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I talked for quite a well with a guy who is doing WRAPS up here in the Great White North! er Canada.
The way he structures his deal is the “buyers” are treated legally as tenants and they have a completion day. That is they have to take him out of the property. The reason he structures it this way is doing arbitrage on the underlying first mortgage. He settles for a downpayment, non-refundable and a 1 to 2 percent on top of the first mortgage rate.
He sets his completion date about 30 days in advance of the mortgage renewal date so that he can, as he wants, negotiate a new rate such that he maintains his margins.
I get the impression that you folks structure your deals differently.
Bearhunter
Steve,
With a lease option your right the tenant get the option to buy. The tenant has to come up with the rest of the downpayment plus the financing to cash you out of the property.
In a WRAP there is a sale agreement but title and therefore ownership do not transfer till the tenant/buyer pays out the unpaid balance or the agreement terminates.
Given that in both the WRAP and LEASE OPTION have similar time element and title transfer terms I find it difficult to distinguish the difference between the two.
What are your thoughts? [confused2]
Bearhunter
Lucifer_au
Thanks for the reply.
James