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Kelly Sniate…, Real Estate Pro in Matthews, NC

Does anyone have any experience with a lease/purchase? Any tips or advice for me?

Asked by Kelly Sniatecki, Matthews, NC Sat Apr 30, 2011

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My best advice is to get an attorney to advise you and your client and draw the lease purchase documents. You can arrange for some of your commission to be paid up front so that you do not lose out completely and not get paid anything for your time and efforts should the puchase not be completed. The seller should ask for a sizeable non-refundable deposit so that the leasee has some serious skin in the game and more incentive to complete the transaction. I would be very clear on the leasee's credit current credit worthiness and what it will take for them to qualify for a loan to purchase the property. You need to feel comfotable that the purchase end is realistic for the leasee. Make certain that all parties understand whether the transaction is to be a lease with option to puchase or a straight lease-purchase, where a portion of the leasee's rent will be applied to their purchase of the property. Lease-purchases can be further complicated by appraisal issues, especially in a declining market. Again, talk with an experienced real estate attorney so that you will not be held responsible should the deal fall apart. Best success! Kathleen Turner
1 vote Thank Flag Link Sat Apr 30, 2011
I am not a Realtor, but a nationwide home buyer who also owns a strategic consulting firm. We specialize in lease option strategies.

Some of the "what if" questions that will arise from the seller:

- What if the tenant does malicious damage?
- What if the tenant files a frivolous (or not so frivolous) lawsuit?
- What if I can't afford repairs
- What if the tenant defaults?

We work with several companies who offer 100% coverage in each instance, as well as 6 months of lease payments if the tenant should default.

Since we are not Realtors, we do not advise on market rental rates, comparative values, or negotiations between the tenant and landlord.
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0 votes Thank Flag Link Thu Dec 4, 2014
Thank you to everyone that responded to my question. You all gave some great advice! I have contacted an attorney and we are currently waiting on a pre-pre approval from the lender before we go forward with this. Wish me luck!

0 votes Thank Flag Link Mon May 2, 2011
I honestly recommend that you do not do one. Save your money and buy when you can. I think they're trouble.
0 votes Thank Flag Link Sat Apr 30, 2011

I agree to have an attorney involved. But, you need to decide why they cannot buy the house now. if it is becuase of credit worthiness; then make sure you speak to the mortgage person and ask them what the feasibility of them getting a loan by the end of the lease purchase term is like.

I usually ask for 2% of the sale price as a non refundable deposit to do a lease purchase if they are going to do a FHA loan. if they are going to do a conventional loan I ask for 5% to 10% depending on what they are putting down.

Make sure you ahve na agreed upon payment plan that falls in line with what the mortgage payment is goign to be. if the seller is not goign to be whole ask that the attorney collect the rent payment and pay the mortgage with it. that way the seller does nto skip out on paying the mortgage and lose the house and the buyer is out all that money....

I try to do them for as short a time frame as possible...6 months to a year is a feasible time frame.

Also, in this market you have to have a pre negotiated sale price. but need a contiengency in there if the house appraises for less..Who is responsible for the difference?
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0 votes Thank Flag Link Sat Apr 30, 2011
I agree with Kathleen Turner. You need to work with a real estate attorney to draft the lease and the offer to purchase and contract. At this time in the practice of NC real estate law, the lease purchase is recorded at the Register of Deeds on the property (this is a new practice). If the tenant violates the lease, then what happens with the purchase contract?

I favor the lease option with a non-refundable deposit. The right for the landlord void the contract if the lease has been breached. Likewise, the buyer has to be protected from a landlord who many not be making mortgage payments. The attorney needs to search the title to make sure there are no liens on the property. My husband is a real estate attorney who does this work, Yates W. Faison, III. You can catch him in the office at 704-896-2216.

Robin Faison
0 votes Thank Flag Link Sat Apr 30, 2011
Not familiar with NC laws but here the usual process is:
A deposit of a few thousand dollars (decided between owner and tenant) is accepted with legal contract outlining how long the lease is for and when option needs to be exercised (usually one year). Both parties agree on a price that the house will convey for at that time--the tricky part. The seller wants a lot of money thinking that values will go up. The tenant wants a low price expecting prices to keep dropping. At the end of the time period if the tenant does not buy the property the landlord keeps the deposit money. If the tenant does buy the property the few thousand dollars is used toward down payment. Another option is a minimal amount up front (still at least a couple thousand) and a portion of the tenant's rent each month goes toward the down payment. Either process works but I always advise my client--whether the buyer or seller -- to have their attorney advise them upfront and don't make promises unless you've had legal advice.
0 votes Thank Flag Link Sat Apr 30, 2011
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