As more and more properties go to foreclosure and more and more banks bound their lending restrictions we are going to see a growing trend of people selling their homes using lease options. Quite frankly lease option has been around for a very long time but never have been given the publicity that perhaps they should. the whole mortgage/real estate industry spend a lot of money trying to convince you that their way is the only way of doing business.
First of all it opens up the amount of potential buyers that you can market to, which being in a buyer’s market is a good thing. we would like to provide ourselves the most effective chance possible to sell our properties for top dollar all the while protecting our equity. In these circumstances we’ve got two options…open up the amount of potential buyers or pay the real estate agents more to sell our property. some of you might be thinking that paying your agent a lot of shouldn’t matter but let me tell you it does. If they can make 7-8% instead of 5-6% commissions you better believe they will be pushing to sell your property.
Secondly it preserves equity that you would probably be paying to a real estate agent, closing costs and price reductions. Throw it in your local classified ads instead of paying for a real estate agent to market the property for you saving yourself the 5-8% commissions that are commonly charged. Besides that when people buy your property they expect to be able to negotiate the purchase price somewhat, but with a lease option this is a less likely scenario. i would always recommend that you involve a lawyer in the process to make sure that the lease and the choice are both well documented for your local laws.
Thirdly you can ask for first and last month’s rent a rental deposit and options consideration. The first and last month’s rent and the rent deposit are all a part of the rental/lease contract and are probably refundable. What you are doing not want to be refundable is that the options consideration and that is why you want those contracts to be separate.
Lastly you’ll charge future value for the property and top dollar in rent. By fixing your contracts, and i suggest that they be 2 separate contracts, one being the lease and the other being the option you’ll get away from any confusion about the people renting your property actually purchasing your property using vender finance. Therefore by making the distinction you’ll ask for future value of the property and that can be a part of the choice contract. On the other hand you’ll charge more than market rent for the property because you’ll have some of the rent go towards the down payment and closing prices when they exercise the option.
Just bear in mind that you simply don’t want to give your renters the option of extending their contract while not paying another option consideration. you also want to make sure that with any contract that there ar some teeth in their so that if they don’t perform that there are some serious consequences. you may also want to consider putting in the contract something to the effect that they are completely responsible for all utilities and maintenance of the property and if they alter the property in any way that they’re solely responsible for the costs.
Conclusion…Lease options are a great way to sell your home in a buyer’s market (in any market) because you will be able to sell your home more quickly, while conserving your equity and creating monthly cash flow through rents. not to mention the choice consideration and any other fees you deem necessary you get to keep regardless if they exercise the choice or not.