Lease option?
I am new to this site and so far have really enjoyed what I have read.
I have a house that I am considering putting up for sale in a couple of months however, I really hate thinking about paying a realtor 20K commision if I don't have to. What advice does anyone have for a newbie that has never done this before?
Thanks!
Scott
Hi Scott,
A lease option would be a good thing to consider. If you are comfortable with real estate, it is very easy to put together a L/O transaction.
The other thing you may consider is to simply run an add in the paper for ____ week(s) and see what kind of response you get. The market is starting to get very hot in my area, hopefully yours too. Even if you decided to sell it fast and you dropped your asking price by a couple thousand dollars, this would be more cost effective than paying a $20,000 fee in commission.
If you are not comfortable with putting a lease option or even a standard sale together by yourself, even though it cost money that we all hate to spend, sometimes using a real estate professional (if you are uncomfortable) is not a bad thing.
The other thing that you can do is to get a contract on your house and turn it over to a real estate attourney. Many options are available to you.
Best of Success!
BAMZ
BAMZ,
Thanks for the reply!
No, I have not done anyother real estate transactions other than buy my own home. My thought process is this. The 20K that I save in comm. would sure give my investing career a kick start and talk about a hands on education. It is just going to take awile to figure out all of the particulars. I have time though because I would not be ready to do this until July- Aug time frame. Any help anyone has regarding setting a price or drawing up the deal would be greatly appreciated.
Thank!
Scott
Hello sreisig, I just posted one of my properties in the paper as a L/O. The first day that it hit the paper I got three couples to view the property. All three are very interested in the home. I even had a realtor phone me and asked if I would give them their 3% if they bring me a client.
So the L/O can sell fast if you price the thing right and present it right.
Hi Vern Rookie Investor,
Just wondering about your deal as I will be selling one myself soon,
Did you inflate the price at a predetermined amount,say in 2 yrs?
Or did you ask for market value now?
Let us know how it goes
Thanks!
Lynlinz
Thanks Vern!
That is very encouraging, I would be interested in know how you determined price and terms if you would not mind sharing.
Scott
Not only can you Lease Option your property, but you can also create a Land Contract, or Contract for deed. The difference between the two is that in the CFD or L/C you have a saleable instrument. You can sell the mortgage (at a discount) or you can keep the income and demand a baloon after 1-5 years. Either or saves you the big commiss. and gets you a lot more buyers (Non Conforming).
Good Luck,
Shawn(OH)
Scott, I have sold several houses without a realtor. I sold the houses by having an open house on weekends. Advertise in the paper and put out signs. good luck.
Bob
Scott,
If you are interested in knowing the best way to price your house for a fair and fast sale, You may consider having a local realtor come to the house.
It is really easy. All you do is tell the agent that you are interested in selling in the next few months and are interested in what the property may be worth on the active market. When they come to your house, tell them that you are interested in marketing the property at first by yourself, and then if you are not successful in _____ days/months that you will give them the listing.
The good news is that with a L/O or L/C, you should have your property sold in no time at all.
Best of Success!
BAMZ
Scott,
Welcome... and for my 2 cents here ya go:
I sell most of my properties on a Lease/Option (typically a 12 or 18 month term). What are the advantages:
1. No Commissions or Closing Costs
2. Cash Flow - You can usually make cash on the spread between what you are paying on the financing and what you are charging the L/O buyer
3. Future Appreciation and then some... Not only can you mark up the sale price for take appreciation into account, but you can usually demand a little higher. Why, because this a refi and it will be easier to push it through with the lender, basically the underwriting terms are less stringent on a refi...
You have some time so I would recommend doing some reading in the Creative Real Estate realm... it will be well worth your time...
Real Estate Agents will tell you they can set up a L/O for you, but you will have to pay the comissions...
Go to your local book store, business section, real estate and pick any number of books... if you want a recommendation I will be happy to make one...
Best of Luck and Welcome!!
LynLinz,
Why would you not mark-up the property for future appreciation? Why give this $$ to someone else... Now if a L/O buyer gave me some FAT CASH as a Non-Refundable Down Payment then I might consider splitting the appreciation with the L/O buyer, but only if they wore me down in negotiation... not likely
scott,
you can also put in the lease purchase contract that buyer will pay for all maint. (now this will not cover everything you would have to refer to state landlord/tenant laws). As for future appreciation, if your areas appreciation is say 7% a year then only charge them say 5% so they get a little equity.
I would try to get 3-5% non- Refundable option consideration (NOT down payment)
put the add in the paper
rent-to-own
no bank Qual
set up appointments with each caller but who to say they all can't be on say saturday at 2:00 pm (appointments are less apt to be missed then open houses)
collect $20 per adult going to live there for the cost of the credit check have them sign an authorization to release, get names, ssn, date of birth any other purtinent info. Also See how much they are able to put down. thats your up front money.
now the sandmich:
what do rentals in your neighborhood go for? reason you can bump up the rent a couple hundred and give a rent credit (only if payment is recieved ontime) toward the price of the house (NOT towards the down payment) ex.
mtg 1000
rent 1300
lease purchase 1500
you make 500 a month
you could also charge them the full 7% appreciation and give them a better rent credit. But, you want them to have some equity in the house when they buy to help them get there financing...
-Tony-[ Edited by Tonyy on Date 04/18/2003 ]
Stacy,
I would be interested in your recommendation(s) of L/O books.
Thanks,
Vince
Hello Lynlinz and Sreigig. The appraisal showed the comps in the area, rents, selling prices of the last properties and all. This will give you a good ball park figure for you sell or rental prices. I always request a copy of the appraisal when I purchase property.
Next I have a good working relationship with a brokerage firm. I had them to qualify the clients that were interested in the property. You see it would have worked well for both of us. The mortgage company gets the business and I get the low down on the client ability to pay.
I think that I have it price right for a quick sale. I could ask more. I say why keep on the market for 3-4 months in an effort to gain two thousand dollars.
Hi Scott, Thank you for your wisdom. Would you, or anyone, please explain the "refi" part, though? I thought it would have to be a completely new mortgage as the title would be changing.
New to site, TJ_NewJersey
Hello Scott, just an update on the sale of my home. In less than a month I have a tenant that is ready to purchase the home as soon as the divorce is final. They will lease for now, which is no problem since I will have a $165.00 a month positive cash flow.
I told them that when they were ready to purchase, we would use my current sale price. We would just split the equity increase. Either way I am happy and the tenant is happy. The tenant has been preapproved for the loan, so the mortgage broker will be happy also (smile).
So, selling your home without a real estate agent can be a win win win for all parties envolved.
sreisig,
For your situation I would suggest using a discount RE agency or a RE Attorney. Both of these can help you protect your interest by making sure that the sale is completed correctly but cost a lot less than a full price agent. Many discount agencies offer a range of services so you only pay for what you need.
[addsig]
Stacy,
You said:
Future Appreciation and then some... Not only can you mark up the sale price for take appreciation into account, but you can usually demand a little higher. Why, because this a refi and it will be easier to push it through with the lender, basically the underwriting terms are less stringent on a refi...
I get it all except this refi... The L/O bottower will be getting their own mortgage.
Pls Explain Thanks!
Just found this site, and it's great. Good information. I am just starting in the L/O world, but a tip to everyone, is to keep them as seperate parts, ie: a lease, and an option, this way if the t/b ends up not paying you can evict quickly!
safe investing to all
Win - how do you keep them sperate. How does this help you in making a timely eviction.