Should We Use a Real Estate Agent to Lease- to Own a House, or Just Go Straight to the Individual?
My husband and I found a home we love. We REALLY want it but do not have a down payment right now to buy it. We have been working on repairing our credit so we can buy soon, but are not ready to yet. We want to know if we have to go thru a real estate agent to do the lease option or can we go straight to the individual? Do we actually do a closing and have to pay agent fee’s when just signing the contract to lease to own? We were told just to do the lease option we had to do a new mortgage and closing and had to pay $12000.00 in real estate fee, that doesn’t include the initial non refundable fee to the owner. Does that make sense? I thought we would just draw up a contract on it and not actually do any closing or anything…..I am confused. Any help would be greatly appreciated!! Thanks!!
It’s not smart to go without professional advice. If the Lessor agrees to rent it to you, or does a lease option agreement, hire a lawyer to review it before you sign anything. Especially where there is non-refundable $ involved. This is a legal function, you need a lawyer, not a realtor. If you didn’t have a particular house in mind, a realtor would help you find one, but I’d still use a lawyer that specializes in real estate law in your state, before signing anything this serious. You shouldn’t have to pay any agents fees. When the seller lists his home with a realtor, the seller pays the commission. Please, get professional help. It is less costly to pay for expert advice than to get out of a bad deal, later because you didn’t protect yourself from the start.
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It’s not smart to go without professional advice. If the Lessor agrees to rent it to you, or does a lease option agreement, hire a lawyer to review it before you sign anything. Especially where there is non-refundable $ involved. This is a legal function, you need a lawyer, not a realtor. If you didn’t have a particular house in mind, a realtor would help you find one, but I’d still use a lawyer that specializes in real estate law in your state, before signing anything this serious. You shouldn’t have to pay any agents fees. When the seller lists his home with a realtor, the seller pays the commission. Please, get professional help. It is less costly to pay for expert advice than to get out of a bad deal, later because you didn’t protect yourself from the start.
References :
retired realtor, PA & NJ
remember..
if it is "to good to be true..it is a scam"..
why are you not protecting your deposit??
is this a listed home?
if this home is listed..the owners owe the real estate fees.
you need a "real estate lawyer"..and you may not get the home..anyhow…..
you need your deposit better protected……..
non refundable??
i wouldn’t do it..
References :
A rent to own does NOT require a closing, nor should it involve a real estate agent. Unfortunately if someone is using a real estate agent and they decide to do a rent-to-own situation with you the agent does not get paid, at least not yet. The way it works is the person selling keeps the house, charges you a monthly rent with a portion of that rent going toward a down payment in a specified amount of time, usually 12-18months, but sometimes longer. The benefit to the seller is they get a positive cash flow. The other thing you want to know is that the price you agree to buy the house is locked in so if it appreciates in this time period you get the house with that built in equity, however if it goes the other way you may be buying the house upside down.
Fortunately for you you can always opt-out of the lease option if this is the situation.
This is usually a practice that investors use to put someone in a house without having to wait to close. I would approach the seller directly and articulate to them that you would be willing to pay maybe a slightly higher price than he is selling it for, in exchange for a lease-option scenario.
Hope that helps, feel free to contact me if you need more info or have any questions on anything involving real estate
J.Charles
J. Charles Investments & Capital Management
P.S. I might be able to show you a way to come up with a down payment in a short period of time,
then maybe you could do seller financing(no bank, make payments to seller, higher rate)
let me know if I can help!!!
References :
Let me answer the specific parts to your question then talk about Lease Option and Lease Purchase.
First, let me applaud you for taking the initiative to repair your credit. One of the great things about doing a Lease-Purchase or a Lease with Option to purchase is it will also help repaire your credit.
In answer to the first question, you do not have to go to an agent. In fact, most agents are totally out of their element when it comes to doing any type of lease-to-own scenarios, and they will require you to use their documents if you do do it through them.
In answer to your second question, you do not have to do a closing in the initial lease period. You may be confused by the language they are using, because, eventually, you will have to take out a permanent loan (this will occur at the end of the lease period). This should not be at the initial lease period.
It may help to get some definitions clear here. You will notice I am using two different terms; Lease Option (aka Lease with Option to Purchase) and Lease Purchase. That is because they are two different animals. A lease with option to purchase is just that – you have a specific lease period, and you have the option to purchase the property within a specific period of time, for a specific price. It is typical to get what is known as a Non-refundable binder deposit, or option money. Typically this nonrefundable deposit goes towards the down payment when you finally take out permanent financing, and is forfited if you walk away from the deal in the future. It basically is the same thing that would happen to your down payment if you walked away from your property while financing it.
The other type of option (and it sounds like they are trying to go this route) is a lease purchase. Unlike the lease with option to purchase, you are obligated to buy the property at the end of the lease period or it can be reported as a default. As with the option contract – you will loose your deposit. On the flip side to this – if you lease purchase (as opposed to option) most states will make the owner go through a foreclosure process to get you out if you stop paying your contract (varies by state).
So what you should expect from a lease purchase, or lease option is (unless a Realtor is involved who is trying to extract a fee) is:
You may have to get qualified from a lender so they can determine how long it will take to get your credit corrected to the point where they can get you permanant financing (I do this with my buyers because it helps me determine the lease period). When you do go to get financing, it is usually cheper because most lenders treat this as a re-finance as long as you have paid on time.
You will have some consideration up front that goes to the binder deposit, and it is non-refundable (the price you pay if you walk). You should not be going through a typical closing, until you refinance.
You will have a lease payment and if you have negotiated right, some of the payment will be applied towards your down.
At the end of the period (usually 12 – 24 months) you will go to get permanent financing.
We call this our "Try it Before You Buy it" program at ThePadSeller – and is designed for people exactly in your situation.
There are too many homes out on the market that you can get this easier financing structure.. so if the owner becomes too inflexable, go to the next one.
References :
I am a real estate investor who buys and sells several properties a year.
http://www.ThePadBuyer.com