Wednesday, August 21, 2013

Why Use a Lease Option?

Undoubtedly being in the Real Estate markets you’ve heard the phrases “Lease Option,”

“Lease Purchase,” and “Rent-to-Own;” which all mean renting the home you’re in until you can

secure a loan and call it yours!

However many people do not understand what a phenomenal deal this can be, how to use the system, and

the benefits not only for the buyers - but for sellers too.

The process of Lease Option starts when you find a home you’re interested in, or

already in! Some benefits to note about purchasing a home this way are the freedom to customize the space,

update, and plan the home anyway you want. However any repair costs, insurance needs, and

maintenance becomes the tenants responsibility.

Adding an additional monthly option fee to the rent is common and makes living in an “option home” more

expensive versus strictly renting. The option fee goes towards the down payment/purchase of the home; so

think of it as slowly building a purse to purchase your home. Option fees, the lease term, and purchasing

guidelines can be negotiated and vary from state to state. This type of deal is best used for a

buyer looking to raise money or credit scores necessary to obtain the house.

New homebuyers are often refused loans due to no/little/or bad credit, a cycle which

can be hard to break. Lease options give the buyer time to improve their credit and

add “option money” toward the house payment in the mean time. This kind of home buying

technique is not right for everyone. It does require some additional monthly expenses and other

upkeep that is the tenants responsibility during the optioning period.

Here are some considerations for people looking into optioning a house:

• Do you plan to stay in the area? Since optioning in more expensive than renting

the decision on location is important once your option is due.

• Can you afford the option money? There may be a small upfront fee in addition

to a monthly option fee that goes to the purchase of the house. Unlike a

security deposit you don’t get any money back if you back out on the option.

• Can you afford the monthly payments on the lease? Usually terms include fair

market rents plus the option fee.

• Will you be able to secure financing at the end of the lease term?

• Will you be able to make monthly payments on the home and afford the

expenses of ownership?

Using this checklist and talking with someone who has experience in “Lease Optioning”

is a good way to start your custom home buying experience. For sellers, this is a way to move

property while continuing to make a profit and release some responsibilities throughout

this process.

In the Seattle Real Estate market,  “optioning” may assist some buyers toward the goal of owning a home.

Call me at 425-270-7292 or email today to talk about your

homeownership options!

Happy Investing!

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