3 Lease Option Tips You Need to Know

Lease options can be extremely profitable, but there are some pitfalls to using them. The biggest problems arise when the seller decides not to live up to his end of the bargain, which can cost you thousands in legal fees and time in order to kick him out. Here are a few useful tips that can be used to help lower the odds of such a situation:

1. Record the Option - Sign the option before a notary so that you can record you option in the public real estate records. If you neglected to get it notarized, you can sign an affidavit called a “memorandum of option” and file it in the real estate records where the property sites. While this does not create a lien on the property, it does create a “cloud” on the title.
2. Escrow the Deed - Sellers that die or disappear can be problematic when it comes to signing over the deed. As a result, an escrow should be created up front in which a title company or attorney holds an executed deed. When you are ready to exercise, then you simply have to tender the money to the escrow agent and collect the deed.
3. Record the Mortgage - A mortgage is recorded to secure payments on a promissory note, but the same thing can be done to options. You as the optionee will now be a lienholder, in the same position as a secured lender. You can collect the deed.

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