Attorney Bill Bronchick Explains the Difference Between Lease-Options and Contract for Deed

 When you're thinking about selling your property with creative seller financing such as a 

lease with the Option to buy, or a "Contract for Deed" (also commonly known as a "Land 

Contract") you really need to make sure and decide how much control you want to give the 

"end" tenant-buyer and/or Buyer when you sell. I am not an attorney, therefore I don't ever 

give out any legal advice. I do have a short video for you though with real estate attorney 

Bill Bronchick, who explains the differences between the two types of contracts. This will 

allow you to make the most educated decision and help you decide which of the two 

options are best for you. 

Crucial Differences to Consider Before You Sell  

Using Either a Lease-Option or a Contract for Deed

When you work with home owners, wholesale real estate investors, landlords, property 

managers, and Realtors, I have noticed a fair amount of confusion between these two exit 

strategies. The objective of this blog post and the video I shared, is to help you understand 

and know the fundamentals of both before you enter into a contract. 

Lease-Options:

• Ordinarily you can safely collect 3-5% upfront (non refundable) and if the "end" tenant-buyer fails to pay their rent on time (or at all). you can evict them.

• This exit strategy is not considered a sale because the tenant-buyer has the "option" to buy and the "option" not to buy.

Contract for Deed:

• Ordinarily you can ask for 10-20% down upfront (non-refundable), and if the end buyer fails to pay their mortgage, you will need to foreclose on them.

• This exit strategy is considered a sale.

Landlord? Here's How to Avoid the Tenants from Hell!

 
"Daniel, what happens if your tenant-buyer wrecks my 

property and becomes the Tenant from Hell?"

Key differences of Having Only Tenants Versus Having "Tenant-Buyers"

 Most of the time, people that we initially work with don't know the differences between a

conventional tenant and "tenant-buyers" that we work with, naturally they are worried that 

they will get stuck with the dreaded "Tenant from Hell."

 The Burden of Having Just a Regular Tenant

Let's face it, we all have heard horror stories of horrible tenants destroying the property 

owners homes. There is no denying that these types tenant exist. We fear that we are 

going to have to deal with one of them. Unfortunately, they make it more difficult and give 

good tenants who actually take care of their rental a bad name.

Here is why:

• It's human nature to take of what you personally own (or will own in the future). Think about this... We don't wash our rental car, but we will wash the car that we own and take good care of it.

• They don't see your property as theirs, therefore they have nothing to look forward to regarding your property in the future. You do, but not them. Thus, there is real reason for  them to take care of the property as if it was (or will become) theirs.

• Tenants themselves have very little "risk" and "consequence" when you look at the big picture. This is because they only put down a very small refundable deposit (equal to the first month's rent) which they will get back at the end of their lease agreement so long as they have taken care of the property till the end.

 

 

Benefits of Having a "Tenant-Buyer" 


You may have figured out by now, a great tenant is someone who:


• They see the property as if it was theirs (or will soon be).
• Wants to achieve home ownership, and not just rent a home for a specific time period of the lease and then have to move on.
• They have something to look forward to with property they are currently living in. 
• They have real "skin in the game" by having to put down a considerabaly large amount of money upfront (that's not refundable from the start), so they have a lot to lose if they walk away from the property.
• You have someone who with written permission ahead of time from the home owner, will improve the property such as painting etc. Our tenant-buyers are actually responsible contractually for the first $5,000 or more sometimes-in repairs.
Conclusion


I understand your concerns.

Believe me.

I know and understand that you do not want to put someone in your home that does not 

appreciate it, then turns around and wrecks the property, only to leave you stuck with the 

bill.
 
I get it.

While there are no guarantees in life and even with a tenant-buyer that we send you, my 

hope is that the information that I provided for you above will give you some "food for 

thought" on this subject and show you that most assuredly, that again, while there are no 

guarantees, at the very least with our tenant-buyer we send, you have someone who is 

willing to give you a large, non refundable deposit for your protection.





