I was on floor duty this weekend and spoke to a woman interested in a (short-term)lease with option to buy. She says she will be ready to buy in Jan, but doesn't mind signing a year lease if need be.She also mentioned she is recently divorced. Since SoCal is still a declining market, what would make the deal worthwhile, as opposed to recommending she just wait a few months? Appreciate your feedback.

I listen to people who throw out thoughts of getting the "Option to Buy".

I have to remind them that they already have the "Option to Buy".

What they actually want is to only move once, and to have the "Option to Buy" taken away from everyone else in the market (except them), so that they are not threatened with having the roof over their heads sold off from over them.

Does this person have any non-refundable "Option Money" with which she can purchase an "exclusive" Option?

For one of our office listings we 1) Neg. the sales price 2) do all inspections upfront 3) And put the closing date on or before some future date (less than one year) 4) Collect a nonrefundable 3-5k dep.

Most of these end up falling through. Everyone thinks their credit will be better "next year".

ok- what would you ask for in terms of rent credit to go towards the down payment? 25%? 50%?

Zero

Here are some thoughts I had last year about:

Rent to Own Contracts

I still feel about the same way !

What ever they pay above the fair market rent.

Do you know what the option ? It is basically I give you (Insert amount) dollars to have the option to buy your property at (Insert amount) dollars on or before (insert date). So basically I agree to buy and you agree to sell your property for 100K 1 year from now. For that option I will pay you 5K. The lease is a seperate agreement.

Now if you want the rent to go toweards the purchase price, thats a Rent to own agreememnt. So 50% of my rent goes towards the purchase or down payment.

Don't confuse the terms. I can see you on the recieving end of a law suit for doing so.

Most of these never close.

Buyers really think a lease option is best for them but it really benefits the investor.

If you have a regular lease purchase a beneficial interest is created in the property for the tenants which is not good for the investor.Granted the buyers have to purchase or be in default but usually they have an out to get the security deposit back.

With a lease option no beneficial interest is created and you the investor can spend the money right away. If 2 months later they stop paying rent you can evict and just lease option again to a new buyer (at least in my state)

So basically with options you can repo a house over and over for more option money to new buyers.

My agents own a few now where the property is for sale but they might consider a lease option. The buyers only have 1K or 2k down and my agents won't do it. The reason is if they don't pay and trash carpet and paint along with eviction costs you will be at 4k to 5k.

So in that instance it's better to leave listed and wait for more down to cover risk.

I can never figure out how an option or rent to own could benefit both sides of the transaction. Seems that someone will lose some money or value!

I would prefer Owner Financing, the transaction is more clear. Lease to buy is very risky and headache. However super realtor is right, all of this transaction always benefit the investor. If the buyer is so sure that will finish the credit repair for 6 months, what is the deal to wait six months to get qualified and then buy with no risk.

+

Its all owner finacing.

Rent- I will give you 500 dollars to live here and the contract is extended each month.

Lease- I agree to pay you 500/month for 1 year to live here.

Lease with option- I Pay you 5K for the right to purchase your home 12 months from now for (insert price), In the meantime I agree to pay you 500/month to live here. Sometimes it benifits the buyer and the seller looses. Other times it benifits the seller.

Rent to own- I will rent your property for 500/month with (insert and amount) going towards the purchase price of (insert amount).

They are basic terms, but still the jist of them.

They should benifit the investo, the investor carries alot of risk and liabilaty.

I would suggest to the original poster that they check their E&O to see if it will cover them and also if their BIC will allow these types of deals before getting involved. Also check with their state REC and their state REALTOR's associations legal hotline to see what are the implications in this type of deal in your state. CYA for not just you, but your clients!

If a deal sounds too good to be true.....

This is not an unusual request and most landlords don't have any problem with it. In my experience if people think they might one day own the property they are more likely to take better care of it.

Most people probably won't go for $0, but it is in your best interest to negotiate as little out of their rent to go towards your down payment.

It is more money in your pocket this way.