Brokering Lease Option & Seller Finance Deals

I can tell you're excited William, but here's a few reasons agents don't get involved in SF and L/Os.

The agents want to get paid, they are paid on sales, not leases, but either party can pay a fee, usually the L/O is kinda thin so the Realtor may go hungry.

Many RE Brokers don't allow it due to the liability. It's not a state contract and usually a broker won't allow agents to use guru contracts, the E&O coverage may not apply if the broker fails to use approved contracts. A broker may go along if an attorney is involved in each deal.

Another reason brokers shy away is that the agent isn't qualified to do loan underwriting, and the broker takes the responsibility if a deal blows up.

If a property is listed, you have two brokers involved, double trouble. If just one, you're a transactional broker, not a leasing agent, and you can't advise on either side, you simply facilitate the deal, brokers have ethical issues with this in putting someone in an installment contract and not being able to advise and additional liability.

If someone puts a chunck down for an option and they can't get financing, say at the end of 2 years due to problems that should have been avoided, the broker becomes an easy target as well as the agent.

I like options, the key to doing them successfully is knowing how to get the buyer financed at the end, not just putting them in a house, the deal is not done until title changes hands. Most agents look to qualifications at that time, that's not the issue, it's where the buyer is down the road. Getting some there takes a lot of hand holding and dollar for dollar in time and effort, not really worth it to an agent.

Totally agree education is key, but I've never heard of a guru note or LO type teaching underwriting.

You can also bump into SAFE Act issues with residential, screw that up you're likely loose your license. Agents know about the unauthorized practice of law, that's drilled into them, they are less aware of the unauthorized practice of mortgage origination and associated liabilities if they are permitted to originate a mortgage

A good RE Broker will keep an agent from getting hung, not only for his/her protection but also to protect the agent and agency.

Everyone usually thinks I'm being negative, raining on a parade, saying don't do this and don't do that, maybe so, it's because most really think these aspects have real liability and they haven't done enough deals to have problems end up with an attorney or a judge.

Actually, I'm surprised that there is so much fear by landlords of getting sued and never a thought of getting sued by a buyer for predatory lending or due diligence. It's on the rise.

I know pretty much what John does and in Texas I believe he has it nailed when his "system" is appropriate. Brian G. also does a lot of L/Os. Not sure about others. Nothing wrong with a creative deal if it works, but for an agent that takes on a whole other flavor.

So, @William Velazquez, how do you address these issues?

Source: http://www.biggerpockets.com/forums/21/topics/83916-brokering-lease-option-and-seller-finance-deals

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