Are you, like generations before you, looking for the traditional home to retire to? Back in the late 70s and early 80s, buying your first house through any one of numerous lease option to buy homes in was a very popular method for those who were unable to raise the significant down payment required by most lending organizations. Over twenty years later, this practice has surged in popularity once more because of the national housing crisis and credit crunch.
With homes worth over a million dollars lying stagnant on the market, you can easily see why this might just be a viable option for the owners of those properties. Especially since fair market value for leased property is currently around $800 to $1200 a month, about what a mortgage payment would be. By clicking we get more information about the sell home for cash Los Angeles.
The original wording of such purchase agreements back then were murky enough that some lending partners and real estate brokers actually took several cases to court, claiming that the sale was not really a sale because it had begun as a lease. Thankfully, every court agreed that it was indeed a sale, based on good faith laws. That said, today’s version of lease option to buy homes continues on as three separate legal terms, and we will explain each facet to you so that you can understand what an affordable way it is to purchase your first home.
At its heart, the buyer pays the seller what is called option money for the right to purchase the property at a later date. Depending on the seller’s terms, it can be a substantial amount, or a small percentage. Normally in this type of contract, the buyer and seller have previously agreed upon a mutual selling price for the home, but it is also possible for the buyer to agree to pay fair market value for the home at the moment the option is exercised, usually within two years.
It is smart to have legal advice throughout this kind of deal, and it is also wise to lock in the selling price as best you can, so that you are covered should the market take another nosedive at the end of the lease term, and your option goes into effect. Unlike escrow paid in by the buyer in a traditional transaction, the option money is rarely refundable, unless otherwise agreed upon. No one else may bid on the property while you possess the option, but you can change your mind about exercising it, and you can even sell your option to another party if you so choose.
Just like the option process, buyer and seller agree on a purchase price, and an option deposit is secured. You also enter into a property lease contract, in which you take possession of the property for a set term, allowing for part of your lease payment to be taken and accrued as a final down payment on the property for the time the option would be executed, usually within two years.
The negotiated contract will set the lease payment per month, how much of it goes towards accumulating a down payment, as well as any interest the owner of the property wishes to charge. Once everything is agreed to, you can then take possession of the property and move in. In this case, the option deposit is usually not refundable, nor is it considered part of the down payment, unless both parties agree. You can choose to not exercise your option at the end of the term, and it simply becomes a lease at that time. You cannot transfer or sell your option to someone else without the seller’s approval.