Rent with an Option to Buy

pexels-photo-261658.jpegKnow your Rights!

One of my clients asked,  “How does the process work for a rental with an option to buy lease agreement?” I thought I would share the answer  in case anyone else has the same question.

To begin the conversation I will share with you, there are not too many owners of property who will consider a rent with an option to buy.  You will not have many properties to choose from and your selection will be very limited.

The official contract is called a rent-to-own agreement, a lease option or a lease-to-own agreement. When the buyers sign this kind of contract, they are agreeing to rent the home for a set amount of time before exercising their option to purchase the property when or before the lease expires.

Here are some features of rent to own:

1.  Your required down payment is often substantially higher (10% or 20%) and is non-refundable if the potential buyer doesn’t purchase.

2.  The monthly rental is above fair market rent, so there will be money to pay the rent and excess amount going to purchase is the amount above the fair market rent.  This is also not refundable.

3.  If you’re not qualified for financing at the agreed upon time and price, then you lose everything.

4.  The purchase price is agreed upon at the beginning of your contract, and at the end of the contract who knows what the value of the house will be, it could be higher or lower usually you cannot change the terms you agreed on at the beginning of your contract.

5.  You are completely depending upon the owner to pay their mortgage.   If they don’t pay and end up in foreclosure, you lose.

My recommendation is If you get involved in this process, please involve your real estate attorney in the contract and ask questions before you sign on the dotted line.

Questions to ask:

How will the contract be structured? You know you will be paying more than the market rate, find out how the money will be used. Ask your lender how much if any of the funds you have already paid to the landlord will be credited toward your purchase. Don’t assume.

Who is responsible for what tasks?

For example, ask about repairs, maintenance, upkeep, renters insurance and landlord’s insurance.  Your contract should disclosure who is paying for association fees, utilities and any other fees involved.

How will the title be transferred to the buyer in order to complete the purchase and what additional fees are involved?

The buyer should know about closing costs, deposits and any other lump sum of cash needed.  The buyer should know what is non-refundable and what is refundable. Buyer should insist on clause stating sale is contingent upon appraisal. It is important to ask if the price can be adjusted before you buy.

What happens if the buyer is not ready to buy at the end of the contract?

Ask for a clause to be written into the contract that describes in full what your options are and how you can execute them. Determine if there will be any penalties and how significant are the penalties. If you are working on your credit then keep up to date records of what you have done and discuss this progress with your landlord.

Please visit the latest issue of my e-newsletter, which contains helpful real estate articles, tips and more. Just click on the link below to view

Your Real Estate Update

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We are Leroy & Theresa Miller with The M & M Team Realty. We are Residential Realtors working with clients to purchase, sell or lease. We specialize in clients who need to sell their residence due to life changing events (for example divorce). We understand the urgency and sensitivity.

A good referral for us is anyone going through a life changing event and need to downgrade, upgrade or relocate.

Our tagline is “Helping people make dreams come true.”

Theresa Miller
themmteamrealty@ca.rr.com
(310) 713-8459
http://www.themmteamrealty.com

 

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January 2018 – New Year – New Home Buyers Looking to Purchase Property

So, you’re ready to take the ultimate step and buy your own home.  Whether you are buying a single-family home, condo or townhouse here are a couple of tips that will help you get the home of your dreams and take away some of the stress with the purchase of a home.

Let sellers know you are ready, willing and financially prepared by getting pre-approved by a  mortgage lender/bank before going out to see homes. When you apply for a loan, you have four options to have your credit reviewed , let’s take a look at your choices:

  • Pre-Qualification without credit review – during this phase the buyers have talked to a mortgage lender/bank about purchasing a home. The lender relies only on what the potential borrower tells them about their income, assets, employment, debts and other financial information.  The credit report is not reviewed.
  • Pre-Qualification with credit review – during this phase the buyers have talked to a mortgage lender/bank about purchasing a home and the credit report has been pulled however there is no official verification of income, assets or employment. If a pre-approval letter is given during this process potential problems may arise leading to additional documentation requirements and/or the loss of the loan.
  • Pre-approval without Underwriting Review – during this phase the buyers have talked to a mortgage lender/bank about purchasing a home, credit report has been pulled, income, employment and asset documentation have been reviewed by the lender. Following this step, the lender will send your information through an automated underwriting system. There is still potential for errors because the live underwriter has not seen or reviewed your application and documentation. Most lenders feel good about this option but trouble can still arise.
  • Notice of Loan Approval (NOLA) – the best and most accurate way – during this phase the buyers have talked to a mortgage lender/bank about purchasing a home, the loan application and all of the documentation have been reviewed by the live underwriter and a notice of loan approval (NOLA) have been issued by the underwriter to the buyer.

