Home Selling in 30518>Question Details

Deb, Home Seller in Sugar Hill, GA

My realtor wants us to consider a lease/option to see our home. What are the pros and cons?

Asked by Deb, Sugar Hill, GA Tue Mar 31, 2009

we are selling due to a job transfer

Help the community by answering this question:

Answers

6
To start by being repetitious all the advice below is pretty firm.

There are very strong reasons for both and the best answer isn't possible due to a lack of detail. The person who would know is your accountant, or if you don't have one, you need tax advice, not real estate. There are simply too many areas of concern to really give clear advice in a forum like this. Income is a factor, AMT is a factor, Investment strategy, your age, your family situation, your lifestyle and income, etc. Generally advising a client to lease option is to prevent a liquid seller for having to sell in the best buyers market in years. Let the crisis pass you buy and sell in a better market. Yes it is leasing, yes it has risks, yes you probably won't close but you still have the asset.

I might also suggest an investment opinion. Ask your investment advisor what the best inflation hedge is and what the probability of 70's style inflation is in the coming years. Between your Tax guy, Investment guy and realtor, the answer should become very clear.
Web Reference: http://bob2sell.com
0 votes Thank Flag Link Fri May 8, 2009
Deb,
I agree with all that has been said, but with that said, there are LOTS of homes today being offered as a lease purchase. They are doing it in Sugarloaf Country Club, Edingburgh and everywhere in between. There aren't many good reasons to do it, but it's another option. If my seller wants to do it, I make sure we ask for a hefty NON-refundable OPTION, like $10,000 or $20,000 (depending upon the price of the home).

First off, that gets rid of those "renters" who really can't afford to buy and who aren't qualified. Then when the purchaser backs out a year from now, you will get that money plus any rent you may get in between plus some tax advantages.

I think lease purchases are way worse for buyers and would not represent a buyer doing a lease purchase because most likely, they will lose.

Hey Guys, Please straighten me out, here - I know just because everyone is doing it doesn't make it right, but it makes it feel like there is another option AND that 1 perfect lease purchase person could be purchasing one of your listings ...
0 votes Thank Flag Link Wed Apr 1, 2009
Deb -

You'd be foolish to entertain a lease purchase as a seller - you'll be wearing that house like a boat anchor. You can bet the farm that any deal will fall apart, you'll effectively be a landlord, the home will need work when they leave and you'll still be trying to sell a year or however long into the future this runs. Also, you'll have a track record in the MLS...

Buyer's looking for lease purchase homes aren't buyers - they're renters. Unless a buyer can actually buy, they should rent. Lease purchases routinely collapse and there are no winners when that happens.

There's a reason that your home isn't selling - maybe a lousy agent or it's overpriced / under marketed / not show ready / has "issues"......whatever the reason the market is telling you that something is obviously out of whack. The market stinks and will stink in your area for some time to come - but there are buyers out there.

Hank Miller, SRA, ABR
Associate Broker & Certified Appraiser
Prudential GA Realty
678-428-8276
0 votes Thank Flag Link Tue Mar 31, 2009
Both answers here are right on the money. Lease - Purchase deals rarely culminate in a closed sale, and the contract process and the move-in/ move-out process can be frightfully messy. Even so...

On one hand, it COULD conceivably prevent your price from declining further, but the likelihood of that is very slim, since your "buyer" would probably opt out if prices deteriorate further during the lease period. In fairness to your agent, he or she may have been asked whether you'd be open to the possibility of a lease-purchase, and had to ask you the question simply to meet one of their ethical responsibilities to you.

Like the others on this forum, I can't imagine that it would be your agent's RECOMMENDED course of action for you unless your job transfer requires that you leave the property for what could be an extended period. Why?

*Vacant houses can be targets for vandals, squatters, unchecked damage from mishaps (caused by nature or other), etc.
*Vacant houses can be a real pain in the neck and wallet to insure. Ask your insurance provider...many do not even offer coverage for homes that are vacant.
*Your leaving this house means you'll probably need another house--even if you're planning on renting--where you're going. If you're in a cash-strapped position already, money from the lease can stop the bleeding caused by carrying two mortgages (or one mortgage and a rent payment).

Whatever the situation, go into it with the attitude that it will MOST LIKELY NOT RESULT IN AN ACTUAL SALE. If you're ok with that, it may be a good fit.
0 votes Thank Flag Link Tue Mar 31, 2009
Last I heard only about 15% of lease options really settle. If the buyer is or will be qualified the time they spend in your home is time they could be looking for a better deal. In similar situations I have had clients do one of three things. 1) Drop the price to where you know it will sell quickly. This is assuming you are in a sufficient equity position to do so. 2) Rent the home and consider it as a long term investment. 3) Rather than a lease option write a contract with a delayed settlement and non-refundable deposit if the buyers can't perform in the specified period. Frankly lease options are open ended situations for you that may find you right back where you started.
0 votes Thank Flag Link Tue Mar 31, 2009
Deb,

Is this person a "REAL" full time real estate agent? Lease Purchase really means Renting in this market. A true lease purchase is where someone puts money down on the home to secure the OPTION to purchase it later.

If you don't have equity and are upside down on your home then a lease purchase may be the only option, other than a short sale.

What I don't understand is why a realtor would recommend them. They are messy, not usually in the client's best interest and keeping it real here, the pay is horrible.

Good luck!
0 votes Thank Flag Link Tue Mar 31, 2009
Joshua Jarvis, Real Estate Pro in Duluth, GA
MVP'08
Contact
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2016 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer