lease with and option to purchase
In February I listed a home with the Stephens family and they had no choice but to sell for more than what was owed on their home or face the daunting task of a Short Sale. They didn’t want to do that and neither did I. After a few open houses and very little traffic the thoughts and talks of offering a lease or lease with an option to purchase came to a reality after 3 months of no offers. So we decided to go the free marketing route with the time tested Craigslist.
I had ads, the homeowner had ads, they were all over the Atlanta area and Athens section of Craigslist. After almost immediate phone calls and showings a family who was already trying this at another home, decided to look at my listing here. They were familiar with the idea of a Lease Purchase Option. This just means the prospects will be a tenant and then later on become a buyer. It’s just that easy!
We didn’t make terms that were unreasonable. The homeowner asked for a small down payment and a modest monthly rent for this 4 Bed 2 bath house that was basically a deal the buyer could not refuse. $2000 down for $850 per month on a 12 year lease with an option to close on a purchase anytime before that. If the buyer fixes his minor credit issues then he may exercise the option early, if not, maybe save up a bit more for a bigger down payment. You see, the lenders will have a tough time with the down payment or earnest money, or even a monthly credit going towards the purchase. We have made it easy, so that the buyer can choose whatever financing method they would like, be it USDA or VA with no money down, or maybe they do FHA and would still have to come up with 3.5% at the time of closing. There is no way around that. The $2000 is an option to buy in the future. You can charge a lease deposit as well, but that’s not our goal so the owner decided against that.
Now you might ask why would a Realtor do this? Well, I am helping the current owners move out and get a bigger home, so why not reduce my commission on this side and then help them buy and get paid later. It all works out for everyone in the end, and the Stephens family gets more money out of leasing then selling. We could possibly have created a larger option fee, and maybe created a note with that, if buyer didn’t have enough, but why not KISS. Keep it Simple, Stupid! This was the acronym that an, Kelly Johnson of Lockheed came up with long ago. The KISS principle states that most systems work best if they are kept simple rather than made complex; therefore simplicity should be a key goal and unnecessary complexity should be avoided. (Thank you Wikipedia)
There will be a few things that I follow up on to make sure the process is going smoothly, but I am confident in the buyer and the situation as a whole. People are usually more committed to things when they are happy and think they are winning in the situation. All these parties are happy.
