The Lease Option
Another Viable Solution To Home Ownership
The Offices of James Robert Deal, Washington State Attorney and Real Estate Broker, can assist homebuyers with the lease option.
LEASE-OPTION TRANSACTIONS
JAMES ROBERT DEAL, J.D.
425-774-6611 x 1
James@JamesDeal.com
MATTHEW PARKER, J.D.
MatthewParker@JamesDeal.com
425-774-6611 x 2
The law office of James Robert Deal does escrow closings and escrow setup for wrap-around, due-on-sale, seller-financed, creative financing transactions.
Our office also does escrow setup and escrow closings for commercial real estate transactions.
In some cases our office can do escrow setup in all 50 states.
Our office closes for-sale-by-owner transactions in Washington.
More Seller Financing Information
Read overview of wrap-around, seller-financed deed of trust.
Read an overview of Dodd Frank..
Read an overview of How to Beat the Due-on-Sale Clause.
What Is A Lease Option?
A lease-option transaction is a form of seller financing. It differs from the wrap-around deed of trust transaction in that the lease-option is generally not recorded while the wrap-around deed of trust transaction is recorded. A memorandum of lease or lease-option could be recorded, but that would be unwise in a due-on-sale situation since it would give potential notice to the lender that a violation of the due-on-sale clause had occurred.
The aim is not so much to hide the transaction from the lender. The aim is not to change the transaction, for example, by changing the insurance policy, which would force the servicer to pull the file and review it. Most loans get capitalized, and servicers want to leave them alone.
With the unrecorded lease-option deal, title stays in the seller until the buyer refinances or resells or otherwise pays off the seller. The advantage of a recorded wrap-around deal is that actual title is transferred to the buyer. Having title is valuable. It can be very tricky to refinance out of from a lease-option into a new loan. If you are a lease-option buyer, you should pass all your payments through a collection service so you can prove to your new lender someday when you are refinancing that you paid all payments and paid them on time. This includes the down payment.
Generally, sellers want to be paid in full at closing and not muddle around with seller financing. However, if they are open to seller financing for some reason, they are more likely to consider seller financing if the buyer pays a significant down payment, generally enough to cover all closing costs, including commissions and to leave the seller with significant money in hand.
Generally, sellers are less likely to consider a recorded wrap-around recorded deal if the buyer has only a small down payment. But sellers might still consider a lease-option deal. A good example of this is the renter who says, oh, by the way, I would like to have the option to buy this house.
An unrecorded lease-option deal is not as good for a buyer as a recorded wrap-around deal, but it can still be good for a buyer. It may be the only way the buyer can even get close to becoming an owner.
Why would a seller give the renter a lease-option?
An advantage to the seller: A landlord can generally charge a higher sale price and higher rent to a lease-option buyer than to a regular tenant. There is a larger pool of potential buyers. Surprisingly, there are many lease-option buyers who have a significant down payment and good income but who cannot qualify for a new loan to cash out the seller. They probably have dented credit.
Another advantage to the seller: With a lease-option, the seller can sometimes require that the renter be responsible for all repairs and maintenance, taxes, and insurance. The renter intends to become the owner down the road and so the renter should start taking responsibility.
Another advantage to the seller: The seller will be able to increase the sale price every year or so. The SAFE Act and Dodd Frank require that payments and interest rate on a recorded wrap-around deed of trust deal be fixed for the first five years before they can be increased later. With a lease-option, a seller will generally want a relatively short option period, say two years, so that the seller can adjust the price upwards if the market value of the property increases. The law presumably does not require that lease-options last a minimum of five years with fixed rent, although some authorities say otherwise.
The lease-option buyer should negotiate for the parties to sign and notarize a deed and wrap-around deed of trust and deposit them into true escrow so that these documents can recorded when the lease-option buyer is approved for financing and ready to close. This provision crease would involve complex drafting and a seller would want enough money paid to pay the costs of this extra transaction.
The buyer will ask that part of each monthly payment apply to the purchase price, whereas the seller generally will want none of the rent to apply to the purchase price. This is always negotiable.
Lease-option buyers often negotiate for a two-year lease-option term. However, bear in mind that whatever is wrong with a buyer’s credit that prevents the buyer from being able to get financing in two years may take more than two years to fix.
Technically, a lease-option deal triggers a due-on-sale clause. However, because generally the lease-option agreement is not recorded, there is no way the lender will learn of the sale unless one of the parties to the transaction tells the lender or if the buyer is added to the seller’s insurance policy. A lender will almost certainly not call the loan due as long as title and insurance have not been changed.
Another issue pertains to eviction.
The lease-option contract should say that only a simple eviction would be necessary to terminate the lease and option. However, landlord tenant laws are different from state to state and from city to city. A quiet title action might be necessary to terminate the option.
Regarding insurance, it is best to keep two policies in place. The lease-option buyer should obtain the buyer’s own homeowner insurance policy. When the buyer is added to the seller’s policy, a lender might pull out the file and review it.
A lease-option situation might arise in the case of a listed property. A buyer is located. The buyer does not qualify for financing. But suppose the buyer has a substantial down payment, enough to pay commissions and a substantial payment to the seller. Brokers like to get paid, and if the option money is great enough to cover the commission, the commission might be paid at the start of the lease-option agreement.
On the other hand, If the option money is smaller, the broker might have to wait until the buyer cashes the seller out. If the option money is enough to pay part of the commission, then part of the commission might be payable when the lease-option begins and the rest when the buyer cashes the seller out.
Lease Option Summary
Most lease-option deals do not involve a real estate broker. Brokers need to be paid and there is no good way under a lease-option deal for a seller to give security to the broker that the commission will be paid some years down the road.
Sincerely,
James Robert Deal
Real Estate Attorney & Real Estate Managing Broker
James@JamesDeal.com
PO Box 2276 Lynnwood WA 98036
Law Office Line: 425-771-1110
Broker Line: 425-774-6611
Cell & Text Line: 425-670-1405 (better to send email)
KW Everett Office Line: 425-212-2007
Fax: 425-776-8081
WashingtonAttorneyBroker.com/Helping-Brokers
WashingtonAttorneyBroker.com/Helping-Buyers
WashingtonAttorneyBroker.com/Helping-Sellers
WashingtonAttorneyBroker.com/Seller-Financing
WashingtonAttorneyBroker.com/Wrap-Around-Deed-of-Trust
WashingtonAttorneyBroker.com/Escrow-Attorney
Fluoridation Is Done with Toxic Waste Filth – A Complete Absurdity
Door To Door Transit – The Only Way To Eliminate Congestion
3 Trillion Atoms of Lead in Each Liter of Everett Water
How To Remove Lead and Arsenic from Fluoridated Water Systems
Smart Meters, Coming to Snohomish County, Inferior in Every Way
White-Skies – Chemical Spraying-Coal Fly Ash Containing Filth
Green New Deal is Not Green Enough
Jimmie Deal’s Green Politics
Attorney Evaluation of Safe and Unsafe Vaccines
Religious Objections to Vaccines
Buy my book: The History and Theology of Food.
Download a free copy at this link
Music By Jimmie Deal

