11. Monthly Flow of Funds During Lease Period Lease Payments Lease Servicer Principal Interest Taxes Insurance Credit Counseling Property Oversight Servicing Fee $35/mo Purchase price x 30 year amortization at prevailing rate plus Actual Taxes, Insurance, $135 for Credit Counseling and Property Oversight Lease Payment Stripped & Distributed Collected Via ACH Reserve Pool Seller Carrier Program Administrator Due 1 st of Month Late After 5 th Late Fees go to the Servicer Funded by Buyer’s Program Fee 1 1/2 % of Purchase Price of Home Pays if Renter Defaults Re-Insurer Backs Reserve Pool
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29. Seller fees Q: Does the Seller Pay Any Program Fees to LTO? A: Yes. 2 ½% of the Listing Price is Due When the Tenant Becomes the Owner of the Property (At the end of the Lease). Traditional Real Estate Commissions/Fees Still Apply. Seller Also is Responsible for an Appraisal Fee and Title Search. Remember! Seller Receives a FULL PRICE OFFER Seller Receives Guaranteed Rent Cash flows are Insured Against Loss Seller Earns More Net Seller Proceeds Realtors Earn More Money
About the Courseware This program is design for two purposes. First the course will help you understand the lease-to-own transaction, how it works and how to use it. Second, when you complete this course you will be able to identify and LTO opportunity and transact the business with your buyer, or seller. Upon successfully completing the quizzes and examinations you will earn the designation of “LTO Certified”. Good luck with your study and we hope this information will provide you a lifetime of profitable LTO transactions.
When to use the Program with Buyers When your buyers apply for the Program you want them to have the best possible chance to be successful . It isn’t difficult to understand whether a consumer will qualify, it takes a little common sense. There are, at least, three Buyer profiles you should watch for when considering an LTO solution for your buyer. Use LTO when Buyers have: Less than perfect credit (credit scores from 550) Good to Excellent credit (620+) with little to no down payment Good credit with clients (620+) who want to use their cash for something other than a down payment LTO is not for everyone. You can ask several simple questions which will help you understand whether the Program is a fit for you client: LTO is NOT a program for: Buyers with little to no income, or might be currently on unemployment Buyers who cannot afford a home Buyers with terrible credit (recent foreclosure, short sale, bankruptcy, auto repossession, unpaid judgments, tax liens) Buyers who are on welfare programs (e.g. Section 8) Buyers who cannot prove they have been renting and self-sufficient LTO will accept: Buyers who have Paid Collections on their credit report Buyers who have Unpaid Collections (may have to be repaid) Buyers who have Debt-to-income < 45% Buyers with little to no credit Multiple Buyers with income (spouses, friends, family, etc.)
When to use the Program with Sellers There are many Sellers who will directly benefit from using the Lease-To-Own Program. When you master LTO you will become a more creative agent who understands the power of gaining a return on a real estate asset and you will be a very different kind of agent. Generally speaking, the LTO program will bring your Seller more financial benefit than an ordinary sale. We’ll discuss this, at length, in the section LTO for the Seller . However, many Sellers will benefit. Which ones will benefit? Sellers with flexible terms. If you seller is flexible, LTO will be highly rewarding. Perhaps your Seller has already purchased another property, or has inherited a property from their family. These are excellent examples. Sellers with slow moving properties. Sometimes properties sit unsold for many weeks or months and threaten to place a financial burden, or a lifestyle hardship on the Seller – all the while their property value is sinking. Sellers who wants, or need income with a defined takeout. Move-on Sellers with less than 30% equity who can’t get new financing until they sell their home. This is a double benefit. The Seller can LTO their residence and move on to occupy a new residence under LTO themselves. Investor properties; those that need a managed process with an exit and those who seek higher returns with less ri sk are excellent LTO prospects. Non-delinquent short-sellers. We see a large number of short-sellers who may be able to correct the problem if caught early. If the default is small and can be solved with cash flow over time, Or no default is pending but the seller needs relief in fear of default, then LTO could be a viable selling strategy saving the Seller years of credit damage. LTO is NOT for Sellers who: Must have final sale immediately Most Bank-owned properties where final sale is only option