Do real estate agents get anything out of land contract or lease option sales? Is it possible to purchase a short sale house with a lease option?

Asked by Jhutch, South Bend, IN Mon Jan 11, 2010

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Don Tepper, Agent, Burke, VA
Mon Jan 11, 2010
Technically, it would be possible to purchase a short sale house with a lease option. But it was be a terrible move--financially and strategically.


A short sale means the house is worth less than the seller owes on it. Example: Joe Smith bought a house in 2005 for $400,000 with 100% financing. The house value has dropped to $250,000. Joe needs to sell, but obviously no one will pay $400,000 for a house worth only $250,000. So Joe offers the house as a short sale for $250,000. If someone offers $250,000, then that sale is contingent on the lender(s) approving the sale.

Keep in mind that Joe probably can't afford to keep making payments on the $400,000 mortgage. That's why he wants to sell. You're asking whether you can lease-option the home for $250,000. If you lease-option it for $250,000. If you did, Joe still has his problem. And the rent you pay won't cover the mortgage. Joe's paying about $2,700 a month (maybe more) for his mortgage, if he's staying current. The house probably rents for about $1,700. Joe will lose $1,000 lease-optioning it to you. And he probably can't afford the payments to begin with. When the house is foreclosed upon, your option becomes worthless. In short, Joe has no incentive to lease-option the property to you. And you're in the worst spot possible: holding an option on a property heading to foreclosure. And with the lease-option, Joe wouldn't be able to sell the property to anyone else.

I assume what you really want to do is find a super-cheap lease option, and you're thinking that a short sale house must be as cheap as you can get. First of all, not all short sales are good values. Many of them aren't. Second, there are plenty of other ways to find real values out there. Third, if you want to lease-option a property, then you want to make darn sure that the owner can deliver the house when you exercise the option. You want an owner with maximum financial stability, not minimum stability.

Do real estate agents get anything out of land contracts or lease option sales? Yes. Sometimes some of the commission up front. Sometimes they have to wait for the remainder.

Hope that helps.
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Kathy Weber, Agent, Murrieta, CA
Mon Jan 11, 2010

Realtors that are involved in land contracts & leases either get a "flat" fee or a %. It's negotiable with the broker.

As for getting a "lease" on a Short Sale property...............why? The house is either not going to be approved or if it is, will be occupied by the new owner. Most investor's do not want this type of property. Takes too long for them to gain a good ROI. (return on investment). Not a good option for a rental.

Best of luck!
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