pay off the construction loan. Contingency - Conditions, which must be satisfied before the buyer, can close the purchase of a property. Contingencies are generally outlined in the purchase contract between the buyer and seller. Example: The buyer has 14 days to remove the property contingency under the sales contract. In this case the buyer has 14 days to inspect the property and request the seller to perform repairs. If the buyer is not satisfied with the condition of the property or if the buyer

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and the seller cannot agree on repairs, the buyer may back out of the contract with no penalty. After 14 days the buyer no longer has the right to back out, without penalty, as a result of a problem with the condition of the property. Contract - A binding agreement between competent parties to do or not do certain things for consideration. To have a valid contract for the sale of real estate there must be: 1) an offer, 2) an acceptance, 3) competent parties, 4) consideration, 5) legal purpose, 6) written documentation, 7) description of the property, 8) signatures by principals or their attorney-in-fact. Contract for Sale - Same as the Agreement of Sale. Contract Sale or Deed - A real estate installment selling arrangement where the buyer may occupy the property but the seller retains the title until the agreed upon sales price has been paid. Also known as an installment land contract. Contract to Purchase - An agreement of sale detailing the transaction and submitted by the buyer to the seller. Conventional Loan - Any mortgage loan other than a VA or an FHA loan. A conventional loan may be conforming or non-conforming. Convertible ARM - Some variable rate loans come with options to convert them to a fixed-rate loan based on a pre-determined formula, during a given time period. Conveyance - The transfer of title of real property from one party to another. Covenant - A written agreement or restriction on the use of land or promising certain acts. Credit Report - A report detailing a borrower’s credit history including payment history on revolving accounts (e.g. credit cards), installment accounts (e.g. car loan), bankruptcies and late payments, and recent inquiries. It can be obtained by prospective lenders with the borrower’s permission, to determine his or her creditworthiness. A credit report also includes information found from public records including tax liens and judgments.

D Debt-to-Income Ratio - The ratio, expressed as a percentage, which results when a borrower’s monthly payment obligation on long-term debts is divided by his or her net effective income (FHA/ VA loans) or gross monthly income (conventional loans). Deed - A written document by which title to real property is transferred from one owner to another. The deed should contain an accurate description of the property being conveyed, should be signed and witnessed according to the laws of the State where the property is located, and should be delivered to the buyer at closing.

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Deed of Trust - Used in many states instead of a mortgage to secure the payment of a note. In a deed of trust there are three parties - the borrower, the trustee, and the lender, (or beneficiary). The deed to a property is held by a trustee instead of the borrower. Deed Restriction - A clause in a deed that limits the use of land. Default - Failure to meet legal obligations in a contract - such as the failure to make the monthly mortgage payment. Defective Title - Any recorded instrument that would prevent a grantor/seller from giving a clear title. Delinquency - Failure to make payments on time. This can lead to foreclosure. Depreciation - Decline in the value of a house due to wear and tear, obsolescence, adverse changes in the neighborhood, or any other reason. Disclosure - Statement of fact(s) concerning the condition of the property for sale and the surrounding area. In most states, the buyer is protected by disclosure laws requiring sellers to divulge certain information about the property. Discount Points - Fees paid to a lender to reduce the interest rate. Documentary tax stamps - Stamps affixed to a deed showing the amount of transfer tax paid. Down Payment - The part of the purchase price paid in cash up front, reducing the amount of the loan or mortgage. Due on Sale Clause - A clause in the deed of trust or mortgage that states that the entire loan is due upon the sale or transfer of the property.

E Earnest Money - A deposit made by a buyer of real estate towards the down payment to evidence good faith. This money is typically held by the real estate broker or the escrow company. Easement - The right to use the land of another for a specific purpose. Easements may be temporary or permanent. Eminent Domain - The right of the government or a public utility to acquire private property for public use by condemnation, with proper compensation to the owner. Encumbrance - A legal right or interest in land that affects a good or clear title, and diminishes the land’s value. It can take numerous forms, such as zoning ordinances, easement rights, claims, mortgages, liens, charges, a pending legal action, unpaid taxes, or restrictive covenants.

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Equal Credit Opportunity Act (ECOA) - A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs. Equity - (Equity=Property Value - Loans/Liens Against the property) The property value minus what you still owe (the mortgage balance). Escheat - The reversion of property to the state in the event that the owner dies without leaving a will and has no legal heirs. Escrow - An account held by the lender into which a homeowner pays money for taxes and insurance. Eviction - The lawful removal of an occupant and her/his belongings from a property.

