These are some of the most frequently asked questions we receive from potential lease/option candidates. If you have a specific question that is not answered here, be sure to join our mailing list and leave the question in the comment box that is provided.
Q: What is the difference between a “lease with option to buy”, and a “land contract”?
A: A lease with option to purchase and a land contract are similar in some ways, but very different in others. Land contracts are technically not allowable by most banks due to the “due on sale” clause of most mortgage products. From a banks point of view, signing a land contract means the property has been sold. If this is the case, the bank can actually demand payoff of the mortgage or mortgages on the property itself.
A lease with option to buy are two separate documents - a lease for the rental of the property, and an option agreement to purchase the property at some point in the future. Until the option is exercised, the property ownership stays in the name of the seller.
A lease with option to buy is a much more flexible and advantageous agreement for both parties. It accomplishes the same things as a land contract - without the risks for buyer or seller.
Q: Do I have to have good credit to qualify to lease/option one of your homes?
A: We realize that everyone goes through hard times at some point in their lives. Let’s face it, things happen. Divorce, job loss, medical problems, etc. Having bad credit does not necessarily disqualify you from qualifying for one of our lease/option homes. If you have bad credit presently, putting a plan in place to get good credit is the most important first step. The most important factor for us is your personal commitment and desire to own your own home. A written explanation of how your credit got so bad and your plan to get your good credit rating back will help tremendously as far as we’re concerned.
Q: Am I responsible for all repairs to the house during my lease/option agreement?
A: Our biggest concern is that all of our lease/option candidates treat the home as though they own it. However, we realize that all repairs are not your responsibility. We do require our candidates to cover small expenses and repairs - repairs that are generally under $100. These would be things like leaky faucets, dirty carpets, etc. Keep in mind that the house you lease/option will have been rehabbed to excellent condition before you move in.
Q: If you sell the home to at market value, how do you make money?
A: This is a common question but a good one. Because we purchase homes that are bank owned, and usually need some work, we can purchase these homes at a discount. Our “profit” is the difference between the purchase price we pay to the bank, and the market value that we sell the home on lease/option to you. We also get tax advantages during the lease/option period because we own the home during this time period.
Q: Can I purchase the home before the lease or option agreement is up?
A: Absolutely! Remember, the option to buy gives you the right to purchase the home at any time. If you find that you can get a mortgage in 3-4 months and lower your monthly payment by paying a bank directly, then by all means do it. The option period simply gives you some built-in time to get your financial house in order.
Q: What if during my lease/option agreement, someone else wants to buy the home?
A: With the option to buy, you have the right to purchase (or sell) the home to anyone. For example, suppose that you sign an agreement to purchase a home from us in 2 years for $100,000. After one year, your neighbor tells you that he would like to buy the home for $105,000.
In this scenario, you can do one of two things: 1) you can purchase the home from us for $100,000 then sell the home for $105,000 to your neighbor, or 2) you can sell the option to buy agreement to your neighbor for $5000. He will then have the right to buy the home for $100,000, basically achieving the same result as if he bought the home for $105,000. Either way, you walk away with $5000 in profit.
Please let us know any other questions you may have by joining our mailing list and leave your question(s) in the comment box.
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