Submitted by Dan Martinez, Real Estate Broker, Keller Williams Realty South Sound
Houses are selling quickly. Interest rates remain at historic lows. Rents are climbing. You want to buy a home but don’t qualify for a loan due to some remaining credit problems or income history. You want to sell a property but don’t have enough equity to cover the costs of the sale or make needed repairs and updates.
If you would like to be part of the current favorable real estate market and the traditional purchase and sale systems are blocking you out, then a Lease Option may work for you.
With a Lease Option, buyers who have difficulty obtaining a commercial loan, yet have solid employment can still enjoy the benefits and pride of home ownership while improving their credit status. Sellers who want or need to move can take that next step with little out-of-pocket expense and less worry than a standard rental tenant.
Investor Vaun Mathis of Washington Real Estate Investors recently used a Lease Option to sell one of her rental properties. “After renting for three years I wanted to sell but didn’t want to spend a lot of money to update the property. I advertised by placing a Rent to Own sign in the yard and marketing the home on various real estate sites like Zillow. I received an overwhelming response from interested buyers and was easily able to find a qualified buyer. I sold my property for a price that was attractive for me and the future buyer, without needing to make repairs and updates.”
Benefits to the buyer include:
- Move in quickly – credit issues OK. – However, you will need a knowledgeable mortgage lender to help resolve your credit issues and purchase the home at the end of your option period.
- Typically, lower upfront payment required. Caution: This is usually non-refundable.
- Can build credit while living in their future home.
- Option to lock in purchase price today or pay market value later.
- Not obligated to purchase the home.
Juliana Berg has a plan for home buyers needing credit assistance.
Juliana Berg assists buyers with credit issues as a Mortgage Development Specialist with Qualstar Credit Union. “I have a 9 step home buying process which has been helpful for first time home buyers. If buyers don’t yet qualify for a loan, I assist them in re-establishing credit as soon as possible and saving enough for the down payment so they know when they can purchase a home. I have been able to establish credit for some clients in 3 months. Once I assist buyers in developing a plan, I follow up with them monthly and can usually tell within 2-3 months if they are on track to qualify for a mortgage.”
Advantage for Sellers
- Typically can sell home more quickly and for higher price than listing the home.
- Leave property now with potential cash and monthly payments covered.
- More available buyers.
- Maintain tax write offs.
- Buyer tenants care for the property as an owner and assume more maintenance responsibilities.
- Property is actually on track to sell instead of renting indefinitely.
- Purchase your next home now while interest rates are low.
Bean, Gentry, Wheeler, Peternell attorney John Kesler explains that Lease Options tie three agreements together:
- The Rental Lease
- Option Contract
- Purchase and Sale Agreement
As with all real estate transactions, Lease Options come with their own set of potential risks. Seeking counsel of knowledgeable professionals such as a lawyers and lenders early in the process is strongly recommended.
Kesler advises that “Potential buyers and sellers who enter a lease option agreement should know they have a landlord-tenant relationship at the outset. There are numerous rights and responsibilities under Washington law, including the Landlord-Tenant Act, which the parties should understand. The ability to blend different agreements (e.g. part of the rent under the lease may be a credit towards a negotiated purchase price) is often what makes a lease option attractive. A lawyer can assist in making sure all of the elements of a valid contract are present for each piece of the agreement and may be able to suggest certain wording that is tried and true.”
A knowledgeable Real Estate Broker can assist you through the process and recommend trusted resources in addition to finding potential Lease Option properties.
Lease Options are certainly not for everyone, but may provide that window of opportunity for buyers and sellers to achieve their real estate goals.
Resources…..
Vaun Mathis, Investor, Washington Real Estate Investors,
Juliana Berg, Mortgage Development Specialist, Qualstar Credit Union,
John Kesler III, Attorney, Bean, Gentry, Wheeler, Peternell
Dan Martinez, Real Estate Broker, Keller Williams Realty South Sound