F Fannie Mae/Federal National Mortgage Association – A federal organization that purchases loans from lenders and then sells them as FNMA mortgage backed securities. Farmers Home Administration (FMHA) - An agency, within the U.S. Department of Agriculture, that makes and insures loans for rural housing and farms. Federal Deposit Insurance Corporation (FDiC) - A government agency that supervises and insures accounts held by lending institutions. Fee Simple (Fee Absolute or Fee simple Absolute) – Absolute ownership of real property; owner is entitled to the entire property with unrestricted power of disposition during the owners life and upon his death the property descends to the owner’s designated heirs. Federal Housing Administration (FHA) - A government agency within HUD that administers and insures mortgage loans for private lending agencies. FHA Loan - This program provides mortgage insurance to protect lenders against the risk of default on loans to qualified buyers. A loan insured by the Federal Housing Administration is open to all qualified home purchasers. FiCO Score - FICO stands for Fair Isaac & Company. Credit scores are reported by three major credit bureaus, Equifax, Experian and Trans-Union. Scores are not necessarily the same on each bureau’s report because each bureau may place a slightly different value on different items. Fiduciary - A person in a position of trust or responsibility with the legal authority and duty to make decisions regarding financial matters on behalf of the other party.

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Finance Charge - Interest charged by a lender. Fixed Rate Mortgage (FRM) - The mortgage interest rate will remain the same throughout the term of the mortgage for the original borrower. Forbearance - A lenders postponement of foreclosure in order to give the borrower time and an opportunity to make up for overdue payments. Also, an agreement for a buyer to temporarily make higher payments in order to satisfy overdue payments. Foreclosure (Repossession) - A legal sale of property forced by the lender when the borrower defaults on the mortgage loan. Freddie Mac/Federal Home Loan Mortgage Corporation Freddie mac/Federal home loan mortgage Corporation (FhlmC) - Purchases loans from the Federal Reserve and the Federal Home Loan Bank Systems then sells them as FHLMC mortgage backed securities on Wall Street. Free and Clear - A property that has no liens. FSBO (For Sale By Owner) - A property for sale that is not listed with a real estate broker and therefore will not be listed on the Multiple Listing Service (MLS).

G Grace Period - The time period between the due date of a mortgage payment and the date when late charges are assessed. For example, payments due on the first of the month may have a 14 day grace period, meaning that fees will be charged if payment is not received by the fifteenth. Graduated Payment Mortgage (GPM) - A mortgage that has lower payments initially (with potential negative amortization), which payments then increase each year until the loan is fully amortized. This program is intended for people with low current income but greater anticipated future income. Grantee - That party in the deed who is the buyer or recipient. grantor - That party who is the seller or the giver.

H Hard Money Lender - Lenders who use private money to make loans with Borrowers who have trouble getting loans via conventional methods. There is usually a very high interest rate associated with hard money lenders. Home Improvement Loan - A loan used to finance home improvements. It may or may not require a mortgage or collateral.

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Homeowner’s Association - An association of homeowners that oversees the common areas of the development and its rules and regulations. Home Warranty Plan - Private insurance insuring a buyer against defects (usually in plumbing, electrical, appliances and heating and cooling systems. Typically purchased at the time of closing, a warranty can cover both new and used homes. Homestead - Status provided to a homeowner’s principal residence in some states that protects the home against certain judgments up to specified amounts. Homestead Exemption - Available in some states - this causes the assessed value of a principal residence to be reduced by the amount of the exemption for the purposes of calculating property tax. Housing and Urban Development (HUD) - A U.S. government agency established to implement certain federal housing and community development programs.

I Improvements - Additions to raw land such as buildings, streets, etc. that add value to the land. Income Approach - A method used by an appraiser to estimate the value of rental property based on the income it generates over the life of the structure, discounted to determine its present value. Income Property - Real estate that generates rental income. ingress and egress - The right to go in and out over a piece of property but not the right to park on it. See also Easements. Inspection - An examination of a property or building to determine condition or quality for a particular purpose such as an assessment of structural or termite damage. An inspection may also be used to confirm that the property meets the standards of the contract. Installment Sale - See land contract. Interest Cap - A limit on the amount that the interest rate for an adjustable rate mortgage can change, regardless of how much the index changes. Most ARMs have a cap on both the amount they can increase and decrease at any periodic adjustment interval, and a life-long cap that limits the amount the interest rate can vary over the life of the loan. The two interest caps are sometimes called a“periodic cap” and a “life cap.” interest rate - The percentage rate on a principal amount charged by a lender for the use of a sum of money. Investor - A money source for a lender. Also, one who makes investments.

