What Important Information Can You Give Me on a Lease to Buy Home?
i found a home i really like to buy it is a lease to own home after 24 months i would have to get a loan to buy out right giving me a chance to build my credit up I’m putting 20,000 down on a 130,000 home what can i do to protect myself in case the other pass away within the 24 months can the relatives evict me can i have a lawyer help me and what kind of lawyer will i need?
Get a real estate lawyer familiar with lease-options. Not all real estate lawyers understand them (believe it or not!).
There are a whole slew of ways you can (and should) protect yourself. Among them:
The lease and the option should be in the same document (for you, as the tenant-buyer). If you were the owner, the advice would be: Separate documents.
You want an "Authorization to Disclose Information" from the seller. This allows you to check the status of the mortgage to make sure the seller is staying current. Some renters and tenant-buyers are finding themselves in properties that are heading to foreclosure. An "Authorization to Disclose" won’t prevent foreclosure, but it will allow you to find out whether the owner is current.
You want a notarized "Memorandum of Agreement" that can be filed with your city or county land records or tax assessor’s office. The "Memorandum of Agreement" will "cloud the title," making it very difficult for the owner to sell to someone else during the term of your lease and option.
To protect yourself against the seller dying, the best way is to use a land trust, rather than a lease-option. The owner transfers the property into a land trust. You’re given a beneficial interest in the trust. The trust is personal property, not real estate, even though it’s holding real estate. And it’s a separate entity, so it survives even if one of the beneficiaries doesn’t. In the event of the seller’s death, the ownership of the seller’s interest would pass on to a survivor, but the trust itself (and its provisions) would remain intact. Best source of information on land trusts: http://www.landtrust.net What you’re interested in is a NEHTrust.
You ask whether the relatives can evict you. You can be evicted in any case if you don’t live up to the terms of your lease. If the owner is still living and you have a valid lease that you haven’t violated, you can’t be evicted. If you’re a beneficiary of a land trust and the land trust documents are properly written, you can’t be evicted.
Also to protect yourself, put a clause in the option agreement providing that the option can be extended for another 12 (or 24 months) upon payment of $x. Maybe $1,000, maybe $5,000. It’s all negotiable. But you definitely want the ability to extend the option.
If it’s a lease-option, you want a set price agreed upon up front, but with a provision that if values decline, your set price declines. (Some owners will agree to that; others won’t.) In a NEHTrust or PACTrust, the house must be brought out of the trust and sold at fair market value.
In lease-options, typically a portion of the rent is credited toward the purchase price. Often, that’s in the range of 10%-20% of the lease price. But that, too, is negotiable.
There are a lot of other things you need to know. A good real estate lawyer familiar with lease-options can help.
Hope that helps.
Filed under: lease to own home
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at least you have a handle on some of the what ifs. Most do not. You need a signed copy and have it notarized at that time to help protect you but yes these can be tricky if a judgment is entered on the seller prior to transfer with a sale you could loose or if the estate wants to finalize probate or any number of things. So get this done as soon as possible and have all inspections done now and always pay by check as you will need a paper trail when you do get this done of at least 12 months pay history and the check will do that just fine.
I am a mortgage banker in TN & KY
References :
First check to make sure that the home has not been foreclosed on.
If not, you then should have a real estate attorney prepare a contract for the lease to buy between you and the owners. Without such a contract, should the owners become legally incapacitated (die, go crazy, etc.), those who step into the shoes of the owners would be ble to evict you from the property.
Make sure that any money you pay (as rent or otherwise) is to be counted against the principal amount at the time of purchase; otherwise, you will lose it all.
Good luck.
References :
Get a real estate lawyer familiar with lease-options. Not all real estate lawyers understand them (believe it or not!).
There are a whole slew of ways you can (and should) protect yourself. Among them:
The lease and the option should be in the same document (for you, as the tenant-buyer). If you were the owner, the advice would be: Separate documents.
You want an "Authorization to Disclose Information" from the seller. This allows you to check the status of the mortgage to make sure the seller is staying current. Some renters and tenant-buyers are finding themselves in properties that are heading to foreclosure. An "Authorization to Disclose" won’t prevent foreclosure, but it will allow you to find out whether the owner is current.
You want a notarized "Memorandum of Agreement" that can be filed with your city or county land records or tax assessor’s office. The "Memorandum of Agreement" will "cloud the title," making it very difficult for the owner to sell to someone else during the term of your lease and option.
To protect yourself against the seller dying, the best way is to use a land trust, rather than a lease-option. The owner transfers the property into a land trust. You’re given a beneficial interest in the trust. The trust is personal property, not real estate, even though it’s holding real estate. And it’s a separate entity, so it survives even if one of the beneficiaries doesn’t. In the event of the seller’s death, the ownership of the seller’s interest would pass on to a survivor, but the trust itself (and its provisions) would remain intact. Best source of information on land trusts: http://www.landtrust.net What you’re interested in is a NEHTrust.
You ask whether the relatives can evict you. You can be evicted in any case if you don’t live up to the terms of your lease. If the owner is still living and you have a valid lease that you haven’t violated, you can’t be evicted. If you’re a beneficiary of a land trust and the land trust documents are properly written, you can’t be evicted.
Also to protect yourself, put a clause in the option agreement providing that the option can be extended for another 12 (or 24 months) upon payment of $x. Maybe $1,000, maybe $5,000. It’s all negotiable. But you definitely want the ability to extend the option.
If it’s a lease-option, you want a set price agreed upon up front, but with a provision that if values decline, your set price declines. (Some owners will agree to that; others won’t.) In a NEHTrust or PACTrust, the house must be brought out of the trust and sold at fair market value.
In lease-options, typically a portion of the rent is credited toward the purchase price. Often, that’s in the range of 10%-20% of the lease price. But that, too, is negotiable.
There are a lot of other things you need to know. A good real estate lawyer familiar with lease-options can help.
Hope that helps.
References :