Listing Broker Co-Brokerage Addendum
As both a real estate attorney and a real estate broker, I co-broker with other brokers, helping them to take more listings and service them better. This provides better service for sellers.

Quitclaim Deeds
What is a quitclaim deed? What is a statutory warranty deed? When should you use a quitclaim deed? When should you use a statutory warranty deed? When is excise tax owing on a transfer of title?

Buy Real Estate In Partnership
Interest rates jumped. Prices leveled off and got soft. Buyers over-reacted and stopped buying. Bad idea. It is time to be buying. You can make an offer without a dozen other buyers competing with you. So what if interest rates are up. What goes up must come down. And prices of real estate always trend upward over time.

Flat Fee Payable At Closing
I am a real estate transactional attorney. There is no charge for inquiries by phone or email. I can often quote a flat fee payable at closing.
Voltage Can Vary
Electricity can't be stored, so when I turn on a light, the power station must immediately produce some extra electricity. How is this possible?...

Become An Attorney Broker
James Robert Deal is both an attorney and a broker. Attorneys can become real estate agents and make more money and deliver better service as attorney brokers. Join The Deal Team with Keller Williams.

Final Walk Through on New Construction
The final walk through is important when buying a new home. Make a punchlist. Listed items can be changed after closing. Expect a final inspection one year after closing.
Commercial Mortgages
JAMES ROBERT DEALCOMMERCIAL MORTGAGE BROKER Not only am I a real estate managing broker (DOL # 27330) and a real estate attorney (WSBA # 8013), I am...
How Much Does Social Security Pay?
Why does Social Security pay so little in retirement? Jeanine Joy, Ph.D., CEO, Trainer, Speaker, Author, Researcher at Happiness 1st Institute...
Why you can sell homes in the winter
For Sellers, Move-Up Buyers, Selling Myths The #1 Reason to List Your House in the Winter · 2.1Kshares · 1.9K · 82 · 33...

4926 212th Street SW MLT 98043
Mountlake Terrace Planning has reviewed architectural plans for the construction of a 15 unit apartment with 17 parking spaces at 4926 212th Street SW Mountlake Terrace WA 98043 and has indicated approval subject to meeting a list of reasonable requirements.
4017 Colby Everett
JAMES ROBERT DEALREAL ESTATE ATTORNEYREAL ESTATE MANAGING BROKERCOMMERCIAL MORTGAGE BROKEReXP Realty 425-774-6611James@JamesDeal.com I am writing...
Are Rich People Mean? – How Much Is Enough?
Why Are Rich People So Mean? Call it 'Rich Asshole Syndrome'—the tendency to distance yourself from people with whom you have a large wealth...

Helping Other Brokers
I am a real estate broker and a real estate attorney. I help buyers, sellers, and other brokers throughout Washington. Call me at 425-774-6611 when your purchase or sale involves legal issues. I can often quote a flat fee payable at closing.
Vaccines Wear Off – Cannot Provide Permanent Protection – Cannot Produce Herd Immunity
Is MMR Vaccine a Fraud or Does It Just Wear Off Quickly? by Joseph Mercola, DO | Guest Writer Published May 8, 2018 | Vaccination, Risk &...
LED Street Lights Reduce Property Values – Harm Eyes – wear blue blockers
LED Street Lights Reduce Property Values - Harm Eyes wear blue blockers AMA adopts guidance to reduce harm from high intensity street lights ......
Cell Towers, Smart Meters, 5G – They All Depress Property Values
www.JamesRobertDeal.org/smart-meters Cell Towers, Smart Meters, 5G - They All Depress Property Values Cell Towers, Antennas Problematic for Buyers...
Nina Beety’s 50 page Smart meter hazards report
From James: Smart meters reduce the value of your property. They cause fires. Some damage caused by electrical surges are not covered by insurance....
Anti-vaxxer want informed consent and liberty
