Seek Legal Advice as Needed
When I was new in this business I knew a lot more than I do now. Yep, thought I knew it all. I admit I tend to “ready, fire, aim.” Many times that’s the only way to get something going. However, there are other situations in which one should exhibit more caution. Legal matters fall into that category, specifically contracts. On my first several lease option arrangements, I ignorantly pulled contracts off the Internet. I shudder to think about it now! Here’s the story:
I put a responsible but struggling family into one of my renovated homes. The husband was receiving disability and the wife was supporting the family with a house cleaning business. They had three kids and a grandchild on the way. My heart went out to them. We met several times to discuss how a lease option works. I have a clear and distinct memory of explaining that the option fee was not refundable, even if they could not exercise their option to purchase the home.
The term of the lease was two years. At the end of the two years, they still were not in a position to qualify for a loan. I extended the agreement an additional six months. At the end of the extension, they were no closer to qualifying. It did not make sound business sense to continue the arrangement. I let them know I would need to sell the house, and unfortunately this meant they had to move. Not surprisingly, they claimed to have no idea the option fee was not refundable and took legal action against me. My attorney did all he could, but my contracts were not worded correctly. What could have been avoided by a couple hundred dollars in legal fees in the beginning ended up costing me thousands.
Don’t be pennywise and dollar foolish like I was. Use contracts for all your transactions and be sure that they are reviewed or created by a real estate attorney in your state.