Investors: Having Trouble Selling Your House in a Down Market? Are Holding Costs Affecting Your Cash Flow?
Buyers: Can’t Qualify for a Traditional Home Loan?
Consider a Lease with Option to Purchase
It goes without saying, now that the sub-prime lending market has all but dried up, it has created a huge void in both the new construction and the
pre-existing housing markets. Even in light of historically low mortgage interest rates, housing inventory continues to climb. This has created a great
hardship for both Real Estate Investors and people wanting to purchase a home. So, are there any options for creating home ownership for those
potential home buyers who don’t currently qualify for a traditional home loan and are there options for Real Estate Investor finding it difficult to sell
their homes because there’s a much lower buyer base today?
Enter, Lease with Option to Purchase. Although many of the people wanting to buy a home no longer qualify for a loan thru a traditional lending
source, they may qualify as “Tenant Buyers” via a Lease with Option to Purchase. This unique vehicle allows the Tenant Buyer to rent and live in
the house that they’ll eventually own. Most sellers will perform a credit check to help them estimate how long it will take the Tenant Buyer to qualify
for a mortgage to purchase the home. It’s important to remember that Real Estate Investors offering this type of program ultimately want to sell the
home. However, with so many pre-existing and new construction homes “For Sale” in their area, they may choose to make their home available via
Lease with Option to Purchase in order to keep the home from sitting vacant until the housing market recovers. Which according to the analysts may
take another 2-3 years. In addition to the first months rent and security deposit, the Investor may require an “Option” payment. This money is used
to secure the ‘Tenant Buyers” position in the deal and the pre-determined purchase price which stays in effect during Lease period. Typically twelve
(12) months. Since most future home owners entering into a Lease with Option to Purchase contract may have had some recent credit challenges in
their history, most Investors will also require them to enroll in Credit Repair before an agreement is consummated.
So, if this type of vehicle sounds like an option that’s right for you, what are your next steps you should take?
Home Buyers:
1. Check with a Real Estate Investors Assn. in your area for a list of sellers and services offering homes via “Lease with Option to Purchase”
Here in Columbia, contact Capitol City Real Estate Investors, LLC @ (803) 948-8033 or log onto their web site www.ccreisc.com.
2. If you’ve had some credit challenges, get started in Credit Repair.
3. Determine how much monthly rent that you can realistically pay. Your monthly rent should not exceed more than 35-40% of your gross
monthly household income.
4. Determine how much “Option” money you have available and the various sources where you can obtain your “Option” money.
5. Do your research and determine where you want to live. A particular sub division, school district, etc. However, try not to limit your options to
just one area. Homes available via Lease with Option to Purchase account for a very small percentage of all the homes listed For Sale.
Sellers:
1. If you’re not already a member, join the Real Estate Investors Assn. in your area. Here in Columbia, contact Capitol City Real Estate
Investors, LLC @ (803) 948-8033 or log onto their web site www.ccreisc.com. There you’ll find all of the resources necessary for selling your home
via “Lease with Option to Purchase”.
2. Consult with a local Real Estate Attorney regarding any laws in your State dealing with “Lease Options” and Lease Option Contracts.
3. Educate yourself on the process of selling via “Lease with Option to Purchase”. Here in Columbia you can log onto www.screi.com for links to
local company’s offering resources and the tools necessary to conduct these transactions competently.
In closing, Lease Options are a great resource for Sellers and Buyers alike. This particular vehicle has afforded many buyers to achieve the
“American Dream” of owning a home of their own. It has also been very helpful in improving neighborhoods by decreasing the number of vacant
houses and renters. It can go without saying that “homeowners” typically take more pride in a home that they own rather that a house that they’re
only renting.
For more information on Real Estate Investing, please go to www.ccreisc.com for all the details on our Association.
Scott M. Lane
Dir. of Education & Programs
Capitol City Real Estate Investors, LLC
Columbia, SC
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