Not to worry, we of course:


• Check their income for the last 12-24 months, especially if they are self employed
• Get a pre-qualification letter from a lender with the full break down of their current credit situation, debts to income, past credit problems (if they have any), and anything else you may want to see and know. 
• Find out why they are not buying in the conventional way thru a bank now, and how long will they need before they can qualify (usually 1-3 yrs)
• References
• Check their past rental history to make sure they will be always on time.
• Do a full background check looking for past evictions and/or felonies.
• A letter from the tenant-buyer if there are gaps or causes for concern.
• And more....

All of this would then be presented to you, your realtor and/or attorney for review before our 

assigning of contracts, this way you are never left in the dark as to who you are getting as a 

tenant-buyer-never!

 

Been 90 Days....My Realtor STILL Hasn't Sold My House!

First and foremost, I want you to know right from the start that this blog post is not going to 

be me bashing on Realtors. Rather, I want you to know and use this blog post more as a    

" road map" and "guide" for you and your real estate agent to follow in the event that your 

Realtor is having trouble selling your property for the following two reasons:

• The time frame in which you want it sold

• The purchase price you want

3 Signs That Your Home Is Not Going To Sell Any Time Soon

Here a few reasons why your real estate agent is having trouble selling your home for the 

price you want and/or in the time period that you desire.

• If you see that you are getting some calls but no offers, most of the time you are simply over priced.

• Also, if you are getting showings, but again, no one is making offers, you are over priced. 

• Lastly, if you are getting a lot of "low ball" offers - you guessed it...you are over priced.

 

I know for some homeowners, hearing that their home is over priced is not their favorite 

thing acknowledge, but...it is what it is. It's important to me  to be upfront and honest with 

you. I am in no way implying that your house does not have the value you feel it does. What 

I am saying is that in the given market that you are in, what you are being offered for the 

property (or not at all), is what the market will bear at this given time.

 
The truth is that your Realtor may have not told you this, or they have tried to tell you this 

directly or indirectly, and for one reason or another, you still decided to price the home at 

what you wanted, but still higher than what the market will bear.

How to Sell Your Home In 7-14 Days,...Even If You Are Over Priced

 
The statement that I just wrote above may seem a little odd, since I just told you that the 

reason the house is not selling is because you, your Realtor (or both) have over priced your 

home. I was talking specifically about the purchase price here. When that is too high in a 

market where you are trying to sell in the "conventional" manner - the house will sit.

 One choice you have is to simply do the obvious: Lower the price.

On the other hand... you could sell your home "Rent to Own" as another option.

When you sell your property, "Rent to Own" using what's known as a "Lease with the 

Option to Buy" (or "Lease-Option" for short, you can price your home in ways you could not 

do otherwise in a "conventional" market. 

3 Ways You Can Sell Your Home Using a "Lease-Option"
That You Can't Do...When You Are Selling "Conventionally"

Selling your property on a Lease-Option opens you and your home up to a market you're 

currently not tapping into right now. It's the smart and savvy investor way to get 3 times the 

exposure to a given property and getting it sold in a 7-14 day period, without paying one 

penny in commissions.

• You instantaneously avoid the problem of your property not appraising in your current market

• You can most of the time get 10-20% more than the market value for your home, because you are exchanging a higher price to your tenant-buyer for great terms that allow them yo qualify for your property when they might not otherwise.

• Because you are selling on a Lease-Option, it does not matter if you have zero equity, or even if you are slightly "upside down" and owe more than what your home is worth. That is because you are selling on terms and into the future and not in today's market. Please understand that there is much more to this, and how it is actually structured than what I have stated in this blog post today, so please do not yell and scream, "What???" 
  
  That's not true! or "My Realtor said you are full of it, Daniel!"
  
  Relax...
  
  Take a deep breath!
   
