Congratulations!! You’ve done what is needed using the sandwich lease options method to create a WIN-WIN-WIN outcome for everyone involved. Now the buyer is ready to qualify for a mortgage and then it’s time to close the deal. Let’s look at what will be going on as the deal moves towards the closing table – for your big payday!
Day 1, the tenant/buyer pays the option fee of about 3.5% or more, which is the first step in qualifying for the loan!
Tenant/Buyers Take Action
What makes sandwich lease options powerful is that your tenant/buyers are taking action even before they move into the house. From the very first day, the option fee is intended to apply towards the down payment. This is a major first step because the typical option fee is between 3.5% and 5% of the purchase price. That’s very important because most FHA loans begin qualifying at 3.5%. As soon as the tenant/buyer makes the option payment, they have taken a huge step closer to the closing table.
That’s a big reason why closing the deal in 12 to 18 months is very reasonable.
Then the tenant/buyer builds on this with the professional lease option plan that you put into place. In addition to the qualifying option fee, you have qualified the tenant/buyer’s debt-to-income ratio and that he or she has enough income to qualify for the loan. That’s at least two more action steps towards qualifying for the loan. You’ve also built confidence in the tenant/buyer that the deal is going to close.
Your professional sandwich lease option plan only leaves credit repair as the final step in qualifying for the loan!
Good Sandwich Lease Options Cover All the Bases
But let’s cover all of the bases. It’s extremely unusual but not impossible for the appraised value of the house to decrease during the lease option period so that the value is below the agreed-to purchase price when the time to close the deal is approaching. Fortunately, your sandwich lease option plan has built-in contingencies.
The original paperwork is structured so that the seller doesn’t have to sell for less than the agreed-to sales price. That doesn’t mean they cannot, it only means they don’t have to. The seller (not the buyer) has the option to lower the price if it will still result in a win-win-win for everyone. If the market is expected to continue going down (almost never happens), it can be in the seller’s best interest to do this.
Another way to handle this, with the sandwich lease option paperwork, is by having a clause that allows the option period to be extended in anticipation that the appraised value will return to the agreed sales price. And another clause leaves the possibility open for an alternative solution that both the seller and buyer agree is a win-win-win for everyone. There are many more possibilities such as the buyer paying a little cash towards all or part of the difference between the agreed sales price and the appraised value.
Plenty of WIN-WIN-Win solutions – this is all about creativity!
Go Into the Sandwich Lease Option With Confidence
Right from the start, you want the sales price to be very near the market value. That way, even a minor appreciation in the value will mean there is absolutely no problem appraising at closing to qualify for the loan. This is about the comparable sales analysis before the sandwich lease option is signed. It’s important to carefully document the upfront comparables to show that it was performed in good faith. Comps should be accurate the day the lease option is signed. Don’t fudge by anticipating an appreciated value is coming a few months down the road. This is about you performing with integrity and in good faith all the way through the deal.
Great sandwich lease outcomes are known to exceed the traditional sales process!
Of course, you can’t guarantee that the tenant will complete the purchase. But you can tell the seller that your process has phenomenal success. At least 80% successful sales. This doesn’t have to be your personal success; it’s the process that you have learned from the courses.
There really isn’t a bad outcome. These aren’t typical renters. From experience, we know that even if the tenant doesn’t complete the purchase, they return the house in better condition than when they agreed to the lease option. After all, your professional paperwork transferred responsibility for maintenance and repairs to the tenant/buyers. With every passing month, the house will be in better shape to sell than it was when they moved in.
Although you can’t guarantee the sale (neither can an agent), you are offering the opportunity for the seller to walk away at closing with more money in their pocket than they’ll make any other way.
These are action takers that you are putting in the home with a lease option. They are tenant/buyers extremely motivated to become homeowners. Just point out to the sellers all of the steps these tenant/buyers have already taken. They are aggressively looking for their dream home through a lease to own program. They already have most or all of the required down payment. They’re income qualified. They’re debt-to-income qualified.
Your tenant/buyers are taking the very last action step by cleaning up slightly blemished credit ratings.
Now it’s your turn to take action by putting your professional sandwich lease option process in place today…
- Investing In Real Estate With Lease Options.
- Advanced strategies for Buying and Selling with Lease Options.
- You’re Wealth Building Arsenal.
- Add Personalized Coaching.
- Cooperative Lease Options.
- Expand to Get the Deed “Subject To.”
- Round it all out by Working with Realtors.
By Wendy Patton
For more than 30 years, I’ve used the Sandwich Lease Option System to earn myself and my students millions of dollars. From my experience, I know there is plenty of room and opportunity in the real estate investment market for everyone wanting to participate to find profitable deals. It’s because of that fact and my personal success that I share the Sandwich Lease Option System with others.
If you found this information useful, please visit again soon at wendypatton.com.
For more exclusive content, please subscribe to my RSS Feed and YouTube Channel.
What did you think of this article? Please leave a comment below.