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J Jumbo Loan - Loan size that is larger than the limit established by Fannie Mae or Freddie Mac. Junior Lien - A lien which is in a subordinate position to other liens existing on a property. Junior Mortgage - All mortgages/liens subordinate to the first mortgage.

L Land Contract - A real estate installment selling arrangement whereby the buyer may use and occupy land, but ownership of the property is not transferred until all the payments have been made. Landlord - The owner of real property who rents or leases to another party, called a tenant. Land trust - A revocable trust agreement usually used in conjunction with a piece of property. The managing party of the agreement, the Trustee, is named in public records while the Beneficiary is not disclosed. Lease - An agreement giving the right to occupy property for a specific period of time for a specific amount. Lease option - An agreement giving a renter the option to purchase the property within a defined period of time and for a defined purchase price. Lease With Option To Purchase - A lease under which the lessee has the right to purchase the property. The option may run for a portion or for the full length of the lease. Lessee - A person who leases a property from its owner. (Tenant) lessor - A person who rents property to another under a lease. (Landlord) Lien - A claim against the property for the payment of a debt, judgment, mortgage or taxes. A lien must be satisfied when the property is sold. Lis Pendens - Latin term for “Lawsuit Pending” loan Application - A document required by a lender prior to loan approval. The application includes detailed information about the borrower, their finances, and the property. Loan Origination Fee or Points - A one-time fee charged by a lender or broker connected with originating a loan. This is different from discount points, which are used to buy down the rate of interest.

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Loan-To-Value Ratio (LTV) - The relationship of the loan amount to the price (or value) of the property.

M Manufactured Home - Homes built in a factory-controlled environment and that meet strict HUD codes. They are brought to the property site and are assembled there. Margin - A fixed number added to the index to compute the rate on an adjustable rate mortgage. Market Value - The highest price that a buyer would pay and the lowest price a seller would accept on a property. Mortgage - A written legal agreement that creates a lien against a property as security for the payment of a debt; a loan to pay for real estate that usually includes interest rates and a payment schedule. Mortgage banker - Specializes in originating, selling and servicing loans. They generally sell their loans to investors, but may continue to service them. Mortgage broker - An individual or company which brings borrowers and lenders together for the purpose of loan origination, but which does not originate or service the mortgages. They are paid a fee by the borrower or the seller at the closing. mortgagee - The lender. mortgagor - The borrower. Motivated buyer - Any buyer with a strong circumstance or reason to buy. Motivated seller - Any seller with a strong circumstance or reason to sell. Multiple listing service (mls) - A group of brokers joined together in a marketing organization for the purpose of pooling their respective listings. In exchange for a potentially larger audience of buyers, the brokers agree to share commissions. The listings are pooled by using a computerized network.

N Negative Amortization - An increase in principal balance, which occurs when the monthly payments do not cover all of the interest cost. The interest cost, which is not covered by the payment, is added to the unpaid principal balance.

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Net Operating Income (NOI) - The amount of income you have left after you deduct operating expenses (but before deducting interest and taxes). NOI does not include debt service (mortgage payment). Non-Assumption Clause - A statement in a mortgage contract forbidding the assumption of the mortgage without the prior approval of the lender. Noncompliance - Failure to comply or obey. Non-Conforming loan - A loan that does not meet the Freddie Mac or Fannie Mae standards. Notary public - One authorized to take acknowledgments of certain types of documents, such as deeds, contracts, and mortgages. Note - A legal document that obligates a borrower to repay a loan at a specified interest rate during a specified period of time or on demand. Notice of Default - A formal notice to a borrower declaring that a default has occurred and that legal action may be taken.

O Offer - An expression of willingness to purchase a property at a specified price. Offeree - One who receives the offer. When the buyer makes an offer to the seller, the seller is an offeree. Offeror - One who makes the offer. When the buyer makes an offer to the seller, the buyer is an offeror. Option - The right to buy a property at a specific price within a specific time period. Optionee - One who receives or purchases an option. Optionor - One who gives or sells an option. Option to purchase - An agreement giving the right to buy a property at a specific price within a specific time period. Oral Contract - A verbal agreement. Verbal agreements for the sale or use of real estate are normally unenforceable.

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Origination Fee - A fee charged by a lender for processing a loan application, expressed as a percentage of the mortgage amount. owner occupant - A tenant of a residence who also owns the property. Owner of Record - The individual named on a deed that has been recorded at the county recorder’s office.