Anti-vaxxer want informed consent and liberty Ada Drinkwater, Wife mother grandmother great grandmother Liberty & informed consent are not only...
New York Times – Another Industry Captured Corporation – 5G Must Be Good Because Evil RT Warns It Is Unsafe
From James Robert Deal: Too much microwave radiation will make our cities and towns hard to live and work in. We will be fried by smart meters and...
Tetanus Vaccine – TDaP – No Proof Of Safety
The US Institute of Medicine concluded that the evidence is inadequate to accept or reject a causal relationship between the DTap vaccine and...
I just don*t thing being an adult is gona work for me
Please just overlook the atrocious grammar in three of these. They are not editable but they ARE too good to delete. Contentment is not the...
Sign In
CLICK HERE TOSIGN UP FOR A BETTER PROPERTY SEARCH TOOLYou will be asked for your email address and your telephone number.You do not have...
Buyer Broker Co-Broker Agreement
James Robert Deal co-brokers with other brokers on complex deals. This is a buyer broker co-broker agreement.
JR-Deal-NewZ-2-8-2019
Eliminate traffic congestion. James Robert Deal managing broker. Become a real estate agent.
Home Renovation Can Cost A Lot
Reality check: Don’t fall for these TV home renovation fibs Kitchen and bathroom remodels can cost more and take longer than HGTV shows lead you to...
Funny Mockery of Ineffective Government – From An Opponent of Single Payer
From James: Some points are valid. Some are not. But this is well written and sometimes funny. One of government’s problems is that elected...
IRS Provides Clear Test on How 20% Deduction Applies to Rental Income, Exchanges
Real Estate Calculations Every Investor Should Memorize
The Top 8 Real Estate Calculations Every Investor Should Memorize by Andrew Syrios | BiggerPockets.com...
An additional inspection can cut short the time for the original inspection
An additional inspection can cut short the time for the original inspection QUESTION: I’ve always been under the impression that when a buyer sends...
Ten Mistakes Investors Should Avoid
10 Lethal Mistakes to Avoid on Your First Real Estate Investment by Chad Carson | BiggerPockets.com...
How to Make Earnest Money Non-Refundable
Click here if you are having trouble viewing this message. Weekly Membership Newsletter JANUARY 8, 2019 • Stay Connected! QUESTION: I have been...
4 Different Types of LLCs and the Ways They Pay Taxes
4 Different Types of LLCs and the Ways They Pay Taxes by Scott Smith | BiggerPockets.com...
Why I Walked Away from a 118-Door Apartment, 10 Essential Real Estate Team Members & What to Do When Your Tenant Gives Notice
Support Our Sponsors: For Accredited Investors Only. Syndicator of multifamily investments, Ashcroft Capital. Co-founder, Joe Fairless,...
Home Inspection Questions
What Buyers Should Ask After a Home Inspection October 9, 2018 After an inspector has finished a home report, buyers may feel overwhelmed by any...
Door Knocking to Find Real Estate Sellers
29 Door Knocking Resources for Successful Lead Generation Posted by REDX January is the perfect time to door knock. Most people wait until the...
Radio – 9-16-2018 8 PM Eliminating Traffic Congestion 9 PM Buying Real Estate in Partnership – James Robert Deal – Attorney Broker
JR-DEAL-NEWZ-9-16-2018 WASHINGTON POLITICS JAMES ROBERT DEAL, BROKER, ATTORNEY, ENVIRONMENTALIST, AMATEUR MUSICIAN Radio Program – Sunday, September...
How To Choose A Domain Name – by Saul Klein
Choosing Your Domain in the Age of Dot ANYTHING Written by Saul Klein Posted On Friday, 14 September 2018 13:00 ·...
Mistakes Sellers Make
5 Mistakes Home Sellers Make Written by David Reed Posted On Friday, 14 September 2018 21:56...
Small 5G Cell Towers in Neighborhoods Reduce Property Values
CITY COUNCIL DENIES APPEALS OF CELL TOWER INSTALLATION Sam Catanzaro , Santa Monica Mirror, August 31, 2018 Wireless carrier Sprint wants to install...

