lease/own? need input?

Homegrown Tomatoes · February 07, 2008, 12:22:12 PM

One of my friends back home sent me the email of a realtor who deals in both rentals and home sales.... she called this morning and sent me an email asking if we'd like to look at some of the properties we were thinking of buying and do a lease to buy agreement with the owner. We've never done that, and I don't know anything about it. We've always bought everything outright. I can see that there are some pros: we'd only have to move once, the company would pay our rent for at least six months, which would count toward the purchase of the home, etc. What are the drawbacks? Any of you ever done something like that? The one obvious drawback to me is that we wouldn't be buying JUST land... we'd have to buy something with a liveable existing house on it, and that somewhat limits our choices, and then we could build our MIL cabin later.

I don't know. It's something I never really thought about doing...what do y'all think?

tanya · February 07, 2008, 12:33:34 PM

I have leased to own a couple of properties in the past. One thing to look at closely is the time limits in relation to late payments and when they can begin forclosure. most lease to own contracts will state that the seller can begin forclosure after 30 days late payment, I always make them change that to 90 days at a minimum. Contracts generally go on over a period of years and stuff can happen, illness, car problems, etc. You don't want to get into a contract that allows your seller to take your home just because you are 30 days late on a paymet after paying on time for ten years. Other than that the lease option isn't a bad one for one thing if a better deal comes up during the lease period you can back out, you loose the rent money but at least you are not stuck with a home you don't want. Another thing is that you have time to find out about any outstanding problems with the home that maybe you didn't know about before hand roof, septics, foundations etc. Some states say that the seller has to fix these things before they can legally sell a home and that gives you protection to make the seller fix them or give you back all the money you have invested. The lease option also gives you a chance to check out the neighborhood, schools etc. In this state all of the money paid for down payment and rent goes into an escrow account until closing (which happens after the lease period ends) so if the seller has misrepresented theproperty you have recourse onthe other hand if the property is just fine but you back out anyway you lose all the money you have invested so it is a good idea to make your down payment offer as low as possible. Making a low down payment might give you a higher rent payment but you can keep that initial savings to to use for another down payment after you look around in case there is a better deal available later in the spring.

glenn kangiser · February 07, 2008, 03:16:13 PM

In equipment leasing there are evergreen clauses that automatically continue the lease if you don't tell then in writing you don't want to renew it -- even if you have an option to buy. An unscrupulous lease company nailed me for an extra $5000 because I missed it in their fine print.

Note that a contract is a 2 way street until you sign. You can put a line through the parts you don't like and initial it - they can accept it that way or change it to your liking or not accept your terms. Just because they do the paperwork the way they like it, it doesn't mean you have to accept all of it either.

Homegrown Tomatoes · February 07, 2008, 09:44:16 PM

Thanks for the input everyone. My husband is leaning toward just going ahead and renting a place temporarily, and then finding the right place after our house here sells. Right now I'm frustrated with the whole process, whether leasing or leasing to buy. The property manager who was supposed to show my mom some properties today backed out and says she'll have to wait until tomorrow, and I told him a week and a half ago that I needed to know something BY Friday of this week. The movers hopefully will make it here tomorrow, weather permitting. The house looks like a refugee camp. I'm really really tired, and my ankles are swollen

I'm thinking that a lease to buy would require one, if not two, trips down there to look, which would waste more time and money, whereas if we just rent for six months, then we'll be somewhere that is absolutely temporary, so it doesn't matter so much whether we like it or not.

February 08, 2008, 09:08:24 AM

As a landlord I used to advertise my properties "Rent to Own". I would collect the standard rent and deposit plus an option fee to tie the property up for one year. The renter then had that year to clean up any credit problems and obtain financing. I would show the deposit, the option fee and $100 per month of the rent as a downpayment if they purchased the property. Few ever did but leasing in that fashion produces a better class of tenant. They are thinking like homeowners and taking better care of things.
Property values skyrocketed in 2005 and I wound up selling one house at way below market value because I had set the price a year before when they had signed the lease. So I haven't been doing that lately.

Homegrown Tomatoes · February 08, 2008, 11:33:37 PM

Found a house. It's in the city, but it is best for the time being. Short commute to DH's work, and good place to scout out new territory from. Gotta sign the lease when we arrive, but the rest is a done deal.

glenn kangiser · February 08, 2008, 11:41:38 PM

That's great news, city slicker.

Homegrown Tomatoes · February 10, 2008, 12:21:29 AM

I'll never be a city girl, even if I have to live there a while... I lived in Seoul, South Korea for a while and rode the subway every morning and worked and lived in a big city. It was a good experience, but I remember just dying to get home. For the five days until my jet lag wore off, I went camping in southern Oklahoma and all I did for those five days was just float around in the lake waiting on the water to get all the smog and dirt out of my pores. I remember how good direct sunlight felt after not having felt it all summer (because of the clouds and smog in Seoul.) When I was younger, I worked as a vet's assistant at the Oklahoma City Stockyards (which is right downtown in OKC, for those who've never been there.) I didn't know any better and parked down the road a ways and walked into the stockyards to work on my first day... several blocks... and some Mexican guys hanging around outside a cafe' started hollering at me that I must be from out of town if I thought it was a good idea to leave my truck there and walk in.

February 10, 2008, 12:45:45 AM

I've never met a city I trust.

desdawg · February 10, 2008, 09:16:37 AM

I been to a town..............

glenn kangiser · February 10, 2008, 10:02:59 AM

Thanks, Jeremiah.

lease/own? need input?

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