Thinking about buying some property or a house? Worried about your bad credit history, or perhaps you do not have any credit history at all? Worried you will never qualify for a loan? Well do not give up just yet, there maybe an option still left for you, that is, the lease option.
What is a lease option?
What a lease option does is it allows a renter to buy a property, or in other words it gives the renter an option to buy the property within a certain time period. In most cases when buying a house, part of the future down payment is paid by a portion of the rent. Most people who use the lease option are those that do not have sufficient funds to make a down payment and to pay for closing costs. Usually lease options are found more when the market is slow, because if it were to be hot the seller would not use the lease option and would be able to cash in more by selling the property.
What the renter needs to know about lease options:
- The portion of your rent that would go towards the purchase is usually only used when rental payments are greater than the normal market rent.
- The real estate world can be tricky, make sure you read all of the paperwork and have someone that knows what they are doing read through it with you to make sure you do not have any unsolved concerns. Do your homework.
- Make sure your property that you are thinking about using the lease option on has a set price at the time of signing any contract. This is very beneficial because if the market gets hot during your contract, your property value will go up and you will still be paying the same amount agreed upon at the start of your contract.
- Find out if your contract is “assignable” or “non-assignable.” Most contracts are “non-assignable,” but if they are not, then the person that is renting may be able to sell the property at the fixed market price and be able to cash in a little extra by doing so.
- Be sure to seek legal advice
A word of caution:
Lease options are usually used by those who do not qualify for a loan and therefore try to use a lease option thinking that they will qualify on a future date. However if you do not qualify, any money used to pay your payments or money paid upfront will be lost seeing that you were not able to make a big enough down payment. Therefore make sure that at the time of the purchase date, you will qualify for a loan by your employment status, your assets and savings. Another con of the lease option can be that if the market goes down during the period of your contract, you may be forced to buy at a price higher than market value and the seller will still demand a mortgage commitment.
What the seller needs to know about lease options
· The best time to use a lease option on your property that you want to sell is when the market is slow. That way you can ensure that it is sold.
· If the renter is not able to make a down payment after the rental agreement is up, you get to cash in on the money collected from the payments made.
· Be careful that you do not get locked into a deal where you have to sell at a price that is lower than market value.
· Be careful of changes made during the rental process such as financial status and so forth.
p>Jason Luke is a Client Account Specialist for 10X Marketing. Go now to the one minute millionaire website to find out more about real estate or lease options and their benefits. |
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