Hello, we are thinking of buying a small home in a community where the land is leased. They give you a lease for the entire term of the mortgage and on... Will lenders have a problem with this? Would I more likely need a commercial lender?
The lease fees cover real estate taxes, grounds, snow and trash removal.
Any recommendations?
2007-03-10 08:12:19 · 6 answers · asked by Bluesky 1 in Business & Finance ➔ Renting & Real Estate
I would be extremely cautious about this. Are there any conditions where you can take ownership of the land? What if the landowner defaults on any of the services, for example?
Buying a home is difficult today. Please get an attorney or other professional to help.
2007-03-10 08:15:42 · answer #1 · answered by nora22000 7 · 0⤊ 0⤋
1. Leased land is very common in some places. Hawaii, Much of the United Kingdom. When it is common then the buyers, sellers and lenders all understand and there is little issue.
2. When the areas is mostly freehold (vs leasehold) then the average buyer or seller will not understand the implications. There will be fewer lenders who have competitive programs.
3. The key to buying any real estate is what will happen when you go to sell? Will you achieve a good price? Will the property sell just as quickly as other property for sale in the area? Will the average buyer be interested or do you need to attract a buyer who has a special interest or a special need?
Buying a home (or commercial structure for that matter) that is on leased land does work. It just works differently. I happen to own a few lease hold properties. In one market the lenders prefer leasehold deals and are less likely to lend when there is a freehold involved. Markets can be different and you need to understand how the differences will impact a future sale.
If a whole community is leasehold then there will be some lenders who have products that work. They will tell you what their guidelines are in terms of how long they need the lease to be to make a loan. Note that you need to understand how long of lease will remain when you go to sell so that the next buyer can get a loan that meets the lender's requirements.
2007-03-11 05:55:59 · answer #2 · answered by Anonymous · 0⤊ 0⤋
There are lenders who will lend on this type of deal. There is a lot more to it that you would need to explain though. We in Washington have a lot of "indian leased land" meaning it is on a reservation. We lend on it only if we are allowed to forclosure if the loan becomes deliquent. Some reservations have a policy that does not allow us to do that and so in that case we will not lend on it. Most of the leased land is a renewable 99 yr lease. Make sure you have all the info you need and work with someone who is local and familiar with the area as well as the lenders. Good luck!
2007-03-10 09:14:48 · answer #3 · answered by queenvwr 2 · 0⤊ 0⤋
Guess who wins if you have a problem with the land owner? You can't just walk off in a huff and take your home with you. These arrangements had a purpose for a while, but in the long run, it's not for sure that you'll be the winner. Yes, you may get in for a less costly amount initially, but in the end you don't have an estate that you can fully will to your inheritors.
Unless it's a mobile home....
2007-03-10 11:46:16 · answer #4 · answered by Venita Peyton 6 · 0⤊ 0⤋
I would stay stay out of it....the problem as someone has already mentioned is when trying to re-sell. Not very many people would be wanting to buy a house that sits on leased land. Unless you pay so little that it would beat the price of renting in your area.... Give it a good thought!
2007-03-10 12:28:48 · answer #5 · answered by kalamity 3 · 0⤊ 0⤋
DO NOT BUY IT.
TRYING TO RESELL IT WILL BE VERY DIFFICULT!
2007-03-10 11:26:02 · answer #6 · answered by charlotte q 2 · 0⤊ 0⤋