Property Q&A in Saint Louis>Question Details

ABUNDANTLP, Home Buyer in Saint Louis, MO

We're in an apartment right now, would like to rent with the opt to buy later this year when our lease is up in Oct 2013.

Asked by ABUNDANTLP, Saint Louis, MO Sun Jan 27, 2013

I had to file bankrup which was discharged 12/2012 what are some things we need to do to make sure when can get into a house? My husband credit it not all that great, we have a total income $5k per month. I know I can't buy anything for atleast 2 yrs.

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Over 95% of the lease purchase contracts written in the greater St Louis area never make it to closing. There are risks for both the buyer and the seller with lease purchase contracts.

In the St Louis area, we negotiate 2 contracts - the first is a rental contract from date x to date y. The second is a purchase contract where the purchase date is the ending date on the lease contract. The buyer is responsible for doing all their inspections up front and those are negotiated up front so everyone knows the status of the home prior to the buyer/renter moving in. The appraisal and the loan commitment date, however have to be within a month before closing, which leaves the seller very vulnerable to what the property values for the area will be when it is time for the second contract to kick in since the sales price is negotiated up front.

They are also vulnerable, because if the buyer isn't able to qualify for a loan when the lease ends (and sometimes that is because the rules for credit scores, how much money you have to put down, etc have changed not because the buyer didn't fix the issues that initially caused them to rent rather than buy right away), they now have a tenant in place, with tenant rights that they have to get out of the home in order to sell it to someone else. I have seen it get to the point where the buyer refused to leave and the seller had to go through the process of evicting them, plus the seller then has to go through the home and make it "show ready" again before it can go back on the market (paint, clean carpets, etc).

On the buyer's side, typically the homes that are set up for lease purchase are the ones that have a bit more difficulty getting sold. Often they have an "issue" that has prevented regular buyers from finding them attractive enough to put in an offer - it may be a wet basement, or a horrible backyard, or they make be on a very busy street or any number of other things. The really nice homes, esp since we are back to a sellers market in much of the greater St Louis area, are selling quickly and the sellers don't need to deal with a lease purchase contract offer. That means that the buyer who chooses to put themselves in a lease purchase contract starts out by limiting the homes available to them to ones that have issues that will 99% of the time still be there when they get ready to sell the home in the future.

Bottom line, I highly encourage people to fix their issues first, then buy a home as a regular purchase so they can consider all the homes in their price range, not just the ones that have issues
0 votes Thank Flag Link Sun Jan 27, 2013
I don't necessarily recommend renting to own (I have rarely seen these go all the way through to an actual purchase). I think it would be better to save your money and repair your credit for a while with the intention to purchase down the road.
0 votes Thank Flag Link Sun Jan 27, 2013
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