Things To Know Before Selling A Home
Years ago there was a family who wanted to buy my home that had five bedrooms, but they didn’t have access to financing for it. This is not the only family that was eager to buy my home and didn’t have the money for a down payment, but they stick in my memory because they were so excited about the home. They just loved it. I really wanted them to be able to own it, too, because after I fix up a home it feels good to know that the buyers are really appreciative and happy to own it.
Well, we had a few meetings to discuss various possibilities for creative financing, and what finally happened was that I agreed to lease the home to them with an option to buy it later at a certain price. They were happy because they got to move in right away. I was happy because I had people who just loved the house and would very likely take good care of it.
This family is just one of many who have wanted to buy my home and it just wasn’t quite time for them to qualify for a mortgage. Some had temporary and some had longer-term financial issues, but they all just needed a break. Let me explain a lease with an option to buy in case that technique is something that you may need when you are a buyer or a seller. It can come in handy for you in either position.
First of all, it is only a temporary solution that gives a buyer the right to buy my home at a certain price within a certain period of time, and in the meantime they pay a certain monthly lease payment. A lease with option to buy doesn’t last forever, and all those details are negotiable of course. When someone wants to buy my home and they are not in a good position to get a mortgage loan right away, I will often suggest that we write up a lease option agreement for my asking price, with an option fee to be paid along with the first month’s rent, and a monthly lease payment somewhere in the neighborhood of 1% of the asking price. So, a monthly lease payment would be approximately $1200 on a home with an asking price of $120,000. That payment amount is subject to market conditions of course.
This agreement is usually written up for a period of one year, not longer than two years. The buyers can choose to close the transaction and pay me for the home anytime during the year or two, but after that time we either have to re-negotiate or they have to move out so I can sell the home to another buyer. That family I mentioned at the beginning of this article was able to obtain their financing and buy my home within the first year and they were so happy. I was happy, too!