If Everyone Bought a Horse, Would Real Estate Stabilize?

Or, maybe if everyone bought a house, would Real Estate Stabilize?

I just read a post written by Pam Hills,  Just a thought & please don't shoot me for asking.... wondering about revisiting the old practice of Lease To Own or Lease Purchase. Her title made me laugh. It reminded me of "They shoot horses don't they?" Pam, I totally enjoyed your post. Today with so many homes sitting on the market for so very long owners that are carrying that second note hit a critical moment. They ask themselves, "should I let the house go?"

My answer to them is, "not unless you absolutely have to! As your Realtor® I would recommend that we visit the possibility of creative financing."

Creative Financing is wonderful when you can make it work. It is actually a great deal more work than selling a house due to details that must be covered. First of all, if you are considering offering this possibility to any of your clients you must become acquainted with your State Laws. Being creative is wonderful as long as you are playing within the law.Texas, for an example does not allow an Arms Length Mortgage.

Therefore, if you do still have a mortgage on the house, you cannot sell it to a family member, friend, or anyone that shares any interest in the house with you. It is best described by one of our own...Elizabeth Weintraub and Why Does the Bank Require an Arms-Length Affidavit on a Short Sale?

EXAMPLE: Mom agrees to buy the house and rent it back to you. She agrees to sell the house back to you once you are back on your feet. Texas says, "no way!" It is illegal.

Also, if your client still has a mortgage on the property you must judiciously fill out the paperwork to show the legal term as a RENTAL. Otherwise, your bank or mortgage holder can call your NOTE DUE UPON SALE. This turns out to be a glorified "Lease Purchase or Lease To Own" but it can remain legal. Your paperwork can show "CREDITS" from the monthly payment towards down payment when ready for purchase and any other agreements you make with the potential buyer. It has been my experience that it is better to do two sets of paperwork. This is totally legal in the State of Texas. One set shows the rental and this is the current paperwork that validates their occupying the property, amount of rent and all rental terms. The other set of paperwork is filled out as an addendum or extension of the original paperwork. This paperwork becomes valid once all requirements are met by the potential buyers.

EXAMPLE:  Basic rental paperwork allows you to remain within the law. If for some reason the client defaults they will be treated as any other renter and will have no right to the house beyond that of a renter. Often times, local banks will offer to finance the house for the renters if you can show they have already paid XXX number of dollars towards the down payment based upon the agreed sales price, have made payments on time for 18 months to two years, and have cleaned up their credit to qualify.

Benefits for the Seller: The seller has immediate relief from the monthly payment, insurance, and taxes. All of these expenses may be included within the monthly payment. First time buyers and people who have been turned down due to credit or not having a 20% down payment are usually grateful to spend more to have a home. Because the Renters are looking ahead at improving their lives and have begun taking emotional and mental ownership of the home they normally take better care of the property. Many landlords will find they are making improvements to the structure (with owner's approval of course) that will increase the value of the home if they do move out and it eventually is placed back on the market. Yet another benefit for the Seller is that of maintenance. Simply make it a term within the rental paperwork that Seller will pay up to $50.00 for any major repair and the future purchaser will pay the rest. Besides, it's going to be their water heater right? So, they pick it out and have it installed. Easy does it. The benefits are too many to list.

Benefits for the Buyer/Renter: The dream and feeling of home ownership. OWNERSHIP is the key word here. Everyone deserves to have a home. They are allowed to live their dream before they ever would normally. They have the ability to accumulate a portion of their down payment, build a good monthly payment report, have time to strengthen their credit, and they will experience the pride of homeownership. This usually can be accomplished withing 18 months to two years. It's all good. 
 
 
Benefits for the Realtor? WE GET PAID! First of all you have found a solution for your client. This sort of thing really helps me to sleep at night. There is no reason to wait till the house sells to realize compensation! Get CREATIVE! You just saved a house from going into FORECLOSURE and I assure you this is more work that a clean sale! YOU found the renters and future buyers! You just earned $$$'s. How do you want to get paid? It is really up to you. How about 50% of their down payment and $50.00 a month? With enough of these deals you could end up with a nice passive income!

Or, you could charge a flat fee. It's all up to you. You simply do not work for free.

You will also want to have the soon-to-be Seller pre-sign a guarantee to you for full compensation when the sale transpires. In fact include a BRA attached to the paperwork in case some one else comes along to purchase. Let's do this right!

Disclaimer. This post is written based upon experience. I am not a lawyer and do not intend to be teaching law. Please consult with a Lawyer. Thank you!