Four Pitfalls Of Lease Options For The Seller

When you have a home for sale in today's market with the recent debacle in subprime mortgage, bank and insurance collapses, and the plummeting stock market, the lease option is becoming a popular answer in real estate investment.

The first thing you must understand is the difference between the lease option and the lease purchase. When you have a lease purchase, there is no option to buy at the end of the purchase. The buyer has already agreed to buy the home after an initial rental period and must find financing after that.

With the lease option, the buyer can back out of the purchase at the end of a designated period of time. Often a large, nonrefundable deposit is made and a portion of the rent is applied to the purchase price if the buyer chooses to exercise the option.

If a seller is considering going with a lease option, they are usually highly motivated to sell the property. There are some cases where this can be used as an investment strategy; if a buyer backs out, it really doesn't matter because they receive a high return on their money. There are also several things to keep in mind as the seller that may be potential risks:

1.When you are selling your house, chances are that you have already jumped through all the hoops to make the home for sale presentable. If the buyer chooses to back out, you may have to go back in and replace carpeting, repaint, or repair unexpected parts of the house.

2.The lease option will leave you with limited access to your equity. You won't be able to tap into your equity until the lease option is exercised.

3.You are obligated to sell the home at a predetermined price. If the home appreciates, as it often does, you have to sell at the price negotiated in the contract.

4.Once the buyer gives you the payment, they may choose to not pay on time or not pay at all. In that case, you are stuck with out-of-pocket expenses.

In most cases, the lease option tenant is a much better tenant than the typical landlord/tenant arrangement. They intend to take ownership of the house, so you will have someone living there with a vested interested in maintaining and caring for the property.

If you are looking for someone that needs a lease option, try seeing a transaction specialist for referrals. Networking with home buying groups that have a long list of potential buyers is an excellent way to sell your home quickly or invest. Transaction specialists are ready to do the work for you. They can help alleviate your tax problems and make a quick and discreet sale. You can have a peace of mind as they handle all the headaches of selling and buying your home.