Should we rent our Jacksonville FL house with option to buyWhat do you think about renting our Jacksonville FL house for a year to a tenant with an option to buy?
 
That is a great question! It is certainly an option for Jacksonville FL sellers to rent their home with an option to buy vs. keeping the home for sale, hoping the right buyer at the right price will come along.
 
SELLER ADVANTAGES
 
Prospective buyers who rent a home in Jacksonville with the intention to buy in a year will pay more in rent. They will pay close to or equal what their mortgage payment will be. They will treat the home as if it were their own, and will pay a nonrefundable deposit. The deposit will be larger than a simple month's rent, and the seller can use the money to offset any damage or lack of income when they put the home for sale again.
 
BUYER ADVANTAGES
 
The Jacksonville FL real estate market is one of the top 10 in the country where it is more affordable to buy than rent, according to Forbes.colm. Buyers who have cash but may have credit challenges can benefit when a Seller is in the position to let them rent with an option to buy in a year. They can live in their new permanent home and part of their rent and their deposit will go towards the purchase. It is a forced savings account.
 
SELLER DISADVANTAGES
 
Statistically, the buyers will not buy the house in a year. If home values have continued to decline, the Seller's equity will be less than it would have been if they had sold their home a year earlier. There is always the possibility for the house to be damaged above the deposit. The Buyer/Renters may not exercise the option to buy and then the Seller has to decide whether to become a permanent Landlord or attempt a friendly move out with people who have lost a significant amount of money.
 
IMPORTANT SELLER NEGOTIATING POINTS
 
The nonrefundable deposit usually goes to either the downpayment or to buy down the sales price. If the rent is paid on time, a certain % is typically negotiated to go towards either the downpayment or buying down the sales price.
 
Will the house appraise for the sales price in a year? If the downpayment and rent go towards reducing the sales price, then there is a better chance the house will appraise. The Seller can put a sales price above market value expecting the deposit and rent credit to bring the sales price within market value in a year if the market is not in a decline, or even higher if the market is increasing.
 
Does the Buyer have the cash to pay a downpayment in a year plus closing costs? If not, they will have to have deposit and rent go towards downpayment and closing costs.
 
The Buyer may want to extend the rent with an option to buy for another year. The Seller needs to consult their real estate professional attorney for advice as to whether this is in their best interest.
 
Hire an attorney to draw up the lease and language must be specific so as not to trigger a due-on-sale clause from the mortgage company should they find out someone is in the property with the intention/option to buy it. If you are considering renting your home with an option to buy, contact us.

We can take the guesswork out of renting your Jacksonville FL home to a prospective buyer who wants an option to buy the home. Give us a call at 904-673-2308 or email us at sharon@teamalters.com

 

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About the Author: Sharon Alters works with her husband, Frank, and team member, Ann Dunsford Curley. They are in the top 5% real estate agents for production in the Jacksonville Florida area, specializing in Military and Corporate Relocation in the Fleming Island, Orange Park, St. Johns, St. Augustine and Beaches areas. Their local knowledge can help Relocating Buyers find the perfect lifestyle, whether it is a Castle on the Ocean, or a Cottage in the Country. 

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This post has been included in Florida Real Estate News Clay County, FL Real Estate News Fleming Island, FL Real Estate News
Post is included in group: Advice for Sellers
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Post is included in group: Jacksonville, Florida Real Estate
Post is included in group: Northeast Florida Real Estate Professionals

9 Comments on SHOULD WE RENT OUR JACKSONVILLE FL HOUSE TO A TENANT WITH AN OPTION TO BUY?

JAN
21
2011
382,714 Points 8 Featured Posts Localism Sponsor Attended Rain Camp Called Shot Master

Some very good advice on a trend that is gaining again in popularity in my area with today's sellers; bookmarked and suggested.
9:17pm • #1
203,127 Points 1 Featured Post Hit Router

i think that we are at a decent point in the market, where the lease w option to buy in a mutually beneficial deal.  i would not allow the lease money itself though to be the only consideration for the option.  there should be additional consideration, unless that option amount is incorporated into the rent on a monthly basis
9:28pm • #2
389,734 Points 28 Featured Posts Localism Sponsor Outside Blog Attended Rain Camp Called Shot Master

What a great article Sharon.  I especially liked "Hire an Attorney".  Great advice my friend :)
10:20pm • #3
1,210,622 Points 118 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

Sharon, excellent blog. I think the biggest disadvantage for the Seller is that s/he is not in control. If the Buyer decides to exercise the option, the Seller can't refuse. But the Buyer can.

In a declining and even in a flat market it is difficult to induce the buyer to exercise the option, as usually the buyer will have to pay more after becoming an owner, rather when he is a renter.

Of course, if people want it very much, it may be prudent for the Seller to charge higher rent, especially because part of it goes towards the Down payment (or buyout on the price).

Often Buyers fall in love with the house, but that fades out after living there for a while.
10:40pm • #4
JAN
22
2011
872,258 Points 47 Featured Posts Localism Sponsor Attended Rain Camp Called Shot Master

Teral, this question was asked in an email this week from one of our Sellers. Someone has approached them and they are considering it.

James, there is a nonrefundable deposit - could be $5000 for this type house. Is there any other type of consideration you had in mind?

Elizabeth, thank you my friend! :)

Jon, thank you. Yes the Seller does lose some control but they keep their cash flow going and some extra cash if the Buyers opt not to purchase. You make excellent points about why the Buyer may not exercise the option.
12:45am • #5
JAN
26
2011
561,252 Points 3 Featured Posts Outside Blog Called Shot Master

Sharon,

Your post on Lease Options is very thoughtful and could not be more timely.  

Good speed,

Steve
11:51am • #6
JAN
29
2011
872,258 Points 47 Featured Posts Localism Sponsor Attended Rain Camp Called Shot Master

Thanks, Steve! We are seeing more of them in our market.
12:46am • #7
JAN
30
2011
339,046 Points 8 Featured Posts Outside Blog Called Shot Master

A really great, informative post - I love the way you lay out the pros and cons for both sides. We're also seeing this in NYC. Now, I have a better understanding.
10:33am • #8
872,258 Points 47 Featured Posts Localism Sponsor Attended Rain Camp Called Shot Master

Jill, glad this post gave you some more insight into the pros and cons of doing a lease option.
6:20pm • #9


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Sharon Alters 904-673-2308 Fleming Island FL Real Estate

Fleming Island, Orange Park, Jacksonville

Fleming Island, FL

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Coldwell Banker Vanguard Realty

Address: 3168 U S Highway 17 S, Fleming Island, FL, 32003

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