In light of all the questions and uncertainty in the real estate market today, I thought I’d share a quick success story that worked out being a real Win-Win for buyer and seller. I recently helped put together a 2 year lease purchase for one of my buyer clients. This was a real win-win because the buyer’s income from a new (and successful) business couldn’t yet be counted for mortgage purposes. The seller’s house was sitting vacant and empty and the seller was making payments. The result: seller has a pretty strong guarantee of getting their home sold in the future, buyer has a place to live, seller is no longer coming out of pocket to make house payment.
So, exactly how does this work? Well, here’s the insight:
- The buyer pays a lump sum fee up front (in some areas this may be considered an “Option Fee” which effectively buys them the right to purchase the house for some time into the future. In this case the fee was around $3000 and my clients are “under contract” on the house, and must close by 12/31/13
- The buyer and homeowner execute a lease for the same period of time, agreeing on monthly rent payments and other details surrounding the buyer/tenant occupying the property
That’s the gist of what’s needed to take care of this transaction. Of course there are always pitfalls, so I’d suggest consulting with a professional attorney or lender. Here are few other precautions that should be taken. A major precaution to protect buyer and seller is to record a memorandum of contract. This provides public notice that there is a contract for the purchase of the property and will give the highest assurance possible that the seller/owner can’t sell the property to another buyer. A local attorney can take care of this.
In today’s market, it pays to be creative and look for the win win- hope this gives you some ideas!
November 7, 2011
For Buyers, Wilmington