LEASE PURCHASE DETAILS



LEASE PURCHASE DETAILS

| |ADVANTAGES |DISADVANTAGES |

|SELLER |Immediate and monthly cash flow |Wait for Purchase Price |

| |Put off capital gains |Possible Tenant damage to house. |

| |Tenant may default and you get house back. # |Tenant may default and you get house back. |

| |In improving market, more money for house. * |In declining market, less money for house. * |

| |Quick closing. | |

| |Less closing costs until real purchase. | |

| | | |

|TENANT/BUYER |House of dreams without a bank loan. |Lose house if can’t get loan. |

| |Immediate possession with bad credit. |Must have money for big down payment up front. |

| |Renting, but building equity. + |Just renting, no equity. + |

| |Control a valuable asset with very little money. |Less privacy and control. |

TERMS:

The terms can be set up in innumerable ways, whatever meets the needs of both the Seller and Tenant/Buyer.

Terms in favor of Seller:

(These are my preferences. Once again, it is all negotiable – whatever all parties agree on.)

Pre-Screen Tenant/Buyer

Know what it will take for Tenant/Buyer to get a loan (clear credit issues, pay off loans to lower DTI, get more income, etc.), and that it is possible for them at the end of the agreed on term.

Length

Short term, less than 1 year.

Down Payment

Big down payment (no less than 3 ½ %) from Tenant/Buyer

Down Payment is Non-Refundable, just like your down payment on your mortgage. But it does get credited toward Purchase Price at closing. If Tenant/Buyer defaults that is not all bad; you get another big non-refundable down payment and start over with new Buyer. #

Purchase Price

Purchase Price to be determined when Tenant/Buyer is ready to buy; market value at that time. (You are in an improving market right now.)*

Monthly Payments

None, or very little, of monthly rent goes toward Purchase Price. +

Deed

Transfer deed only at closing. Control property until you can cash out.

Closing

When Tenant/Buyer can get loan. Use a title company or attorney. (Usually the mortgage broker/banker has their own company they use.) Transfer title then. Customary closing costs for both Seller and Tenant/Buyer.

Maintenance, Insurance and Taxes

Seller is responsible for home owners insurance and property taxes (to make sure these critical items are cared for). You can allow or not allow changes you mentioned earlier, like painting.

Tenant/Buyer is responsible for usual home maintenance and renter’s insurance for contents.

You can’t just go in and check on house, unless both parties agreed on that from the beginning.

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