Or are they only liable for the debt if they are approved through a lender. For instance can I "become the bank" without be liable if the tennants fault on a payment. Or is it still on me.
5 thoughts on “If I sell a house as a lease option are the tennants liable for the debt?”
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Any loans you have on the property likely have a clause that they are immediately due and payable if you transfer your interest in the property used to secure the loan.
The tenants are only liable for their "written" agreement to you. They are not in any way liable for "your" debts, and that does not change if you transfer the property to them (which does NOT transfer your liabilities). So any loans/leins you have on the property need to be settled at closing (ie, before or simultaniously with transferring the property to them) unless your mortgage is assumable and they meet the requirements of your lender.
the TENANTS (correct spelling) are fully liable for the total debt IF IT IS IN WRITING.
In some states, you cannot ‘become the bank’ and do ‘your own financing’…you have to register with your state to do that.
If they go through a LENDER, like a bank or a mortgage broker…YOU are off the hook because YOU get paid IN FULL by that bank or mortgage company. From then on…it’s THEIR problem if the tenant defaults on payments. Because THEY own the house-you’ve been paid off.
If you think you can ‘lease’ the house and have the tenants get a loan from someone else and still make payments to you…nope. Can’t have it both ways.
If you draw up the correct contract (and you DO want a lawyer to help on this) you CAN ‘lease’ them the house with a portion of that payment applied to the full price of the house within a ‘set’ or ‘predetermined’ time period that they have to ‘seal the deal’ and BUY it from you.
But they can’t ‘lease’ it AND buy it from you at the same time.
lease and option to buy are two seperate things. They are renting, until they decide to buy, then it becomes a purchase. Different rules apply. You may become the bank as much as you think you can handle the paperwork that goes along with the place, charge interest, and be ready to foreclose,
Too many times people will walk away from this type of deal, and you will have trouble getting the property back if it is all recorded as it should be..
I have sold property, buy using say a years rent toward the downpayment, and they get their own loan.. This way they were able to buy without as much out of pocket expense. Of course I charged a bit more for the house, but sind did not have to pay commissions, Made out fine.
It’s still on you.
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