| Have you heard that offering Lease to
own is now outlawed in the State of Texas?
What you have heard is wrong.
It is still legal to offer Lease to Own
as a selling strategy in the State of Texas, but today the law is very
restrictive.
The Reference Manual for Lease Option
Transactions under three years in the State of Texas was written to
help you understand what you must do and how you must communicate with
your tenants.
Written by Steve Davis, a Texas Licensed
Attorney, Real Estate Broker and mortgage broker and Sam Maropis a real
estate investor who has seen the many benefits of lease options. They have
written a guide that is easy to understand and easy to follow.
The book offers:
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Questions and Answers that help put all of
this into perspective.
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A Flow Chart to help you understand what must
be done when – in language that you can understand.
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A Procedural Guide that breaks down all of
the many different aspects of this law, so that you are able to stay in
control.
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Sample disclosures, helping you understand
what needs to be communicated to your tenant buyers.
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The complete Texas Revised Statute covering
lease options.
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With so many methods available to finance
borrowers who are buying real estate in Texas, lease-option contracts are
just one means of establishing an agreement for financing real estate transactions.
What makes lease-options attractive to both the borrower and the lender
is simple. The buyer is able to buy a house without perfect credit
and during the option period the buyer can repair most credit problems
while proving to a future institutional lender that he, she or they can
afford the payments, thus improving their credit standing while leasing
the house. Generally
the buyer is asked to put some money down towards the purchase of the house,
so when they are ready to qualify for a traditional loan, there is some
equity built into the purchase; some lenders also look at the new loan
as a refinance rather than a purchase, which again may improve the borrowers’
chances to obtain a loan to place permanent financing on the house.
The lease-option seller is able to find a buyer without having to wait
for weeks to have them qualify and be approved for a loan; there are usually
more buyers available since they do not have to go through a formal loan
qualification process of a bank. Also, the lease-option seller is
able to keep their carrying costs low if the buyer is making lease payments
that cover any underlying note the seller may have on the house.
Other advantages for the lease-option seller are that they remain the owner
and are able to deduct interest on the underlying note, depreciate the
house, and if they hold the property long enough, they can possibly qualify
to pay only capital gains tax rather than personal or corporate tax rates
when they sell a house.
This Manual is intended only to educate
and not give advice to the reader, so we of course recommend that you seek
competent legal and tax advice before entering into any lease-option arrangement
whether you are a buyer or seller. We have only presented information
that should prompt you to look further into matters that concern specific
transactions, all of which have their own particular legal and tax consequences.
Because Steve Davis, who wrote most of
the text of the manual and incorporated the amendments of the Texas Property
Code into the existing Texas Property Code, is an attorney, real estate
broker and a mortgage broker, he cannot ethically give any advice to a
buyer or seller without having specific knowledge of each transaction and
an agreement between him and the legal client, real estate buyer or seller,
or borrower. Sam Maropis, who wrote the Flow Chart and Guidelines
for Notices, and generally helped with the edit, table of contents and
index, is a real estate investor who is a board member of the San Antonio
Real Estate Investor Association; Mr. Maropis felt there was a serious
need to understand what was changing in the Texas Property Code due to
the fact that many investors with whom he has come into contact are or
were either using or considering using a lease-option method of sales for
their investment properties. Since there are very serious punishments
for failure to follow the Texas Property Code requirements and since the
lease-option method of selling properties in Texas was benefiting so many
buyers who would not otherwise be able to own a house, both Mr. Davis and
Mr. Maropis decided this Manual would be helpful to all. |