When the real estate market takes a tumble, it isn’t always possible to get the deal you want when you sell your home. You don’t want to take a loss on the property, but you find that buyers can’t qualify for financing at the current price or that the house will not appraise for the listing price. One alternative to an outright sale is a lease/purchase. You and the buyer agree to a sale at some time in the future, usually one to three years in the future, at a set price. In the meantime, the buyer agrees to lease the property from you and you agree to hold it off the market. Try to negotiate a deal that favors you in the event the buyer defaults on the deal.
Instructions
1. Work with a real estate professional to negotiate your lease/purchase deal. In most states, this means you will work with a good real estate lawyer or a licensed Realtor.
2. In a slow market, a lease/purchase agreement may put you in a stronger position to get full asking price. Both you and the buyer are expecting that things will turn around before close of escrow.
3. Read the terms of the buyer’s offer very carefully. Understand all the language in the offer. Distinguish between “escrow money,” which the buyer may get back if the deal doesn’t close and "option funds," which are not usually refundable. As the seller, you may be in a better position if the buyer puts more money into the option and less into escrow.
4. Insist on an inspection at the beginning of the lease period and decline an inspection immediately prior to close of escrow. You will fix everything in the house before your buyers move in. You don’t want to be required to fix the wear and tear they put on the place during the lease period.
5. Evaluate your home’s fittings before you say “yes” to a home warranty plan. If your appliances, air conditioner and water heater are older, you might find it less expensive to invest in a warranty plan that will fix or replace anything that goes out. If your things are new, however, that warranty may not pay for itself. After living in your home for two years, let your buyer purchase a home warranty plan at close of escrow.
Tags: close escrow, lease purchase, real estate, warranty plan, home warranty, home warranty plan, lease period