15605 Cascadian Way Bothell WA
15605 Cascadian Way Bothell Washington. $430,000. 3 bedrooms, 2 bathrooms. Buy on FHA Rehab Loan. Hold long term. Eventually sewers may be extended 400 feet, and then two homes, two duplexes or five townhouses can be built. James Robert Deal, Attorney and Broker, 425-774-6611.
Cell Towers Reduce Property Values
Survey by the National Institute for Science, Law & Public Policy Indicates Cell Towers and Antennas Negatively Impact Interest in Real Estate...
Reciprocal Easements by Prescription
Reciprocal Usage Easements? What is the Purpose? Many buildings that were constructed prior to the 1960s lacked adequate parking, and/or even...
There may be a short statute of limitations on your credit card debt
Shortening the Limitations Period on Credit Card Collection Lawsuits Jon Sheldon August 6, 2018 Print/Download Email link to this article CONTENTS ·...
The Downside of Smart Homes
The Downsides Of Selling A “Smart Tech” House Posted on August 4, 2018Natural Living · · · · · · ·...
Cancelling, Restructuring, Extending, Deferring, Rehabilitating, Consolidating Student Loans
Student Loan Repayment Rights: Consumer Debt Advice from NCLC Joanna Darcus August 2, 2018 Print/Download Email link to this article CONTENTS...
Where Americans Move To – Where they Moved From
Just a few years ago, experts indicated Americans (especially young Americans) were more interested in a different lifestyle than previous...
Selling FSBO Can Cost Sellers A Lot Of Money
Selling Your Home Solo to Save Money? You’ll Actually Make Less Than You Think Posted in Economist Commentaries, by Amanda Riggs on July 9, 2018 385...
Renew the National Flood Insurance Program (NFIP)
RENEW FLOOD INSURANCE BUT QUIT SELLING NEW COVERAGE AND QUIT BUILDING NEW HOMES IN FLOOD ZONES SEA LEVELS ARE RISING Can't read or see images? View...
Underwater Properties – Due to Climate Change
Climate Change Will Force the Poor From Their Homes Low-Lying towns and Homes in Washington will be affected too Alamy This story originally...