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Question
Lease to own option?
I'm thinking of offering my home for sale as a lease to own or purchase sale. Only I want whomever buys it to be locked in as a buyer, not as an option. Is this possible to do legally?
I have had several postential buyers ask to lease my home for a year until they can get approved financing. Fine, but I want limited risk as a seller.
Can you do this: Offer the home for lease with say $15K down, that in the event they do not purchase the home, I keep the money. They agree to terms of 12-18 months on a lease and make a payment that goes towards intertest and principle. After or before the lease terms are up, they must purchase the home. If they fail, they forfiet their down payment? Is this possible, or something similar? I just don't want to let this huge family in my home with 8 kids and have them destory it. At least with a large down, subject to being lost, they will do all they can to follow through.
Best Answer
Yes, your scenario is possible, and it is common. However, the terms that you are describing usually involve the lessee being able to obtain the property at a predetermined price. It really is just a matter of what you are able to agree to.
Those who are regularly involved in the lease-to-own market tend to swear by such contracts, say, as opposed to renting the property. The down payment (usually nonrefundable) gives the owner a large amount of cash to work with. The monthly payments make the lessee feel good ("Building Equity"), and the principle is more security for you since it is all nonrefundable.
However, the majority of owners involved in a lease-to-own contract also recognize that 50% or more (I've even seen stats stating 70%) of lease-to-own are unsatisfied. This can be frustrating, due to eviction complications and neglect or damage to the property that usually accompanies such situations. It can also be very lucrative. If a lessee breaks their contract, you still own the property, control far more money than you would have renting, and usually come out significantly on top after expenses.
Since most lease-to-own contracts are unsatisfied, owners will usually offer the home for a predetermined price. This allows the owner to offer the home for an even larger down payment as well as monthly payment, which is where most of the money is made in a lease option.
In short, the contract is very important. There are a number of websites that you can google regarding the structure and verbiage of a lease-to-own contract as well as what determines the contract being broken. A number of companies offer their services in helping you to set up the lease, but this is something that you are definitely capable of running from start to finish.
Good Luck!
Other Answers
You are really talking about a land contract, if you're getting $15k down. If that is the case, then amortize it over 30 years (so they can afford the payments) and put in a balloon clause (say one or two years) where they will have to refinance by then. The risk is that you will get the home back if they don't make payments to you, or are unable to refinance. Then you have to go through the foreclosure process..... which is a pain.
Another option would be to have them buy it now and get a 80% mortgage and you carry back a 20% second. That way, your exposure is limited to just the 20% and you get most of your money upfront.
Hope this helps a little.
Source(s)
Banker
by mibanker - 5 years ago"Contract for Deed" is not a problem. What you proposed is/can be. If you take a "down payment" and apply it to a predetermined "Sale Price" you've created a problem. If this couple decides to divorce while they're leasing from you, a good attorney can make a (valid, BTW) claim that they have an equitable interest in the property. Now, you can't evict them, you have to get a Judicial Foreclosure! No telling how long that will take, and do you think they'll keep paying while that's going on?
Lease/Options do work but protections for Buyer and Seller have to be in place (via the use of Land Trusts).
