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Unformatted text preview: asty School (www.dynastySchool.com) 9-47 REAL ESTATE FINANCE
The monthly payment may exceed mortgage payments (benefit to lessor/seller). The seller–lessor may credit a portion of the payment toward the purchase price (benefit to lessee/buyer). The contract usually provides for forfeiture of deposit if the lessee/buyer decides not to purchase the property (lessor/seller benefit). There are tax benefits to the lessor/seller by renting property. This procedure may require approval from the underlying lender if there is a due–on– sale clause in existing financing. LEASE WITH OPTION TO BUY
Similar to the lease–purchase agreement, this procedure combines the lease with an option to buy rather than a contract to buy. A deposit is not necessarily made. The lessee has the right to exercise the option to purchase for as long as the lease is in effect. SALE–LEASEBACK
This arrangement between seller–lessee and buyer–lessor releases capital which the seller has tied up in property at an old basis with no depreciation left. The seller is normally a business which owns the premises and continues to occupy them as lessee after the sale. The seller can retain an ideally suited property for use of the business. The seller–lessee can deduct full rental. (Advantage over borrowing on equity and deducting interest only.) The buyer–lessor gets an ideal tenant who manages the property, as well as depreciation benefits and appreciation potential. 9-48 Licensing School for Appraisal, CPA, Contractors, Insurance, Real Estate, Notary, Nurse, Food Handlers, Tax and Securities 9: FIXED RATE MORTGAGE AND ALTERNATIVE MORTGAGE INSTRUMENTS BUYDOWNS – TEMPORARY
With a buydown the effective interest rate is reduced or “bought down” during the initial term of the loan for the borrower by contributions made by other parties, e.g., the builder–developer or seller. The third party, in effect, pays for part of the interest in advance. The buydown cash is usually deposited into a non...
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This note was uploaded on 12/30/2010 for the course SOC 101 taught by Professor Zhung during the Spring '10 term at Punjab Engineering College.
- Spring '10