  Again, this blog post is meant to be an "overview" (a simplification), not an in depth look at 
  
  how to structure your unique situation, based on your specific wants and needs. However, if 
  
  you are interested and would like to to learn the specifics, and even have us craft a specific 
  
  offer for your particular wants and needs (with no obligation whatsoever), click here now.
  
   
  
  
  
  We will show you how we can help you, even if you have an agreement with a Realtor. We 
  
  can do this because we do not represent you nor are we trying to take their listing away 
  
  from them. We act strictly as Principles, and represent only ourselves. In doing this, this 
  
  allows you to leverage our expertise without having to pay us a dime in commissions or 
  
  even consulting fees. We are paid only by the "end" tenant-buyer we bring (and pending 
  
  your approval of), and by them only.
  
  
  How We Can Help Your Realtor....to Help You... Get Exactly What You 
  Want When You Sell (Even If You Are Locked Into A Listing Agreement).
  
  
  If you and your Realtor are finding yourselves with a property that just won't sell, and you 
  
  are both open minded to an alternative method to selling your home, click here now.
   
  All that we need to do is slightly modify your original agreement so that we can ensure you 
  
  get your house sold, and your Realtor gets paid upfront vs. waiting till the end of the lease 
  
  term to get paid. In the end, you won't have a second mortgage to pay for and your Realtor 
  
  will get paid for all of their hard work.
  
  
  We will structure everything in a way that we get paid too, this ensures everyone is happy. 
  
  Please feel free to have your real estate attorney involved in every step of the way as well, 
  
  if that helps to put you at ease with this process. We have been doing this 100% online 
  
  without a problem whatsoever. We have nothing to hide and as I mentioned earlier, it's 
  
  important to be upfront and honest with you right from the start.
  
  
  
   

{Property Owner} "Your Tenant-Buyer" Chose NOT to Buy? Do This....

When you sell your home as "Rent to Own" you would do so with the intentions that the 

tenant-buyer will follow through and exercise their "Option" right to buy the home and cash 

you out. But we don't live in a perfect world, and it doesn't always workout the way you 

intended, correct? Some stats show that 30-50% of tenant-buyers exercise their Option 

right to buy the property. What should you do then? Your tenant-buyer calls you up 

someday and says something along these lines...

"Hey...I am really sorry but I can't buy your house at this time"

or they may say....

"Hey... I am sorry but I don't want to buy your house now"

At the end of the day, it's a double edge sword and it can cut both ways. It is an "Option" to 

buy and an "Option" not to buy, correct?

 

Take a break for a moment now.

Let's gather our thoughts and consider the following...

With clear understanding that most if not all sellers that we will work with would prefer to 

sell their home today at a fair market value and get fully cashed out, let's take a look at the 

alternative choices we have to choose from, assuming getting cashed out is not a viable 

option for one reason or another.

What You Get with a Conventional Tenant & Rental

You get the following from your tenant with a conventional tenant and rental:

• Someone who will constantly be requesting for you to repair stopped up toilets, leaky roofs etc.

• Someone who may trash your property

• Someone with no real interest in improving your property by investing any of their own money and improving the property value

• Someone with very little "skin in the game" since their deposit is so small, and has really no interest beyond that

• One month's security deposit (sometimes two), equal to one month's rent

 
What You Will Get When You're Selling Your Property,

"Rent to Own" On Terms...Instead of for Cash Today

With a non-conventional Lease-Option ("Rent to Own") agreements you get the following from your tenant-buyer:

• Someone who doesn't ask you to fix anything when something breaks or needs a repair, because contractually, a set amount of repair costs has been established from the beginning, of which the tenant-buyer is responsible

• Someone who will most often than not ask written permission to invest in home improvements which may increase the property's value

• Someone with a lot of "skin in the game" since their deposit is much larger than a conventional deposit, and their intentions are to own the property after the 1-3 years.

