Many people are currently involved in and or thinking of getting invloved in a Lease Option/ Lease Purchase agreement to procure a property. The recent foreclosure crisis of the past 12 months has created obstacles for unsupecting future homeowners. I receive many requests to help clients find these types of deals scenarios, where they can buy some time before they have to purchase a home.
My first suggestion to begin your search for Lease Option/ Lease Purchase properties would be to contact a local Real Estate Agent, unless you are sure you can handle this situation on your own. By handling it on your own, I mean you understand the pitfalls that can come about if you do not have a firm grasp on the contract and the owner of the home.
Please review the following questions:
What do I do if I enter a lease option and the owner of the home forecloses on the property?
What happens to my option money?
Will the bank evict me once it forecloses on the property?
What if the Appraisal comes in lower than the purchase price?
What if the Seller owes more than our purchase price?
Whats are my remedies if the Seller Defaults?
All of the questions mentioned are potential deal breakers that you should address if you are thinking of entering a contract for Lease Option/ Lease Purchase and they may indicate the fact you may not be ready for this type of Real Estate transaction. These are just a hand full of obstacles that may come up when entering a Lease Option/ Lease Purchase Property, more than likely if the owner of your home forecloses on the property, you will be out money and a place to live. Yes you will have a contract and you will probably be able to recover some, if not all of your expenses, however that may take a legal proceeding. If the Seller owes more than the purcahse price and or if the Appraisal does not come in at the value of the home, there is a good possibility you may not be able to purchase the property. All of these details and questions can be addressed in your contract.
Our National Real Estate Market has brought about many recent cases of tenants being forced from their homes due to a Seller foreclosing on a property. Unsuspecting tenants have been caught in the crossfire as they do not always receive notice of impending foreclosure proceedings. Generally their will be a Specific day notice posted and basically you are forced to vacate the premises. The bank will change the locks on the property and many times tenants are locked out and forced to pick up their belongings at a later time. I trust that by following a few steps noted below, we can help future Lease Option/ Lease Purchase prospects reduce the risk of these unpleasant surprises.
Fortunately there are a few simple steps you can take to protect yourself from having the encounters mentioned above. First, speak to a Realtor and find out what some of the Rent-to-Own/ Lease Purchase norms are for your area. Second, have the agent research a potential property you may be interested in purchasing. Your Realtor should be able to research the property to find out if the mortgage is in default with the lender. Third, try to get information about possibly recording your interest in the property, by recording your interest, you may be able to receive updates on any default with the property (Seek Legal Advice on Recordation of Interest). Crucial updates from your local County Assessors office can make the difference between having a chance to move or just be locked out of your home. Keep in mind, cities, states and counties are different and you must obtain information to pertains to your local area.
Aside from the pitfalls you need to be aware of, there are some great opportunities for Lease Option/ Lease Purchase prospects to begin the dream of home ownership while working on their credit worthiness. Many people whom take the route of a Lease Option are seeking to purchase a home in the near future and may not have quite the credit score they desire to get the loan that works best for them. A Lease Option/ Lease Purchase can lock you into a property and give you enough time for credit repair and or to clear up any other obstacles a home purchaser may have at the time.
Consumer Note: A Lease Purchase/ Lease Option may benefit the Seller more than they Buyer, or vice versa, it all depends on the terms of the agreement.
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