So you've decided to lease a home with an option to buy. Great!! - The contract is signed and the moving truck is packed.
10% of your monthly lease payment will be credited toward the purchase price of your home and when you include the amount of money you gave the seller as your lease option 'premium', at the end of 12 months you'll have enough 'equity' built for your lender to give you a loan.
The perfect scenario? It may be, unless you find out that the payments you've been making to the seller, in turn are not being made to the seller's lender.
In today's volatile real estate market, this is a very legitimate concern that potential lease to own buyers should be aware of.
What to do? As mentioned earlier make sure that you have qualified and appropriate representation through an attorney and/or a licensed real estate professional who specializes in lease to own homes.
As far as specific procedures to help avoid this type of unfortunate event, before entering into a lease to own contract you could ask for a 12 month payment history on the home from the seller to prove that they are not currently delinquent on their mortgage. As far as future payments, you can also agree with the seller to establish and EFT (electronci funds transfer) so that your lease payments are made electronically to the seller and in return the seller agrees to make EFT payments to their lender.
In addition, you can also request that an escrow account be established for any funds used toward your option premium. Just remember that this is a negotiable item and can by home, seller and state.
Saturday, March 8, 2008
Monday, February 4, 2008
Lease To Own Legalities
In our last post we discussed the potential pitfalls of entering into a Lease To Own Contract. Many of the problems that we have seen potential buyers encounter could have been prevented if they would have consulted with a knowledgable attorney familiar with Real Estate Law and also prepared themselves with more knowledge.
A Lease To Own contract is more complicated than a straight lease or rental agreement because it combines the elements of Landlord-Tenant Law with the complexity of a sales agreement. Because of this, there are multiple facets that you should be aware of to protect yourself and your attorney can guide you properly.
For example, you should be made familiar with the terms Option Premium, Rent Credit and Exercise. Often buyers find themselves in unchartered territories with a Lease To Own contract only to find out that the contract language can cause them to forfeit thousands of dollars because they were not aware of the consequences associated with taking or not taking certain action.
In the State of Michigan, our firm recommends that you contact the Law offices of Bruce Inosencio. Mr. Insosencio specializes in Real Estate and more specifically, Lease Option Law. You may reach Mr. Insoencio at bruce@inosencio.com.
Our next post will discuss issues relating to the economic environment and how to know if the seller of your Lease To Own Home is making the mortgage payments with your Lease Money!
A Lease To Own contract is more complicated than a straight lease or rental agreement because it combines the elements of Landlord-Tenant Law with the complexity of a sales agreement. Because of this, there are multiple facets that you should be aware of to protect yourself and your attorney can guide you properly.
For example, you should be made familiar with the terms Option Premium, Rent Credit and Exercise. Often buyers find themselves in unchartered territories with a Lease To Own contract only to find out that the contract language can cause them to forfeit thousands of dollars because they were not aware of the consequences associated with taking or not taking certain action.
In the State of Michigan, our firm recommends that you contact the Law offices of Bruce Inosencio. Mr. Insosencio specializes in Real Estate and more specifically, Lease Option Law. You may reach Mr. Insoencio at bruce@inosencio.com.
Our next post will discuss issues relating to the economic environment and how to know if the seller of your Lease To Own Home is making the mortgage payments with your Lease Money!
Tuesday, January 8, 2008
Avoiding Lease To Own Pitfalls Part 2
Our last discussion involved some to the problems you encountered with a Lease Option. Due to the nature of this type of transaction, it is imperative that you prepare yourself as much as possible for the challenges that may be encountered.
In regards to Lease Option Contracts, I highly suggest using an attorney familiar with constructing Lease Option Contracts if you are buying a home direct from the seller or working with an Agent who specializes in Lease Option negotiations.
I am often asked what kind of lease credit you should expect to receive with a lease option. Unfortunately there is no straight answer because most terms of a Lease Option Contract are completely negotiable. There are fringe considerations, such as the amount of credit allowed by lenders, but as t
In regards to Lease Option Contracts, I highly suggest using an attorney familiar with constructing Lease Option Contracts if you are buying a home direct from the seller or working with an Agent who specializes in Lease Option negotiations.
