When can someone get paid on a Lease Option with $100,000 option premium down. The lease to purchase is 12 months.

Asked by Team Komar, Camarillo, CA Sun Jul 22, 2012

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John Souerbry, Agent, Fairfield, CA
Fri Jul 27, 2012
Keeping in mind that few lease option "buyers" ever exercise the option - we'll not get into that - I argree with Roland that when and how much you get paid is based upon how the contract is written - which really means how well you can negotiate payments for yourself. You are free to charge a fee, a commission, or any combination of the two. Be creative. Get off the "commission only treadmill."
I've successfully closed about a dozen lease options and much of my payment came BEFORE escrow closed. Here are some examples of ways to get paid:
1) Finder's fee from seller at time of initial lease signing
2) A percentage of the monthly rent during the lease period
3) A fee on the day the buyer exercises the option
4) A commission at the close of escrow
As they say in real estate, commissions are not set by law... they are negotiable.
0 votes
Barry Shapiro, Agent, Camarillo, CA
Fri Jul 27, 2012
Hi Ray,
You have 2 different transactions going on here. The first one is a lease. You can negotiate your fees to market the home and prepare the paperwork for the lease (or lease-option) with either the lessee or the lessor. If you are writing a purchase contract, which has the lease-option clause and CAR Forms included, your commission will only come from a future sale, from escrow proceeds. If a Buyer is putting $100K down on a multi-million dollar property, and is moving in as a renter for 12 months, the deal needs to be structured to allow for market conditions fluctuations, or there may be some very unhappy Buyers AND Sellers at the end of the year. Is this a CASH deal in 12 months? What if the property will not appraise? I would be more concerned with avoiding a lawsuit on a lease-option purchase you put together, than the commission you can only make when and if it closes escrow in one year. Suggestion: Call the C.A.R. member Legal Hotline. With this kind of money flying around, it would be prudent to advise all parties to seek tax and legal counsel prior to proceeding with the lease-option.
0 votes
Roland Vinya…, Agent, Sprakers, NY
Mon Jul 23, 2012
When you get paid should be written into the contract. Most of our own contracts specify that we are paid upon the "sale or transfer" of the property, in which case the fee would come out of the $100000. But it should be specified. Many times in situations such as this, we get part of our fee up front and the rest either over time or upon transfer of title.

I don't feel I know enough about this to make the kind of comments others have made. Maybe if I did, I would. Or not.
0 votes
Thank you Roland.
Flag Mon Jul 23, 2012
Annette Law…, Agent, Palm Harbor, FL
Mon Jul 23, 2012
Ray, your Trulia profile reads, ""I represent BUYERS exclusively throughout Ventura County -(805) 491-4475"

Unless this is a mulit-million dollar purchase you may NOT be getting your buyer into a favorable situation.

Some states 'outlaw' such transactions. A 12 month provision, in most cases, make the situation so unreachable that buyers will usually not bite. They are overwhelmingly predatory on buyers.

There are many ways to structure a lease/option. The seller, not the buyer, dictates the process to be used. When I do them, representing the seller (never the buyer) I get paid FIRST, before anyone moves in. (don't assume to know how this is done) If you fail to make such provision, you will discover the reality of how many of these fail , why some states make them illegal, and the only beneficiary will be the owner, and they rarely complain.

With what little is disclosed in your question, I would concur with Don, your buyer may very well be placed in harms way.

Annette Lawrence, Broker/Associate
Remax Realtec Group, Palm Harbor, FL
Chat with me on: http://www.RealEstateMadeEZ.us
0 votes
Don Tepper, Agent, Burke, VA
Mon Jul 23, 2012
Whatever you're talking about, don't do it.

A $100,000 option fee? That's absolutely insane! An option fee typically is 2%-4% of the purchase price of the property, although of course it's negotiable. If you're a Realtor acting as a buyer's agent, you're doing your client a severe disservice. And if you're the listing agent, check with your broker.

A 12 month lease-option? No way, especially with a $100,000 option fee. That's--well, I was going to say criminal but that's not true until the 12 months are up. If you're that sure that the deal will close within 12 months, then just do a standard option. Understand: You should allow 90 days for the entire closing process. That means the buyer needs all his "ducks in a row" in 9 months--and obviously doesn't yet, or he/she would be buying today. A 12-month lease-option is risky in any case--lots of things can go wrong--and if $100,000 is at stake, the only answer is: Don't do it.

If you're that sure the purchase will close, then do a lease-purchase. Get all the paperwork signed. Then escrow it. Make sure it's all iron-clad.

You ask "When can someone get paid"? Who's the "someone"? If it's the seller, he/she gets paid when the buyer gets a conventional mortgage. If it's the agent, there are a number of ways to work that. It can be--and often is--paid at closing. However, the seller can also use some of the option fee to compensate the agents involved. Basically, paying the commission (or part of it) out of the option fee.

If you're a Realtor, check with your broker and a lawyer before going one step further. If you're the buyer, one word: Don't.

Hope that helps.
0 votes
I am a BROKER. And this is a multi-million transaction, but thank you for our time. I appreciate it.
Flag Mon Jul 23, 2012
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