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Zhenia, Home Buyer in Kirkland, WA

what is the lease/purchase option?

Asked by Zhenia, Kirkland, WA Tue Mar 3, 2009

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This question is about this property: http://www.trulia.com/property/1069574231-2424-138th-Ave-SE-…

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Zhenia,
There have been lengthy discussions in the past about lease to buy options. The only time such a purchase makes sense for the buyer is when the market is appreciating (moving upwards) during the time of your lease. After paying a non-refundable deposit and a premium on rent for the term of the lease you will then need to seek financing. That can become a problem if you agreed to a market value price today and then 1 or 2 years later the valuation is less. The bank is only going to lend funds based on the appraisal of the property at that future time. Given the economic forecast of today that's a gamble I wouldn't take because if you can't fulfill the purchase component of the deal you 'lose' your non-refundable deposit and generally all the premium rent you paid in the interim. Of course you may negotiate a more favorable deal. I would also suggest that there are other ways to approach the purchase. Unless you have a credit score below 700 - 720, the incentives of FHA lending, the $8,000 tax credit for 1st time homebuyers and sellers covering closing costs makes a strong argument for buying a house now. I can certainly explain all this to you in more depth. You can contact me directly at 206-218-7653 or visit my website http://www.residentialpro.com.
Good luck.
Steve
1 vote Thank Flag Link Tue Mar 3, 2009
Zhenia,

There are many methods of accomplishing a Lease Purchase agreement between a buyer and a seller. The most important thing to note is that you are buying the property, and renting it until you can close escrow. It is not a rental, and contrary to what I am seeing below, you are not purchasing an "option" to buy it (or not buy it). There is a big difference between a Lease Purchase and a Lease Option.

For instance, if you need $5,000 more dollars to buy it, and it takes 6 months for you to save that, you can do a Lease Purchase to close in 5 months. Sometimes an extra $1,000 each month goes into an escrow account to insure that you will that $5,000 by the day of closing.

Bottom line is you need to talk to the listing agent who wrote the words "possible lease purchase", as she can explain what methods are available to you, based on yor personal circumstances.

Small warning. What "possible lease purchase" means to an agent, is that the owner is having difficulty selling it, and so is opening up the options. You should hire your own agent to determine why that is. It could be price. It could be other factors. But "possible lease purchase" is what a seller usually considers when they are haing difficulty selling the property straight up.
0 votes Thank Flag Link Tue Mar 3, 2009
Thumbs up,Steve...you filled in all the details I didn't have the energy to list again--i have done so many of these lease/purchase posts.
0 votes Thank Flag Link Tue Mar 3, 2009
Send me an email or call me. I just left a message for the listing agent on the lease purchase numbers. This house has been on the market 5 months and the owners probably just want to cover their mortgage for a while if they can get a long-term purchase tied up.
0 votes Thank Flag Link Tue Mar 3, 2009
i have posted several times explaining lease/purchase. you can refer to these posts,but I will give you the basics:1.You will put down a non-refundable deposit(usually 10%) to compensate the owner for taking the house off the market. 2.you will lease the house at above market rate3. The deposit & extra money will be put into an escrow account to build up your down payment4. You agree to purchase the house at a specified time(usually 1 yr.)5. At the end of this time,you take your escrow funds,go to a lender & get financing for the house6.If you do not purchase at this time,you forfeit your escrow funds.

of course,these terms are negotiable so you should have your agent contact the listing agent to find out what the owners terms would be. Please do not try to do this without an agent,as it is tricky & you could stand to lose a lot of money.
0 votes Thank Flag Link Tue Mar 3, 2009
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