I am often asked what kind of lease credit you should expect to receive with a lease option. Unfortunately there is no straight answer because most terms of a Lease Option Contract are completely negotiable. There are fringe considerations, such as the amount of credit allowed by lenders, but as t
Sunday, December 9, 2007
Profiting From The Changes In The Real Estate Market
So is the Lease To Own sceanario going to be the next 'wave' in the real estate markets?
My opinion is that it will have an appropriate place just like any other type of hybrid financing. I do see it as a potentially VERY attractive alternative in some markets. For example, I live in Michigan. The markets here have taken a severe price regression and I believe that we haven't seen the end of the fall yet. With recent changes released by Fannie Mae, Freddie Mac and several private mortgage insurance companies in the last several weeks, tighter lending is going to exacerbate the problems in the market. With the potential for a continuing decline in values, Lease To Own has the ability to be an attractive alternative to shrewd and patient home buyers.
Consider the fact that if you purchase a home with a market similar to what is occurring in Michigan. If you elect to buy with little or money down right now, utilizin an interest only mortgage, essentially what you have done is created a situation where you are 'Renting' from the bank or lender.
A Lease To Own, if structured properly, may allow you to build equity faster than a traditional mortgage - allowing you to profit if the market stays flat or by chance does happen to appreciate. In the event that it falls (and especially if it falls hard - ouch) you still have the ability not to excercise your option or even renegotiate your contract. But at least you're not stuck in a situation where you've gone backwards in equity.
Our next discussion will be about some of the negatives related to this strategy.
Hope that you had a great weekend!
Warmest Regards - Jon
My opinion is that it will have an appropriate place just like any other type of hybrid financing. I do see it as a potentially VERY attractive alternative in some markets. For example, I live in Michigan. The markets here have taken a severe price regression and I believe that we haven't seen the end of the fall yet. With recent changes released by Fannie Mae, Freddie Mac and several private mortgage insurance companies in the last several weeks, tighter lending is going to exacerbate the problems in the market. With the potential for a continuing decline in values, Lease To Own has the ability to be an attractive alternative to shrewd and patient home buyers.
Consider the fact that if you purchase a home with a market similar to what is occurring in Michigan. If you elect to buy with little or money down right now, utilizin an interest only mortgage, essentially what you have done is created a situation where you are 'Renting' from the bank or lender.
A Lease To Own, if structured properly, may allow you to build equity faster than a traditional mortgage - allowing you to profit if the market stays flat or by chance does happen to appreciate. In the event that it falls (and especially if it falls hard - ouch) you still have the ability not to excercise your option or even renegotiate your contract. But at least you're not stuck in a situation where you've gone backwards in equity.
Our next discussion will be about some of the negatives related to this strategy.
Hope that you had a great weekend!
Warmest Regards - Jon
Friday, December 7, 2007
Where is housing headed? Is there a safe way to profit from coming changes?
Each day seems to present more questions about the future of our housing market. I can't help but think that things are poised to get worse. That is difficult for me to admit seeing how I consider myself an eternal optimist. Unfortunately there are too many precursors set for more housing woes, even with government intervention.
The good news is that I truly believe that there are some tremendous opportunities in the housing market for potential buyers. Over the next few days I'm going to be talking about how the current environment can actually help you - and even allow you to profit - if you are in the market to buy a home and whether you should look at a straight purchase or the Lease To Own.
I'm really looking for questions, so please feel free to post so that I can help address the pressing questions that are now surfacing with Lease To Own and Lease Options beginning to make their way to the headlines.
Until tomorrow - Jon
The good news is that I truly believe that there are some tremendous opportunities in the housing market for potential buyers. Over the next few days I'm going to be talking about how the current environment can actually help you - and even allow you to profit - if you are in the market to buy a home and whether you should look at a straight purchase or the Lease To Own.
I'm really looking for questions, so please feel free to post so that I can help address the pressing questions that are now surfacing with Lease To Own and Lease Options beginning to make their way to the headlines.
Until tomorrow - Jon
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