P Paper - A mortgage, deed of trust or land contract provided in lieu of cash. PITI - Abbreviation for principal, interest, taxes and insurance, which may be combined in a single monthly mortgage payment. Plat - A plan or map of a specific land area. Plat book - A public record containing maps of land, showing the division of the land into streets, blocks, and lots and indicating the measurements of the individual parcels. points - Fees paid to lenders at the beginning of a loan. 1 point=1% of the loan amount. Points may be further classified into origination points or discount points. Portfolio loan - A loan held (not sold) by banks as an investment. power of Attorney - A written document authorizing an outside party to act on his or her behalf, naming that outside party as an Attorney in Fact. One does not need to be a licensed attorney to act as an attorney in fact. However, power of attorney forms are powerful legal documents that should be used only under advice of a licensed attorney at law. Prepaid interest - Interest paid before it is earned. Prepaid interest is the interest charged to borrowers at closing to pay for the cost of borrowing for a balance of the month. For example, if a loan closes on the 19th of the month and the first payment is due on the 1st of the following month, the lender will charge 12 days of prepaid interest. Prepayment - Full or partial payment of the principal before the due date. This might occur if the borrower makes extra payments, sells the property, or refinances the existing loan. Prime Rate - The lowest commercial interest rate charged by a bank on short-term loans to their most credit worthy customers. Principal - The outstanding balance on a loan. Private Mortgage Insurance (PMI) - Mortgage insurance provided by non-government insurers that protects a lender against loss if the borrower defaults. In the event the borrower doesn’t have a 20 percent down payment, lenders will allow a smaller or nonexistent down payment. With the smaller down payment loans, however, borrowers are usually required to carry private

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mortgage insurance. Private mortgage insurance payments are normally made either annually or monthly. Probate - Court process to establish the validity of the will of a deceased person. Also, the process by which an executor, personal representative or a court-appointed administrator manages and distributes a decedent’s property. Pro Forma - Projected financial statements based on assumptions. promissory note - A signed legal document that acknowledges the existence of a debt and the promise to repay it. Prorate - To divide proportionately, so as to determine actual amounts owed by the buyer and seller at closing. Public sale - An auction of property that is open to the general public. A public sale generally requires notice (advertising) and must be held in a place accessible to the general public. purchase - To buy; or, to obtain property in exchange for money. purchase Agreement - See Agreement of Sale. Purchase money mortgage - A mortgage used to finance the purchase of a property.

Q Qualifying - The process of determining whether a buyer is financially able to accommodate the terms of a mortgage by checking credit history, present and previous employment, and any other sources which may help to determine the buyer’s financial capability. Quiet title (Action) - A court action to establish ownership of property. Quitclaim Deed - A deed, which transfers whatever interest or title the maker of the deed may have in the particular parcel of land. A quit claim deed is often given to clear the title when the grantor’s interest in a property is questionable. By accepting such a deed, the buyer assumes all the risk. Such a deed makes no warranties as to the title, but simply transfers to the buyer whatever interest the grantor has.

R Real estate broker - A licensed individual who arranges the buying and selling of real estate for a fee. A broker usually owns his/her own real estate company or is in a management position. Real property - Land including trees, minerals, and any permanent fixtures attached to it.

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Realtor - A real estate professional who is a member of the National Association of Realtors. Recording - The act of entering into a book of public records instruments affecting title to the real property. A lender requires that a deed of trust or a mortgage be recorded to evidence the debt against the property. Recording Fees - Money paid to the lender for recording a home sale with the local authorities, thereby making it part of the public records. Red-lining - Illegal practice of discriminating based on geographic location when providing loans or insurance coverage. Refinance - Obtainment of a new mortgage loan on a property already owned, often to replace existing loans on the property. Refinancing - Repaying an existing loan from the proceeds of a new loan on the same property. Restrictive Covenants - Private restrictions limiting the use of real property. Restrictive covenants are created by deed and may “run with the land,” binding all subsequent purchasers of the land, or may be “personal” and binding only between the original seller and buyer. Right of First Refusal - The right to purchase a property under terms and conditions made by another purchaser and accepted by the seller. For example, if the Joneses make an offer of $120,000 on a property and the seller accepts the offer subject to the Wilson’s right of first refusal, the Wilsons have the right to buy the property for $120,000. Rollover loan - A loan that is amortized over a long period of time (e.g. 30 years) but the interest rate is fixed for a short period (e.g. 5 years). The loan may be extended or rolled over, at the end of the shorter-term, based on the terms of the loan.