Once you have your notice of loan approval letter the next step is to contact a Realtor to set up an appointment to discuss the location and features of your new home.  Where do you want to live, how many bedrooms, how many bathrooms and any other features you would like to have in your new home should be discussed at this time. Remember to consider your budget and don’t over extend yourself.

Don’t go shopping for a home by yourself.  Your Realtor provides you with their education and experience with the home buying process.  Your Realtor will act as buffers between you and all the sharks out there that want to take advantage of you with reasons why you should buy their house even though it’s in Alaska and you want to live in California.

Realtor team

Meet with your Realtor and all decision makers who will be involved in the home buying process.  Your Realtor will  provide information to everyone at the same time so everyone is on the same page. Take everyone involve with you when you go out to look at homes. This helps when you need to make an offer quickly on a hot property that just came on the market. Don’t waste time going back and forth or the home will be gone.

Commit to working diligently with one Realtor.  Don’t Realtor hop. This can lead to confusion and a delay in the home buying process.  If you are approached by another Realtor, kindly inform them you are working with a Realtor already and give them your Realtors business card.

Finally have funds available with easy access when needed for the following items:

  1. Initial deposit – this is the good faith money to be sent within three days after your offer is accepted and escrow is opened.
  2. Appraisal – this could be paid in escrow or outside of escrow depending on your financial institution where you are obtaining your loan.
  3. Buyers home inspection – After your offer is accepted you will have to option to have a home inspection completed.  This is something that you will and want to pay for within the allowed time frame.
  4. Down payment – this is the amount of money you and your lender have agreed for you to put down on the home to secure your loan
  5. Closing costs – this is the amount of money you will pay to escrow along with your down payment for the cost of escrow, title and various other fees that is included in your closing costs.

Following the tips outlined here will make your buying experience less stressful and will help you to find the home of your dreams.  For more information about the home buying process click here and leave your contact information.  Click here to search for homes in your area.

We are Leroy & Theresa Miller with The M & M Team Realty. We are Residential Realtors working with clients to purchase, sell or lease. We specialize in clients who need to sell their residence due to life changing events (for example divorce). We understand the urgency and sensitivity.

A good referral for us is anyone going through a life changing event and need to downgrade, upgrade or relocate.

Our tagline is “Helping people make dreams come true.”

Theresa A. Miller, Broker/Ownerpexels-photo-94825.jpeg

Direct Line: 310-713-8459

Click to contact me by Email

The M & M Team Realty

Selling Your Home During the Holidays

Residential Sellers,

If you are looking to sell during this time of year here are a couple of things that will help you get the buyers to your home during the holiday season and help you get the highest value for your home.

  1. Price your home to sell don’t overprice – The market will tell you if your home is overpriced. If within the first two weeks you have no appointments or inquiries then the public is saying your home is priced too high. An overpriced home will not sell and the peak market time will quickly pass and you will be left with no interested buyers.
  2. Home Staging – inside and outside – You may only have one chance to make a great first Impression. First impression is everything, buyers start their search online. Usually the first picture displayed online is the picture of the outside of your home. From this initial picture buyers will determine whether or not to request an appointment for showing. Be sure to cut and water the grass, trim the hedges and remove all debris. On the inside, depersonalize your home as much as possible. One of the key aspects of home staging is taking away these personal accents (portraits and family pictures) making your home clean, neutral, and full of possibility for potential buyers. Remove all clutter, work with your Realtor to hire a professional stager if necessary.
  3. Make repairs as needed to improve the home – Often small repairs can make a big difference in getting an offer, multiple offers or no offers in the first couple of weeks. Basic maintenance and cleaning goes a long way in a home staging. Taking the time to ensure that every room is spotless and well-polished will help make the property more attractive to visitors.
  4. Make your home available for showing by:
  • Having a Lockbox on the home
  • Having a for-sale sign on property
  • Having flexible appointment times – refrain from having extreme limiting hours (i.e. Wednesdays and Thursdays only from 3pm to 5pm)
  1. Holiday Decoration – Keep it simple, don’t display your choice of religious decorations, your choice may not be the buyer’s choice and they may be offended and not view your home or make an offer.

We can help you with all of the above,  click here for your free home value report and lets set an appointment to get started.

We are Leroy & Theresa Miller with The M & M Team Realty. We are Residential Realtors working with clients to purchase, sell or lease. We specialize in clients who need to sell their residence due to life changing events (for example divorce). We understand the urgency and sensitivity.

A good referral for us is anyone going through a life changing event and need to downgrade, upgrade or relocate.

Our tagline is “Helping people make dreams come true.”

Theresa Miller, Broker/Owner

The M & M Team Realty

email: themmteamrealty@ca.rr.com