Recently, in the Atlanta Journal and Constitution:
The suggestion is offered at the beginning or tacked onto the end of ads for resale homes and is even being used to lure buyers into new neighborhoods from intown to the suburbs: "Rent to own. Will consider lease-purchase."
Individual sellers seeking to unload a mortgage payment and developers with an oversupply of new homes are offering the arrangements. Some sellers say mentioning the possibility of lease-purchase or lease-option results in more showings, and ultimately, a deal.
"If you can match a seller who wants to sell with a buyer who wants to buy, it really can allow both to achieve their goals in a positive way and result in a win-win transaction," said John Adams, a real estate broker and investor. "It is an ideal adaptation of an age-old home buying strategy to our current market situation."
It's something he's seeing more of, especially as some sellers with mortgages on two homes have given up trying to sell and are desperate for someone to cover a mortgage payment. Tammie Carpenter, a real estate agent with Metro Brokers/GMAC Real Estate, agrees that the perception of a lease-purchase is changing. She's seeing them offered for everything from affordable homes to high-end properties.
"Where we didn't used to like to see a lease-purchase rider on the homes, we're starting to offer that to our sellers, as well as our buyers," she said. "If you're one of those where you've been out there for a while, you can get somebody in there. They're covering your mortgage, and you're going to sell [in] six months, a year."
The fact that new developments, such as Historic Westside Village intown and Millard Bowen Communities' Wildwood neighborhood in Buford, have been using lease-purchases is "absolutely unprecedented," Adams said.
"They are doing this to unload the property. Anything, anything to get them occupied," he said. "They're sitting there empty - somebody's had to pay principal, interest, taxes. It's just a different way of getting money in the door."
That the Atlanta Journal and Constitution is running a long article about the increasing numbers of lease/options and their advantages and disadvantages for buyer and seller should underscore one very important point for investors: lease-purchases are becoming mainstream deals.
Historically, lease-purchase deals were offered only by investors. They provided a competitive advantage over traditional sellers, and allowed the investor to appeal to more potential purchasers. Ordinary sellers were dependent on conventional sales; investors had the luxury of being flexible. That is: investors got homes sold because they were willing to do deals that no one else would.
In fact, the competitive advantages of offering lease-purchases were so strong, a number of investors adopted them almost exclusively for their exit strategies. Signs and ads read "No Banks Needed!" "Rent To Own" and "Owner Will Finance!"
Now, with more and more houses for sale and sellers more desperate than ever to move homes, the edge that the lease-purchase gave to the residential real estate investor isn't as significant as it once was. The competition that real estate investors are facing is severe: homebuilders and developers are cutting prices and offering upgrades and incentives beyond most residential real estate investors. Traditional sellers are dropping prices when they can, and exploring lease-purchase deals. And REOs are hanging over everyone's head. It's become increasingly difficult for the investor to set himself apart in a very crowded selling marketplace.
Still: investors have tremendous competitive tools at their disposal, tools beyond the reach of the developers, the REO departments, and, at least for now, the traditional home sellers. True owner financing, wraparound mortgages, and a flexibility beyond the competition set these investors apart - and they continue to thrive and succeed in today's residential real estate environment.
We'd love to be your Closing Attorneys in Atlanta. Want to know more? Contact us and we'll be happy to discuss how Harlan and Associates can be of service to you!
Comments(3)