The Seller’s Loss of the Property Part 1
This is a serious problem and one that has received a lot of attention in recent years, particularly in some states in the Southwest. In Texas, lease-options have been severely restricted in the sense that the seller must have a very large equity in the property.
When you buy a property outright, there is a short period of time called an escrow when the seller comes up with the deed to the property. There’s a title search to see what the seller owes and to be sure all the seller’s liens (mortgages and other debts) are paid off (unless you assume them). And you get a clear title to the home. You obtain title insurance, which assures you that the property is yours.
When you buy on a lease-option, none of that happens, at least not initially. There is no escrow, no title insurance, no title change, and no payoff of the seller’s debt. Instead, you are simply given a document—a lease-option—that spells out your lease period and terms and specifies the conditions under which you have the right to exercise your option to purchase at a later date.
However, what if the seller is having serious financial problems? What if she finds that because of a job loss, illness, divorce, or any of a hundred other possible problems, she can’t make the monthly payment on her mortgage? So she stops making it.
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