• Someone who actually want to sell their home

• A much larger, non refundable Option consideration fee

Let's Take a Look At The Worse Case Scenario

If Your Tenant-Buyer Chose Not To Buy

Let's say your tenant-buyer chose not to exercise their Option to buy your home, and 

assuming they have made their monthly payments on time for the entire term, you could 

simply take your property back. You could then repackage your home and sell it again and 

possibly even at an increase in value. If the property went up in value during the lease term, 

and the tenant-buyer decides to give you the property back, you could always sell it again 

at a higher price. Otherwise, you may decide you want to hold on to the property as a rental 

for cash flow and continued appreciation.

If the tenant-buyer fails to make their payments on time, you could always evict them 

because a Lease with the Option to buy is not a sale, contrary to the people who are 

confused with the Dodd Frankj Law etc. Understand that a Lease with the Option to Buy is 

not a sale, but rather the Option to buy the property (and the Option to not buy it), as the 

owner of the property, you, can evict the non-paying tenant-buyer just the same as you 

would if you leased the property (only) like a landlord does.

Essentially, you would get the benefits of:

• Getting a much larger down payment/security deposit known as the Option consideration fee vs. a small, non refundable security deposit

• Having a tenant-buyer who wants to take care of the property like you would, because they want it to be theirs

• Remaining on the title and in control

• Selling your property "As Is"

• A hands off experience, since you will not have to repair anything up to an agreed repair cost amount

• A potential cash flow property

• And much much more....

 

4 Foolproof Steps to Qualify Any Tenant-Buyer for Your Home

When you are selling your home as "Rent to Own", you are leasing out your home typically

for a period of 1-3 years. This is someone who is interested in buying your home during this 

time frame or at the end of this term.
 

They usually have trouble qualifying for a conventional home loan from the bank for the 

following reasons:

• Not enough down payment

• Not enough time on their job

• Problems with their credit

• Own too many properties to begin with

These tenant-buyers are in a unique position because they despise the idea of being a

renter, yet loves the idea of owning their own home someday, they elect to buy on a lease 

with the Option to buy - regularly referred to as a "Rent to Own" arrangement. 

 

 Logically, the home owners that we work with have some questions and concerns:

• Why do they have bad credit?

• How do I know they will pay me the rent on time

• What kind of past rental history do they have?

• Have they ever been evicted?

• How much more time do they need on their job before they can satisfy a bank's requirements

• Will this tenant-buyer destroy my house?

• How long will it take for them to fix their credit before they can qualify?

• Do they have any felonies?

• And more....

These are valid and legitimate questions and concerns that must be addressed, before any

homeowner would want to lease/sell their home to someone using a Lease-Option. We 

know that there are no guarantees in life, and that there comes some inherent risks when 

you are leasing a property to someone. This blog post is meant to give you some "food for 

thought" for you to digest, allowing you to make the best and most educated decision for 

your particular wants and needs.

6 Reasons Why Selling Your Home, "Rent to Own" 

Is Better (and Safer) Than Just Renting Your Home

• They will help you save money by not paying a property management company 10% of your rent. This is because they will assume the majority of the responsibilities that a property manager would usually do.

• They will take responsibility for the first $5,000(or more) in repairs, allowing you to never be a landlord

• With your written permission, of course, they will often put their own money to the home to improve it's value

• They take the home "As Is", this way you do not have to invest another penny into the home

• They "tenant-buyer" wants to take care of the home as their own, because that's the ultimate goal(unlike regular renters)

• You get a larger security deposit called an, "Option fee" which is non-refundable-usually 2-3 times larger

6 Reasons Why Renters Who Don't Want to Buy Are Risky

• If you are an out of state landlord, things can get way more expensive and have even less control

• You will have to pay 10% of your monthly rent to a management company, if you are not interested in being a landlord

• You are responsible as a landlord to fix any and all leaky roofs, toilets, faucets, etc., on weekends, weekdays and all hours of the night

• They may have decent credit today and pass your credit check at this moment, but things can change-think about 2007-2010 - as an example.

