A lease option is a great way to sell your home, especially if you need to sell it for more than the property can presently appraise at. If you are in a market that is presently appreciating such as Beaverton, Oregon is, then you can increase the price of the home 3-5% per year for the length of the contract. Also during the time of the lease you can get more than the present rents for an area and a larger than normal, non-refundable, option payment.
One of the biggest advantages to you, as a seller, is that you not only get to keep the mortgage interest rate and property tax deductions, but in most contracts the buyer does all those repairs in the middle of the night, that normally a landlord would have to take care of. Why? Because they are basically the owner and the home will be theirs in one to five years depending on the length of the contract.
But, the reason you should hire an agent that understands lease options is simple! When you need braces, your dentist sends you to an orthodontist and the reason he does that is because an orthodontist is a specialist! He specializes in braces and not just general dental work. An agent that specializes in creative financing such as lease options is the same way, they understand how complicated a transaction can be and takes those extra precautions to protect you, the seller.
When you interview an agent to sell your home on lease options ask them a series of questions.
Do they use special contracts? The answer should be: the contract I use on each house is a little different depending on the situation with the house. Is it a fixer or a move in ready home? I really need to look into your situation with the home, but yes I do use a different contract on each home.
- Ask them how much you should receive per month on your home? If they just throw out a number without asking you what your current PITI (Principle + Interest + Taxes + Insurance) is then they may not have your best interest in mind. You see a lot of things go in to pricing a lease option home, including the present PITI. Sometimes it is better to offer owner financing than a lease option. This is where an agent that understands creative financing can help.
- Ask them who collects the money each month in a lease option? If they answer anything other than an escrow account then beware! You see an escrow account protests both the buyer and seller. When a payment comes in to an escrow account they are a neutral third party and they document the date that it came in. If a contract dispute should ever arise, then the escrow company's paperwork can be used in court. Also, the escrow company makes sure the PITI is paid before any money is issued to the seller, protecting the buyer from the seller collecting the funds and letting the house be foreclosed on.
- Ask them how they qualify the buyer to make sure they can actually exercise the option to purchase the home at the end of the option period? The answer to this should be the buyer and the agent sit down with a mortgage broker to pre-qualify them for a time period to fix their credit, so the can actually qualify for a loan at the end of the lease option period. When I work with a buyer, if my mortgage brokers and I don't think, within a reasonable amount of time, that the credit issues of a buyer can be fixed in order for them to refinance the lease and purchase the home then we tell the buyer what they need to do and at what time they can reconsider a lease option. You see if the buyer can't fix their credit in the time allowed in the contract then it is a waste of everyone's time.
- How do you get paid? If the agent says they require you to have the buyer pay 10% down and they get paid out of the down payment, then this is an agent that doesn't have your best interest at heart. A true lease option agent will work with you and a buyer's situation and get paid maybe a little each month for the repairing of the credit and then the remainder of their commission when the option is exercised. What motivation does the agent have to help you and your buyer after the contract is signed if they have already been paid?
These are just a few of the questions you should a potential agent. If you are considering doing a lease option of your property and you would like to talk to me more about lease options and how they can increase your profit on the sale of your home, please feel free to contact me anytime.
Todd Clark - broker
Kastings & Associates
Phone: (503)524-9494
Fax: (503)622-8739
Todd@IFoundYourNewHome.com
http://www.ifoundyournewhome.com/
But Todd, I went to that seminar that says I get to keep all the money...........Thanks for anothe voice stating the obvious...unless its your home that is being lease optioned, you should not get all the money. I have negotiated a flat fee with FSBOs' if they would not list, I think that is OK. ANd I do not write the contracts any more, to much can and will go wrong in a year or two, you can count on being brought back to stay involved....Nice Post Todd...