my own lease purchase arrangement

[mamasanta25 0]

Hey all,

Long time no talk, I know. I would love some advice from yall right about now. My husband and I are looking for a house that WE can lease purchase. We have very scarred credit that will be better one year from now. We want to get into a home NOW, and start building equity. We can get a conventional loan, but our interest rate is at 9.5%, and that doesn't allow us to afford the payment at a decent house. If we wait a year, we will get a better rate, and a decent house. I found a landlord who would be willing to rent his place out to us for one year, then sell it. He says he simply wants to sign a normal lease, and then have my husband and I get an appraisal done in a year, and then we can buy it.

Now, the house isn't all that, but it needs a lot of work, and we can eventually build a LOT of equity in it. The kitchen and bath both need remodeling, as well as the basement. The attic is apparently expandable and the guy says we can create a few bedrooms up there, and build a spiral staircase to the attic. He wants to build a two car garage, and put new siding on the house while we are renting. Like I said, the place isn't all that, but it's in a good neighborhood, and has lots of potential for improvements. It has two bedrooms, (and we have two kids) but there is a huge room in the basement that can be finished, and a bathroom added as well, which can be a bedroom, and we can supposabely add rooms up in the attic. The guy wanted to rent it out for $900 per month, but he says he will let us rent it for $725 per month, and that way we can save for a down payment. It isn't my dream home, but we want a place of our own, and this just so happens to be the first guy who has been open to the idea of a rent to own in a long time. People around here don't like this lease purchasing idea too much. So, my questions are , 1)what should I get in writing besides a lease? 2)Should we have an appraisal now, and try to talk him into doing a l/p with the terms locked in? 3)What if anything am I missing? Thanks guys.

[MichaelC 160]

Hi, Samantha. Lease purchasing a home for yourself is a very good idea. With the right agreement in place you would have several possibilities available to you between the lease start and end. The problem, though, is that the homeowner does not want to give you the option, if I understand correctly.

I found a landlord who would be willing to rent his place out to us for one year, then sell it. He says he simply wants to sign a normal lease, and then have my husband and I get an appraisal done in a year, and then we can buy it.

This set up benefits the homeowner quite well. But, what's in it for you? His word that he will sell it to you in a year is meaningless, even if he has the best intentions. Plans and needs change. You're left holding the bag if for any reason he is no longer willing to sell. You've lost a year's time and a year's rent. Without a signed Lease with Option to Purchase Agreement, and you have a very good one in your hands, Samantha, you are simply a tenant operating under the constraints of a standard lease agreement. Get the deal in writing, or get another deal.

People around here don't like this lease purchasing idea too much.

Nonsense! Homeowners everywhere are in need of quick and creative solutions to their problems. You need to find them, and you need to let them know where to find you. Then, you can explain how you can solve their immediate concerns, (usually debt relief of some sort). Then, you've got your deal.

[mamasanta25 0]

Thanks Michael, for your input, as always. I agree with you, I am not going for this one. the place isn't all that anyway, and needs a lot of work. We have to be patient, and the right one will come along.

[MichaelC 160]

We have to be patient, and the right one will come along.

Exactly. You need to find a motivated seller. You never want to be the motivated buyer.

[-Tony- 0]

mamasanta25,

 

We have to be patient, and the right one will come along.

 

Then you are stuck with the age old delema; do I keep it for my self or do I take the money and run? Now I know what a motivated seller smells like and I can get anotherone.....

[Mr Saint 0]

You may have already made up your mind but...

 

...this may be something to think about.

 

The seller adds the garage and whatever else he wants to do to the place while you're in there and because you're renting at such a discount, you go ahead and do some work yourself, like finish that room in the basement for the kids. It's very possible that after a year the appraisal may come in way over what you can afford and the seller won't come down in price. Then you're stuck either renting longer or have to move out and loose all that money you put into it.

 

I'd say don't do it without an agreement of terms first.

 

Good luck.

[brownpm 0]

Mamasanta,

 

I agree with Michael's reply. If he's really serious about his intentions of trying to sell to you in a year, why wouldn't he simply sign a seperate Option to Purchase document?

 

Set the purchase price now and make him honor it a year later. Sounds to me like he's banking on you doing improvements to the property during the next 12 months and taking it to the bank, perhaps hold onto it, raise rent, or sell it to someone else at a much higher level.

 

Nonsense, for him to say get an appraisal a year from now and then purchase. That does not put him on the hook for anything.

 

Congratulations to you for wanting to get out of the rent trap. Lease/Option opportunities are not found they are made. You have to convince him that it's the right thing to do. At least he does sound open to the idea, you just need to make it enforceable by making him put his money where his mouth is.

 

Pat