There are so many home sellers looking for the right creative real estate solution to get them out of their homes, but one traditional solution has been modified to become a trap for unsuspecting home sellers.
If you are trying to sell a home and have been approached about doing a lease purchase, I strongly urge you to read this article to the end.
There is actually a worse place to be than your current position, and it all starts with putting the wrong tenant in your home.
Lease Purchase Creative Real Estate Solution For Sellers
Imagine your excitement, a buyer brings you a full-price offer, when nobody else was even looking at your home.
While it might not be a cash buyer, the creative real estate arrangement will allow you to lease your home (with a positive cash flow), while you move to wherever it is that you would like to live.
Not too shabby for a "next best thing to being sold," right?
If done incorrectly, you will rue the day you considered a creative real estate solution.
In order to see what I mean, consider this creative real estate scenario, what would you do?
Buyer Offer: Pay full price, 1% down, close in 7 years. Will pay seller's current mortgage payment plus $180 per month, including all fees for associations and taxes.
Before you say yes or no, consider this appears to solve seller's problem; seller can now move to a bigger house (through a lease-purchase as they will not get financing before their house closes).
Remember, this is not an investment question, this is a homeowner seeking a creative real estate solution due to owing more money on a home than it is worth. But this seller has outgrown the current house and really needs to move.
What Happens When A Creative Real Estate Solution Fails?
The problem with the creative real estate offer above is the same problem that caused the housing market to bubble then burst.
But instead of banks creating loan programs for people with "no skin in the game," now it is the homeowner about to do the same thing.
The creative real estate solution as written allows the "buyer/tenant" to occupy the home for an amount equivalent to one month's rent. Even a tenant would have to pay first/last/security deposit, right?
Sadly, some sellers are so desperate for relief that they don't want to consider the ramifications of owning a home with a deadbeat tenant.
What if this tenant stops making payment? Do you think you can evict them in just a few days? Not in Florida! Imagine spending thousands of dollars over the next six months trying to evict a tenant that is destroying your home (all the while making the mortgage payment and paying your rent).
If you are a home seller and you are thinking that a lease purchase agreement is your creative real estate solution, I recommend you first read this article on what home sellers should know about lease purchase agreements. It might just save you from a disaster.
Of course, there are ways to make a lease purchase agreement the right creative real estate solution for both buyer and seller, and if you would like to know more about how to get that done, just drop me a note and we can schedule a time to assess your specific situation and needs.
Joe Manausa, MBA is a 27 year veteran of real estate brokerage in Tallahassee, Florida and has owned and managed his own company since 1992. He is a daily blogger with content that focuses on real estate analytics and providing his clients with a tactical advantage in today's challenging market.