This is not typically done in Manhattan. You should consult a real estate attorney to see if a contract of sale 2 years out is even enforceable, in New York. Would the buyer place his 10% deposit in escrow for a full 2 years?

It does not sound like a good deal to me but you have not given many details.

Thu May 22 2008, 10:27

Pauline,
Another thought..
Before making a decision: I would contact a lawyer and I would also recommend you check the current market price for your condo, you can do this by looking here and also via the NY times and REBNY or more accurately by having a few agents come by and bring you some comparables, while reviewing your condo ,let them tell you their opinion of it's current value.
Please feel free to drop me an email so I can let you know what brokerage I have decided to associate myself with..

Wed Oct 31 2007, 12:53

Only if you are paid for the option and a contract is drawn up by a real estate attorney. It is like selling a "call" in stocks. The strike price is 450K.

Since you are risking that the price will go up and you will lose money (have to sell below FMV), you need to be paid for that risk. What the price should be I don't know. What is the condo worth now?

Fri Oct 26 2007, 09:21

In my experience lease purchases have worked out well. It's all about how you structure it. I believe in having some nonrefundable dollars in case they don't end up with the purchase. The "rental" amount can include monies to go toward the purchase or not. What is your motivation? To have your monthly expenses covered, to sell the condo or to hold it for appreciation? Be sure you are doing what you want to do. Find a Realtor that has experience in this area or if an attorney structures that in your area use an attorney.

Fri Oct 26 2007, 07:39

Do It! 9 times out of 10 the buyer for a purchase option backs out! Definitely have them pony up 1% for the option to buy, or more if you think they can do it! Your tenant is banking on appreciation! If the property values do not produce any equity when its time to close then they will certainly back out and you will have the option fee as consideration. If the appreciation is there and it is significant, then you can certainly bet that they will be closing or assigning the contract. (a.k.a. Flipping the contract) I work with many investors and they actually prefer to have tenants who want to buy the home. The tenants tend to take better care of the property! If you see appreciation going through the roof then pray that the tenant makes a default payment and X the deal! At which point you can still keep the option. Be sure to have a lawyer draw up the contract with specific stipulation regarding late rents and option fees etc.

Fri Oct 26 2007, 07:11

It sounds like renting with an option to purchase at a particular price at a future date. If you are happy with the price and you are collecting rent and you are compensated up front in some way and waiting two years is not a problem for you, then it could work out. The major problem is that no one knows where the market will be in two years -- if the market drops the tenant could back out -- if the market rises, then the tenant stands to gain (which is fine). Collecting a non-refundable option price up front would probably be a good idea. Agree of bilateral protection terms and make sure you engage a good lawyer experienced in writing these types of contracts.

Fri Oct 26 2007, 05:20

From what I hear, the Manhattan market is hot. If prices continue to appreciate, will your condo be worth $400,000 in 2 years? Is your tenant giving you any money in escrow to seal the deal? A lot can happen in 2 years. Realtors generally don't like to delay closings for more than 60 days. Check with a local Realtor to determine the current market value and then speak with an attorney regarding putting together a contract so you are covered if things go wrong.

Fri Oct 26 2007, 05:16

Pauline,
Hard to say, I would really need more info...Please give us more details
Are you saying they want to rent with an option to buy?
Are they giving you a downpayment now?
Do you want to have the rental income?
The way things have been in recent years the value of property keeps going up...

Fri Oct 26 2007, 05:13