• Renters put down a small, refundable security deposit that's usually equal to one month's rent

• They usually do not tend to take care of your property the same as if it was their own, because that is not their goal in the end. Think about it, You wash the car you own, but don't wash your rental car, correct? Correct!


 With a Firm Understanding of Why We Prefer Selling "Rent to Own," 
Let's Take a Look At the 4 Ways We Qualify Our Tenant-Buyers

1. Letter of Intent
 

2. Rental Application
 

3. "Documentation Always Beats Conversation"

(Please keep in mind that we understand that your credit is not perfect, and you may have a blemished past. Do not worry. We are every understanding and will work with you)

• Valid & Current Driver's Lincense for Both Applicants
• Pay stubs or W2's or 12 Months of Bank Statements or Tax Returns Proving Income for Both Applicants
• References for Your Prior Rental History for Both Applicants
• Background Check for Both Applicants Over the Age of 18
• One paragraph Explanation Letter (if applicable) for Any Challenges You Have That We Need to Be Aware Of


4. Pre-Qualification Letter from the President of Nationwide Home Loans, Inc. - David Ruch

Finding a mortgage lender who understands what a Lease-Option (Rent to Own) 

transaction exactly is, and one who will actually work with our tenant-buyers a year or two 

before being able to qualify for a loan is virtually impossible....until now. 


Mr. David Ruch is the owner and President of Nationwide Home Loans, Inc., New

Millennium Homes, and Nationwide Homes Realty, is one of those very rare individuals who 

"understands what we do" and is a long-term thinker. This probably explains his

 tremendous success.





Mr.Ruch has agreed to qualify all of our tenant-buyers prior to entering into a binding 

agreement with you. This way, you know right from the start how long they need to qualify 

for a home loan. He also has agreed to provide you with a pre-qualification letter that 

assesses the tenant-buyer's:

• Current FICO score credit standing and determine what needs to be done to increase their FICO score and how long it will take
• What types of bank loans they are good candidates for
• What Steps they need to take between now and the time their term will end in order to ensure they can qualify for a home loan
• And...much much more

Here is a little more helpful info about Mr.Ruch



• He has multiple licenses, including Mortgage Banker, Mortgage Broker, and Real Estate Broker in Colorado and California.
• Mr. Ruch’s career as a mortgage lender and real estate investor spans 33 years including ownership of Nationwide Home Loans for the last 20 years.  Currently, he personally owns more than 500 residential units, including multi-family apartments, single-family residences and investment in lease options.


• Over the last thirty years, other investors have entrusted their money to his experience and long term expertise in making them a safe secure profit.  Private Money Lending through high-yielding first  trust deeds is the cornerstone of his investment policy. 
• Conservative asset backed lending and investment in multi-family and single family buildings together with some commercial facilities provide a broad spectrum of opportunities for ample profit, firstly for his investor pool and secondarily his own business enterprises.
• Mr. Ruch takes pride in the fact that no investor has taken a loss not even through the last real estate downturn nor any of the other fiascos and recessions which occurred during his tenure.

Plus...to ensure our tenant-buyers are a safe choice for the sellers we deal with, our work 

does not stop there. Once one of our tenant-buyers has bought the Option rights from us, 

we provide them with our very popular credit restoration book. It has helped hundreds of 

people just like them, restoring much of their credit in as little as 45 days.

 
This helps to make sure that they can qualify to buy your home during, or at the end of, the 

lease term that you and the tenant-buyer has agreed upon.




Free Gift for Your Tenant-Buyers
Our 45-Day Credit Restoration Guide




This free gift is the perfect guide for our tenant-buyers to follow when it comes to the following:

• Increasing their FICO scores
• Negotiating down past debts 
• Qualifying for a bank loan 
• Taking back control over their finances
• Seeing results in as little as 45 days or less