Land contract or lease to own option, when association won't allow rentals.

Asked by Angel, Carpentersville, IL Mon Aug 6, 2012

I helped my Father locate and purchase an investment property in March this year, by hiring the agent who helped me purchase my own home. Shortly after we closed, the association advised us that we could not rent the unit, due to their rental cap which than exceeded 10%. To make matters worse, we found out that their FHA expired about 6 months before we purchased and they can not re-apply due to their delinquencies. We are stuck like chuck unless we can find conventional or lease to own buyers, right?

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Mark Zatz, Agent, Chicago, IL
Thu Feb 19, 2015
Check with Home Partners of America. They have a rent to own program that may qualify.
0 votes
Ron Thomas, Agent, Fresno, CA
Tue Aug 7, 2012
You are desperate!
Your Credit or Finances, or both, will not allow you to go the conventional route:
You need the Seller to help you out!

The Seller will know it, and you are going to pay dearly for this service:
There aren't too many altruistic Sellers out there.

The terms that can be written into a Lease/Option can be dangerous to you:
How long is the Option period?
How much money are you putting in to the Option?
What happens if you are not able to execute the Option?
How do you know what your financial situation will be 2-5 years from now?
How much is the rent in the meantime?
Who will be responsible for maintenance and repair in the meantime?
What will be the Market Value of the home in 2-5 years?
What will be the Selling price 2-5 years from now?

This is the Ultimate Caveat Emptor!
0 votes
I am the seller and we will do everything fairly and to the benefit of both parties. I've read some horror stories about poor buyers getting screwed in land contracts, but we make sure that if they comply with the terms, they will end up with the deed.
Flag Tue Aug 7, 2012
Larry Hines, Agent, Algonquin, IL
Tue Aug 7, 2012
Your choice is a contract sale, Make sure you use an atty who does land contracts (some have problems with them) A few clauses are to your advantage that the good one's use..
You maybe able to rent to family member, check with assoc.
So, you understand Carpentersville has a rental license requirement and if you sell on contract you will need to record a memorandum of the articles of agreement (land cnt).per the village requirements

Many TH/condo assoc. are hitting their max allowable rentals, and some are changing their by-laws (ie: in gilberts in the Durango areas).

Lease to own is a lease.
0 votes
Thank you Mr. Hines, yes renting to family members is allowed, just don't have an family members in the area unfortunately. When you say some assoc are changing their by-laws, what are they changing?
Flag Tue Aug 7, 2012
Randy Schule…, Agent, Saint Charles, IL
Mon Aug 6, 2012

I feel your pain! One of my listings in Carpentersville is located in a subdivision that also recently lost it's FHA approval status, most likely for the same reasons your father's property lost his. When there are too many delinquencies, too many rentals versus owner occupied and reserves dropped below acceptable levels in the associations budget; the likelihood of FHA approving the complex or an individual unit is slim to none.

Like you suggested, unless you or your agent can attract a buyer who is paying cash or financing with a conventional loan you most likely will not be able to sell. If your father is in the position to sell on contract or find the right buyers to do a lease to own (if your association will allow), that may be valid options for you to consider.

If I can help please feel free to contact me at the number below.

Randy Schulenburg
Managing Broker
Mortgage 1st Realty, Inc.
224-805-2616 Direct
0 votes
By the way, our property is in Carpentersville as well. What a coinkedink.
Flag Mon Aug 6, 2012
Hi Randy, thanks for your response. I'm sure the association will not allow us to rent on any terms so I shouldn't have said lease to own, but if we do a land contract, they can't stop us. That is the plan as of now. We are not working with a realtor because we are afraid of them, lol. Kinda messed us up royally you know.
Flag Mon Aug 6, 2012
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