Home Selling in Dallas>Question Details

L Jones, Home Seller in Garland, TX

new law-lease purchase option??

Asked by L Jones, Garland, TX Tue Sep 16, 2008

How does lease purchase option work now that new laws are in effect?

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Answers

4
I'm afraid Texas law is not the same as New Hampshire law. The recent legislation underscored the prohibition on Realtors writing contracts where the closing date is more than 90 days in advance.
Moreover, it brought new requirements on sellers of properties where the closing is more than 90 days in the future. Attorneys are required to draft language in a contract to place the closing in the future that far. It isn't an choice.
Of course buyer and seller can always draw up their own contract, but they would have to live with the consequences. Remember law is interpretive - the judge/jury will decide what each side understood the language to mean if it is not standard or drafted by an attorney.
The annual reporting requirement is the most burdensome part of the deal. The accounting for funds, proofs of payments and amounts due provide assurance to the buyer that the property is not in jeopardy, but many sellers don't want the hassle of having to do the reporting to the buyer.
Since you're going to need a lawyer to advise you on drafting the contract, you should also ask about the annual requirements and how to fulfill them without too much pain. You should read the state law and consider other options, and then discuss them with your attorney. If you contact me through my profile, I would be happy to refer you.
Reporting Requirements (part of the state law):
§ 5.077. ANNUAL ACCOUNTING STATEMENT. (a) The seller
shall provide the purchaser with an annual statement in January of
each year for the term of the executory contract. If the seller
mails the statement to the purchaser, the statement must be
postmarked not later than January 31.
(b) The statement must include the following information:
(1) the amount paid under the contract;
(2) the remaining amount owed under the contract;
(3) the number of payments remaining under the
contract;
(4) the amounts paid to taxing authorities on the
purchaser's behalf if collected by the seller;
(5) the amounts paid to insure the property on the
purchaser's behalf if collected by the seller;
(6) if the property has been damaged and the seller has
received insurance proceeds, an accounting of the proceeds applied
to the property; and
(7) if the seller has changed insurance coverage, a
legible copy of the current policy, binder, or other evidence that
satisfies the requirements of Section 5.070(a)(2).
(c) A seller who conducts less than two transactions in a
12-month period under this section who fails to comply with
Subsection (a) is liable to the purchaser for:
(1) liquidated damages in the amount of $100 for each
annual statement the seller fails to provide to the purchaser
within the time required by Subsection (a); and
(2) reasonable attorney's fees.
(d) A seller who conducts two or more transactions in a
12-month period under this section who fails to comply with
Subsection (a) is liable to the purchaser for:
(1) liquidated damages in the amount of $250 a day for
each day after January 31 that the seller fails to provide the
purchaser with the statement, but not to exceed the fair market
value of the property; and
(2) reasonable attorney's fees.
Web Reference: http://www.SumnerRealty.com
1 vote Thank Flag Link Wed Sep 17, 2008
From my understanding the intent of the legislature is not to do it. There are of course lots of signs around and lots of people preaching you can do it, but if you do as a seller, please get a board certified real estate attorney to walk you through it. Although the good ones I know seem to say they do not recommend it. The standard idea was to take a big deposit from someone with bad credit, let them live in the house and pay rent for 2 years and then let them qualify for a mortgage and buy the house after renting for 2 years. Many were not able to quailify still after two years, so the owner would keep the big deposit ($4000-$5000) and the rent money and would kick them out to try again with someone else. Of course there are lots of variations to this senario, but that was the standard I would hear about from both investors and tenants. The better option is probably to do either a straight lease or a straight purchase. You can always put the home up for sale or lease. You can also sell it to the tenant at the end of the 1 or 2 year lease if you want without tying the two together.
Web Reference: http://www.teamlynn.com
1 vote Thank Flag Link Tue Sep 16, 2008
Bruce Lynn, Real Estate Pro in Coppell, TX
MVP'08
Contact
My understanding is the same as Bruce's. I attended a conference on the topic of "lease w/option to buy" given by an attorney, and he did not recommed it. If lease options are attempted, the documents need to be drafted by an attorney. Realtors should stay clear of this type if transaction. There are too many pitfalls. Either do a lease or do a purchase, do not attempt to combine them.

Yvonne Baker, Real Estate Consultant
http://www.urhomebase.com
ycbaker@kw.com
Web Reference: http://www.YvonneBaker.com
0 votes Thank Flag Link Tue Sep 16, 2008
It is all in your negotiation with the landlord/seller. First you should get prequalified with a local lender so you know you can afford it, this will also helping you in knowing how much money you will need so you can negotiate with the seller. There are two negotiations going to happen. one is the sales price, closing time, how much they will credit you towards closing costs and or deposit and if they require a deposit for the purchase. As well you shold note if you do not purchase, you dont get any money back. the next negotiation is teh lease, how much a month, how long and what terms. again this will reference how much they will credit you if you buy and what happens if you do not piurchase. good luck linda
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Tue Sep 16, 2008
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