Lease to option to purchase?

Question

When considering a potential lease to own agreement (probably for two years) until this buyer can qualify for a loan to purchase, who pays the utilities? i.e.--does the potential buyer only pay what the present mortgage is from the seller-or does the seller estimate what the utilities are and include in the rent-----or should the agreement indicate the potential buyer needs to put the utitilies in "their" name? Want all the bases covered in this potential route to take since my son has TWO mortgages-one in Atlanta and his home here. Thank you for any feedback.

Follow-up-Teran-Rea- The home here was to close one week b/4 his home in Atlanta. The house fell through 1/2 hour b/4 closing here. They had already left their apartment in Atlanta and had to pay 4 months to get out of it and $12,000 invested in the new home------they HAD to go through with it there. Bottom line- a nightmare. The real estate agent here would handle all the paperwork if my son should decide to go this route---( I have NOT mentioned it to him yet). They "buyer" wants to purchase it in 18 months or less. Family is an acquaintance of mine. I basically hope my son can hold off a little longer- it is difficult to say the least.

Answer 1

All things are negotiable. Here's how I would do it to benefit everyone involved:

1. Create two seperate contracts, one a standard lease agreement and the other an assignable purchase option agreement.

2. In the lease, have the tennant pay for all utilities and have them in his/her name.

3. Create an assiganble purchase option contract, so that the tennant (now called Optionee) can purchase the property within a two year period of a stated price. Now, depending on the rent of the first contract, I would modify the price here. Also, depending on the rent on the first contract, I would modify the non-refunable option fee. You want to keep this contract as an assignable contract in order to allow the tennant to assign it to another person (like his brother) if he is unable to purchase the property because his credit is still bad or whatever.

It's also important to keep these as two seperate contracts because if the tennant fails to pay, you can simply evict him. In a lease purchase option contract, depending on the terms, you will need to do more than just evict him because the tennant's interest in the property is more than a regualr tenant. Remember, there is a reason why the banks won't finance this guy. Are you willing to take the risk of doing so when the banks won't?

As Teran stated, stay away from contracts for deed because then you have to jump through hoops to get rid of this person and avoid your lender at the same time.

Regards

Answer 2

Utilities can be handled in both ways--the owner can figure a ball-park figure and then put that in the rent, or the renter can change the utilities into his name and pay them himself. The most important thing is make sure the rent covers the monthly mortgage payment. Also, write in the agreement that the renter has to exercise the option to buy no later than month 11 of a one-year lease agreement. Then, the renter can apply whatever you have worked out to be paid toward the purchase (this is essentially a down payment). So, let's say your mortgage is $600. Charge the renter $1, 000/month with $200/month going toward the purchase (and the other $200 would be the utilities).
Make sure you write in the agreement that during the course of the year, the owner can continue to advertise and show the house. The renter has to agree to that since he has not committed to buying (yet).

Answer 3

There is no standard answer. The parties can do anything they both agree to.

Normally the utilities are assumed to be the responsibility of the occupant.

The monthly amount does not necessarily cover the owner's mortgage, the two are not connected. In other words, the buyer only cares what its worth to him, not what it costs the seller. Would you want to rent it for nothing if there were no mortgage?

Don't go for two years unless you're getting a really good price, a really good nonrefundable deposit, and the rent more than covers the mortgage payment. If the market crashes in two years, the buyer will walk away. If it goes through the roof, you're foregoing the seller's market to come. Instead of two years, make it one, and make it renewable, but the "deposit" is a fee for keeping the option open, so they will have to pay it again.

Answer 4

Don't sell that house on a Lease Option of a Lease Purchase. You said in a previous question that you didn't want to rent it out because you couldn't deal with it if someone messed up that "clean house". What do you think will happen in two years if this person can't qualify then?

Hire a property management company. Lease the home to someone with good credit and rental history. No roommates, not pets, no smoking inside the house.

When there's enough equity to sell it, sell it then, to someone who does qualify.

PS - Why did your son buy another house without CLOSING on this one first?

Answer 5

If you wish to shop for the estate with a rent alternative, now not a rent acquire, on this lending local weather, the banks are not sure. To preserve your self as a Lease Option Buyer: *Have all reinspected (subtracted from) to the longer term pastime cost. *Have the pastime cost tied to a brand new appraisal someday. You do not wish to shop for a depreciating asset. *Have a memorandum of alternative to war of words towards the estate to avoid the landlord from re-mortgaging the estate. *Open an escrow with a Sale and Purchase Agreement stuffed out besides for acquire cost and signatures - date *Have a legal professional appear it over for feasible complications akin to what if the vendor dies, will get sued, does now not pay the PITI, and many others.) Everything is negotiable in a rent alternative. If you're paying the PITI as a rent alternative customer to persuade the Seller to promote to you, attempt to get one hundred% hire carried out to a discount of income cost with the the income cost tied to a brand new appraisal. DO NOT lock within the income cost in these days, particularly in case your marketplace is presently depreciating in significance.

Answer 6

Renter pays utilities, in their name!