Avoiding Lease Option Nightmares
Lease options are one of the most popular real estate transactions in today’s market. Why? Not only are they relatively easy to find these days, but they are in most cases, a win-win situation. However, most real estate investors know that you must be prepared for the worst. Things definitely have a way of coming back to haunt you if you are not prepared and avoiding these costly mistakes should be as important as securing the million dollar deals.
First and foremost, you MUST be certain that your real estate investment is protected. With a lease option deal, there are three ways that you can do this:
· Above and beyond your signed contracts, you should always record the option and file it with the proper county. If you get it signed in front of a notary you can file it with public records. This simply makes it a little more difficult for the seller to sell the property out from under you without further investigation and compliance. It doesn’t create a lien in the true sense of the word, but it makes your interest in the property known and on paper.
· When entering into a lease option contract, you would be wise to make sure that the deed is put in escrow. While it may not be likely that the seller of the property will disappear, if they do, you will have no one to sign the deed. By putting the deed in escrow, you put a third party in the mix so that when you are ready to exercise your purchase option you can go directly to the agent for the deed.
· The last thing you can do, and perhaps the most beneficial, is to record a mortgage. In most cases, payments are recorded on a promissory note. A mortgage can be recorded for any real estate agreement. By doing this, you become a legal lien holder, just like a traditional lender. This gives you the advantage should a seller try to back out of any deal.