S Sales Agreement or sales Contract - See Agreement of Sale. second mortgage - A subordinated lien, created by a mortgage loan, over the amount of a first mortgage. Second mortgages generally carry a higher rate than a first mortgage since they represent a higher risk for an investor. Mortgages are generally recorded in the order of the date they are placed. Section 1031 - The section of the IRS code that deals with tax deferred exchanges of certain property. General rules for tax free exchanges are that the properties must be: exchanged, similar, and used for business or as an investment. Section 8 housing - Privately owned rental units participating in the low-income rental assistance program sponsored by HUD. Landlords receive subsidies on behalf of qualified low-income tenants, allowing the tenants to pay a limited proportion of their incomes toward the rent.

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Seller Financing - The Seller of the property agrees to hold a mortgage and accept monthly payments instead of receiving their money in one lump sum. Sheriff’s Deed - A deed given at the sheriff’s sale in the foreclosure of a mortgage. Single Family Housing (SFH) - A general term originally used to distinguish a house designed for use by one family from an apartment house. More recently, used to distinguish a house with no common area from a planned development or condominium. Example: Townhouses, detached units. Special Warranty Deed - The grantor does not warrant against title defects arising from conditions that existed before he/she owned the property. The seller warrants that he/she has done nothing to impair title. Subordination - A loan in a lower priority, for example a second mortgage is subordinate to a first. Substitution of liability - A buyer’s assumption of responsibility for an assumable loan. Survey - Map made by a licensed surveyor who measures land and charts its boundaries, improvements and relationship to the property surrounding it. Sweat equity - Value added to a property due to improvements made by the owner. T Tax lien - A lien placed on a property for nonpayment of taxes tax sale - Public sale of a property at an auction by a government authority as a result of non-payment of property taxes. Tenancy at Will - A tenancy arrangement in which one party (the tenant) occupies real estate with the permission of the owner, for an unspecified period of time. The tenant may decide to leave the property at any time or must leave at the landlords will. Tenancy for Years - Created by a lease for a fixed term, such as 6 months, 2 years, etc. Tenancy in Common - Ownership of a property by 2 or more persons, each of who has an undivided interest, without the right of survivorship. Upon the death of one of the owners, the ownership share of the deceased is inherited by the beneficiary designated on the owner’s will. Time is of the essence - Legal phrase in a contract requiring that all references to specific dates and times in the contract be interpreted exactly. Title - A legal document establishing evidence of ownership. Title insurance - An insurance policy, which protects the insured against loss arising from a property title dispute. Title insurance policies are typically obtained for the buyer and the lender.

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Title Report - A document indicating the current state of title. The report includes information on the current ownership, outstanding deeds of trust or mortgages, liens, easements, covenants, restrictions, and any defects. Title search - An examination of the public records to determine the ownership and encumbrances affecting the property. Tract - A parcel of land, generally held for subdividing. trust Deed - See Deed of Trust. Trustee - A party who is given legal responsibility via a Deed of Trust to hold property in the best interest of or “for the benefit of” another. The trustee is one placed in a position of responsibility for another, a responsibility enforceable in a court of law.

U Underwriting - The decision whether to make a loan to a potential home buyer based on credit, income, employment history, assets, etc. Unencumbered property - Real estate with free and clear title. unimproved property - Land that has received no improvements.

V VA loan - Home loan guaranteed by the U.S. Veterans Administration, enabling a veteran to buy a home with little to no money down. Valuation - An estimation of value of a property, as determined by various factors. Variable Rate mortgage - See Adjustable Rate Mortgage

W Waiver - The voluntary renunciation, abandonment, or surrender of some claim, right, or privilege. Warranty Deed - A deed, which guarantees the transfer of title from the seller to the buyer. Wraparound mortgage - A seller created mortgage that includes the remaining amount on a current mortgage AND any remaining amount to reach the agreed upon purchase price. The new mortgage “wraps around” the current mortgage. The seller is still responsible for the first

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mortgage. By making defined monthly payments on the wraparound mortgage, the buyer will satisfy the terms of the mortgage held by the bank.

Y Yield spread - A rebate to a mortgage broker from the lending institution that purchases the loan on the open market. The yield spread is usually determined by the difference between the interest rate on the issued loan and the current prime rate.

Z Zoning - The process of determining what, if any, types of property may be placed in a particular land area. Common zoning distinctions include: residential, commercial, industrial, and agricultural. These zoning ordinances are normally enforced by the city or the county.

Documents

SWIFT complete guidebook€¦ · Please note that investing involves risks. Any decision to invest in real estate is a personal decision that should be made after thorough research,