Lease Option vs Seller Finance

[Phillippa Gilkes]

I'm currently working on a deal. My seller is behind in payment and she wants to do anything to get out the property. I presented her with the lease option deal and she agreed. My question is what is the difference between lease option and seller finance. Which would be better for her. The property value is about 150k ARV, her buy out on her mortgage is 135k.

[James Galla]

I'd suggest contacting an attorney before you even do anything more - you are offering the seller terms that you don't even know the consequences of. 

The concept of a lease-option is that the premises are leased out to a tenant and that tenant, at some point in the future, has the opportunity to purchase it. It doesn't necessarily mean it will go through. Seller-finance involves a transfer of the property to the prospective purchaser in exchange for a note and mortgage.

Entering into these arrangements when there is a mortgage on the property can trigger the due on sale clause. Those are the general ideas behind the concepts. You ought to consult a lawyer to get it all drafted and reviewed so you have more than just a generalized explanation.