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  1. #1
    pmsst20 is offline Junior Member
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    Mortgage/Purchase Lease Option

    What is the name of your state? GA

    Right now, my wife and I are looking to sell our home and we have a potential buyer but he wants to lease purchase with option to buy. I'm new to this so any FYI would be helpful.

    This potential buyer wants to rent this house for six months then buy it outright. The problem I can foresee is that I still have a mortgage on this house. Do mortgage companies (my's Chase Mortgage) allow this?

    The reason the buyer wants six months then buy it is because he's going thru a divorce and he said that if he buys my house now (which he wants to) he would be forced to sell it again in his divorce settlement (which he doesn't want to).

    What are my options on this?

    Thanks for all your help!
  2. #2
    LindaP777 is offline Senior Member
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    Quote Originally Posted by pmsst20 View Post
    What is the name of your state? GA

    Right now, my wife and I are looking to sell our home and we have a potential buyer but he wants to lease purchase with option to buy. I'm new to this so any FYI would be helpful.

    This potential buyer wants to rent this house for six months then buy it outright. The problem I can foresee is that I still have a mortgage on this house. Do mortgage companies (my's Chase Mortgage) allow this?

    The reason the buyer wants six months then buy it is because he's going thru a divorce and he said that if he buys my house now (which he wants to) he would be forced to sell it again in his divorce settlement (which he doesn't want to).

    What are my options on this?

    Thanks for all your help!
    Lease with options are very doable! I've done several myself! (I'd be happy to give you a copy if you need one.) Make sure you get a large (nonrefundable) down-payment and rent that will copy your payment (PITI) and a little extra to boot. If he fails to preform, you get the house back and his down-payment. I also charge a security deposit that will be applied towards the purchase, but if the purchase doesn't go through, it's applied toward damages at the end of the lease.
    And as long as you continue to make the mortage payments on your house, your bank won't care if you rent it, or sell it lease with option.
    Make sure you check references and employment.
    You may need to get additional insurance for your house, as it will become a "rental property".

    Good Luck!
    Last edited by LindaP777; 10-22-2006 at 11:20 PM.
  3. #3
    pmsst20 is offline Junior Member
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    Will my mortgage company allow it? because the house I'm living in now is the one I'm selling for rent-to-own. Yes please will you send me a copy as well.

    Any good website or book I can read about on this? thanks for the help!
  4. #4
    pmsst20 is offline Junior Member
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    I see now - I contacted my mortgage company

    You're right - they don't care as long they get their payment.

    Thanks for the clarification
  5. #5
    Bigfoot is offline Member
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    Mortgage/Purchase Lease

    The downside is if the renter/buyer has a change of heart after you've moved, or is financially unable to purchase at the end of 6 months.
  6. #6
    nextwife is offline Senior Member
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    Quote Originally Posted by Bigfoot View Post
    The downside is if the renter/buyer has a change of heart after you've moved, or is financially unable to purchase at the end of 6 months.
    I agree. For the seller, this arrangment is usually a bad idea. The buyer has NO obligation to complete the purchase.
  7. #7
    LindaP777 is offline Senior Member
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    If you get a large enough nonrefundable down-payment ($2000 - $5000 depending on the cost of the house) the buyer seldom walks away from the sale.
  8. #8
    danno6925 is offline Member
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    I'm siding with Linda on this. Make the non-refundable deposit applicable to the sale, and make it large enough to really sting if he backs out. If he's renting for 6 months, make the pmt large enough to cover the mortgage for that period plus a few hundred (500?) to cover any damages he might cause during that time.
  9. #9
    nextwife is offline Senior Member
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    If a renter has 5K for a deposit, why not just have them go ahead and BUY the place then? With low DP plans,what is the seller benefit of waiting that long to complete the sale? If they then have to put it on the market, start over get a buyer/rent to buy buyer, the odds of missing the two year deadline for taxes treatment as a personl residence looms greater. And if the tenant trashes the places, they then get stuck fixing it up. Please explain why this is better for a seller than selling it outright?
  10. #10
    LindaP777 is offline Senior Member
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    Quote Originally Posted by nextwife View Post
    If a renter has 5K for a deposit, why not just have them go ahead and BUY the place then?
    People prefer/need lease with options for several reasons. In this case, the OP said the buyer/tenant needs to wait until his divorce is final before purchasing. Other reasons include bad credit & they want time to clean things up (this usually requires a 2 years LWO and a committed tenant, but I have seen it work). Another tenant of mine loved my house, but wanted to sell their current (smaller) house - so we did a 6 month lease with option (BTW, that tenant was a lawyer).

    I like to do lease with options because I get my asking price, usually right as market value with no RE commissions being paid, so I put another 6% more in my pocket doing a LWO. During the LWO period, I apply $200 a month for every month the rent is paid on time towards the purchase price as a "Landlord's Consideration" - so it help them a little with their down payment. BTW - security deposit, LWO down payment and the $200 per month "LL consideration" is all given back to them at closing.

    Also, with a LWO, there are no inspections or contingencies. During the LWO period, they pay for all necessary maintenance (most of my houses are newer (4 or 5 years) or completely rehabbed and I've never had any big issues come up). So nothing comes out of my pocket. The best deal I had (keep in mind, this is Ohio), I made $500 profit per month on the rent and when it sold, I made over $50k profit. One part of me hoped they continued to rent, because it was cash flowing really well! Did a 1031 on the sale of that house.
    Last edited by LindaP777; 10-24-2006 at 08:57 AM.

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