Question for Real Estate gurus

[bigq]

What about a "lease option" or "lease purchase" from a buyers stand point is this good or bad?
How do they differ and is one better then the other?

[Outnumbered]

A lease option is the same as a lease purchase as far as I know, but I could be wrong. The good thing about a lease option is that it allows you to gain control of a property (with little or no money) and lock in a good price until you get your "ducks in a row". I would only do it if you are not able to (or not ready to) buy but still want the property at a later date when you can buy. The bad thing is that if the market slows down a little more then the option may not be worth exercising. Be sure to have an attorney help you with the contract.

[soupersonic]

We have sold many of those, what we did was take a deposit, enough to be comfortable with them moving in but not enough to feel like we gouged them if they didnt qualify, charged them fair market rent for the house for a set period of time, 12 - 16 months depending on their credit, set a price for the house. it was a sweet deal for the buyer if they qualified and a sweet deal for us either way, but more so if they didnt qualify. Just make sure you DO qaulify IN the specified period of time or they can boot you and take the house back. If you have any questions about this type of transaction you can PM me if you wish. The wife and i did about 16 of these last year. Stay away from the ones that want a huge amount down they most likely will screw you if they can. You dont need an attorney just read carefully the contract.Everything should be on state real estate forms which are legal and binding, also self explanitory.

[locogringo]

We have sold many of those, what we did was take a deposit, enough to be comfortable with them moving in but not enough to feel like we gouged them if they didnt qualify, charged them fair market rent for the house for a set period of time, 12 - 16 months depending on their credit, set a price for the house. it was a sweet deal for the buyer if they qualified and a sweet deal for us either way, but more so if they didnt qualify. Just make sure you DO qaulify IN the specified period of time or they can boot you and take the house back. If you have any questions about this type of transaction you can PM me if you wish. The wife and i did about 16 of these last year. Stay away from the ones that want a huge amount down they most likely will screw you if they can. You dont need an attorney just read carefully the contract.Everything should be on state real estate forms which are legal and binding, also self explanitory.
I agree. I always try to get the person who has the most down though and I take it as an application form from everyone I review and tell them I will give them an answer in under a month.
We are doing these all the time now also and I find it rather refreshing to give the people a chance to clear up their credit and excercise the option at the end of the year. I will let them stay in as a lease-option as long as they wish if the year comes up.
You really don't want someone in your house though if they can only put 5k down on a house that is more than 300k or higher.

[callbob4homes]

We have sold many of those, what we did was take a deposit, enough to be comfortable with them moving in but not enough to feel like we gouged them if they didnt qualify, charged them fair market rent for the house for a set period of time, 12 - 16 months depending on their credit, set a price for the house. it was a sweet deal for the buyer if they qualified and a sweet deal for us either way, but more so if they didnt qualify. Just make sure you DO qaulify IN the specified period of time or they can boot you and take the house back. If you have any questions about this type of transaction you can PM me if you wish. The wife and i did about 16 of these last year. Stay away from the ones that want a huge amount down they most likely will screw you if they can. You dont need an attorney just read carefully the contract.Everything should be on state real estate forms which are legal and binding, also self explanitory.
good info here.
only part I can see a possible problem is the price of the home after the lease period. If selling, you probably want to sell at market price at the time of ballon. (end of lease) If buying, you may want to negotiate the price now.
and as always, this will depend on the market flucuations, so who knows at this point what the market will be in one or two years. We have a situation in our office here (Mesa area) where the seller is wanting out of the deal because the house is worth roughly 100k more than when entered into the lease purchase. The buyer has made all required payments on time and is ready to purchase. Needless to say this will go in the favor of the buyer.

[bigq]

Thanks guys. The reason I was interested in it was to accumulate more down without loosing a property we like. My credit would not be an issue, but I would need more money down to lower the monthly to an acceptable amount. I have two problems with do this. First the property compared to theirs is way overpriced, has been on the market 3 months and needs a lot of work. It was built in 72 and still looks all original; I would say at least 100k to update. Second I would be worried about the value of the property when the time to purchase comes do. I see a lot of "Just reduced" around here. I guess I could ask if the purchase price could be negotiated at the end of the lease.

[Outnumbered]

Thanks guys. The reason I was interested in it was to accumulate more down without loosing a property we like. My credit would not be an issue, but I would need more money down to lower the monthly to an acceptable amount. I have two problems with do this. First the property compared to theirs is way overpriced, has been on the market 3 months and needs a lot of work. It was built in 72 and still looks all original; I would say at least 100k to update. Second I would be worried about the value of the property when the time to purchase comes do. I see a lot of "Just reduced" around here. I guess I could ask if the purchase price could be negotiated at the end of the lease.
If he will not negotiate, I would look for a cleaner property and try to lease-option it or maybe try a low-down teaser-rate ARM to keep the payments low for a year. If you will have more cash at a later date then refi into a fixed after a year or two and throw some cash into the refi. I would not want to lease option an over-priced POS with the market softening up a little as it is (price reductions and growing inventory). I would stay away from an open-ended option because you could just be throwing your money away if the seller is on crack as he sounds to be.

[soupersonic]

good info here.
only part I can see a possible problem is the price of the home after the lease period. If selling, you probably want to sell at market price at the time of ballon. (end of lease) If buying, you may want to negotiate the price now.
and as always, this will depend on the market flucuations, so who knows at this point what the market will be in one or two years. We have a situation in our office here (Mesa area) where the seller is wanting out of the deal because the house is worth roughly 100k more than when entered into the lease purchase. The buyer has made all required payments on time and is ready to purchase. Needless to say this will go in the favor of the buyer.
Yes we felt we wanted them back also especially after the "boom" we just had, we got a few back because they couldnt qualify. But for the most part they went thru, we still made money because we factored in an increase in value. Theres not much you can do to get them back because you have a contract. You could get shitty if they they dont close on the exact date they are supposed to but thats really about it. We made some good money and sleep good at night because we didnt act that way. Our estimates were pretty much right on as far as pricing them for "next year". and we got a few back. The only thing i could think of to do would be to make the price contingent on appraised value at the time of sale

[soupersonic]

Thanks guys. The reason I was interested in it was to accumulate more down without loosing a property we like. My credit would not be an issue, but I would need more money down to lower the monthly to an acceptable amount. I have two problems with do this. First the property compared to theirs is way overpriced, has been on the market 3 months and needs a lot of work. It was built in 72 and still looks all original; I would say at least 100k to update. Second I would be worried about the value of the property when the time to purchase comes do. I see a lot of "Just reduced" around here. I guess I could ask if the purchase price could be negotiated at the end of the lease.
If its already overpriced and it needs work i think i would pass. The homes we were selling I fixed them up already, new carpet paint cabinets faucets lights/fans what ever it need to be fixed was fixed, its not really that expensive to do if you can do it yourself. We would put anywhere from $3500 to $8000 in them to make them nice again. The reason you are seeing the "just reduced" more and more is things are slowing. Now that doesnt mean the values are dropping it just means the demand is slowing and people were over priced to begin with so they have to come down to a more realistic price and wait a little longer to sell

[bigq]

The house has good “bones” but it needs all new flooring cabinets, toilets paint, light fixtures, showers and so on. Most is updating. I looked at others in the price range and all were already nice. The best part is the location, but that can only go so far. The realtor said they would take 80k less than asking, but even that seems high compared to others on the market. Needless to say this looks like a bad plan.