Need Help Estimating Monthly Payments
HI,
I am setting up a contract for a lease option, here are the details:
The house has been on the market for 1 month at $414,500, comps are $425,000
Average Days on Market is 90 days.
I offered to pay $409,000, with $100 for down payment. The house will stay on market at $414,500 while I just sit on it. As soon as I get a buyer I will excersize my option to buy at $409.
The monthly payment for the homeowner is $2025, and includes taxes and insurance.
I will assume the $2025 until it sells. How much principle reduction should I ask for from my option price?
Should I ask for $1000 off the $409,000 per month?
Is the house listed with an agent?
If it's not, you can mostly ignore this, but if it is...
Let's say you have a cheap agent that's only charging 4%. His commission on the sale of a 400K house would be 16K. Were you accounting for this? If you're buying then selling, they probably have a decent basis for charging you a commission for the buy and the sell.
Also look into the taxes/fees you have to pay on the sale of the house. I don't think you've got a large enough profit margin here...
HI,
Yes, it is with an agent, and yes the commission and closing costs have been factored in.
I have decided to make it $5000 for me sitting on it while it sells. Basically I will pay their mortgage every month, but make my option price go down $1000 every month also, therefore if it sits on the market for a while, I will not be out any money.
So the house is on the market for $414,500. I have an option at $409,000. Every month I pay $2000 to cover their mortgage, and they reduce the option price by $1000 every month. This way they do not have to pay anything out of pocket for mortgage, but I will get it when the house sells. The average time on market is 90 days
Does that sound like a good plan?
Maybe it's me, but I'm not getting this deal at all.
Where/how are the costs factored in? You say you will excercise the option when you find a buyer, as Andrew said you could run into double costs then. What if you excercise the option and your buyer flakes on you at the last minute? Options typically have an experation, what's the situation here? Both you and the owner are losing 1k per month, that can't go on indefinately.
The only way I can see to do it would be to have the option assignable, you don't excercise it or buy the house, you sell the option and let the buyer do all that stuff. Even then I think it's a bad deal.
Why would you allow it to stay on the market if you are paying the mortgage? You could gain nothing and be out several thousand dollars. Only pay the mortgage when you have control. Just my opinion, but it sounds too risky.
Bail out!!