Welcome back! Are you getting the deals yet? If not, Basic Membership is only $2.99 per month, Silver ($25 pm), Gold ($100 pm) or Diamond ($1,000 pm). The realestate deal alerts and luxury goods deals go straight into YOUR mailbox before anywhere else! Want to be notified the next time we post something? Get the O-GRADY.com RSS feed.
You open the newspaper everyday and see how the price of homes is falling. The American Dream has never been more affordable then right now. You ask yourself; can I take advantage of this unprecedented time, with the small down payment you have, to buy a house of your own. The answer is yes you can.
Today’s market makes it an unbelievable time for buyers or would-be buyers. It does not take a large down payment and a loan to lock in today’s prices. It takes persistence and a flexible seller. Yes there are flexible sellers out there.
How can you buy a house with little money down and no bank qualify?; with a Lease Purchase Option. A Lease Purchase Option is a contract in two parts: The lease and the option.
The lease is a regular rental agreement for a fixed period of time. You agree to pay the seller a set monthly rent for the property. The second part is an option agreement between you and the seller. The option gives you the right but not the obligation to buy a property at a set price within a stated period of time, usually two to three years. For that right you pay the seller an option fee (1 to 3% of sale price). This fee is usually non-refundable, so you want to make sure you want the house.
Here is how it works: Jane has a good job and is tired of paying rent of $1150 per month for her two-bedroom apartment. She wants to own a house and feels now the time is right, but she does not have a large down payment banks’ require. She starts looking in her neighborhood for a home she wants to own. There are many houses for sale and it is not long before she finds several houses she would like to own. She approaches each of the sellers and asks them if they would be willing to sell with a Lease Purchase Option. One of the sellers is willing and she enters into an agreement for a 3 bedroom, one bath house.
She gives the seller a 3% option fee for the right to buy the property in three years for $125,000 ($3,750.00 which can be used towards the down payment when the option is exercised). She also enters into a lease agreement with the seller to pay the seller $1,150 per month for three years. She asks the seller to credit her back $100 per month for three years towards the down payment on the house. In three years when she exercises (exercise is a fancy word for completing the deal) her option to buy the property she will have $7,200 for her down payment. If the property appreciates during the three years she may not have to come up with any more money to buy the property with a loan.
During the three year lease Jane will not have title but will be expected to keep the house up since she will be the owner of the property, items that she would have called the landlord about will be covered by her. The lease agreement should address major repairs or maintenance that may need to be done during the lease agreement.
So with a Lease Purchase Option you can lock in today’s prices, enter into the agreement with a low option fee, get credit towards the down payment from your lease payment and work towards home ownership long before you may have been able to afford for about the same price as renting.
Michael D Smith
Michael Smith has been a licensed architect in California and a real estate entrepreneur for over twenty years. He lives in Salida with his lovely wife, Mona and their four children. He spits his time between Michael D Smith, Architect and JM2 Investment Properties. Jeff, his brother, and he are developing TwoAverageJoes.com to educate other real estate entrepreneurs.
Related posts:
Recent Comments