Lease Option Nicer Homes

7 Replies

A friend of mine and neighbor has sold businesses and moved out of town but is stuck with his personal residence.  It's been on the market for about 4 months and he has already dropped the price 30k due to impatience.

This house is in one of the nicer subdivisions in a great location in my town but i'm not sure how well lease options work on higher end homes?  He is looking for cash so I would have to do a traditional purchase which I would want to then lease option.  I would kick the RE Agent out of the way (listing has expired) and cut his price about 10% and go from there.

Any thoughts or ideas on how to work this deal?  He wants out so i'm not looking to do anything creative, but I have the cash to do a finance deal and go traditional route but I don't want to hold as a rental long term.  House is listed for 399k currently, I would be looking to purchase at 350-360k max.

@Brian Gibbons

 I've heard that some listing agreement have a clause which states that, even after the listing agreement has expired, and the house is sold by some other means, the realtor is entitled to the commission. 

Have you come across that? If so, how can we target expireds to avoid paying a commission? Thanks.

If the agent didn't procure you, there shouldn't be any look-back regarding a commission.  Seems to me, as the owner is a neighbor and friend it would be easy to prove you were not procured by this listing.  I love higher end houses for l/o's by the way, for what @Brian Gibbons mentions plus more.  Please keep us posted @Brian Huber ! Great find!

Originally posted by @Brian Huber :

@Brian Gibbons

 I've heard that some listing agreement have a clause which states that, even after the listing agreement has expired, and the house is sold by some other means, the realtor is entitled to the commission. 

Have you come across that? If so, how can we target expireds to avoid paying a commission? Thanks.

 I think as @Steve Vaughan mentions "procuring cause" is an important issue with listing agreements

Remember that it's the sellers money that needs to be paid to the listing agent even if they fail to sell the house for a period of time after the listing expires if that listing was the reason why you found the property (MLS)

What I do with the seller if we have an existing listing it hasn't expired yet but it's close to expiring, is to ask the seller to contact the broker of record, Bring your listing agreement with them, and have them cancel the listing in writing, specifically saying that if they do rent it or sell it down the road they are owed no money

Another possible solution is to give the agent/broker of record some money to reimburse them for marketing efforts, which include signs and Internet labor.

"The squeaky wheel gets the grease" is appropriate here and it's important that the seller demands that the broker of record release the listing in writing and state specifically in a letter that "no money is owed if they rent or sell down the road."

Originally posted by @Brian Gibbons :

@Lee S.

Want to make $50K?

Buy $315 cash, sell on Lease 2 Own for $365K.  Give new buyer 24 months to get mortgage. Get 5% down.  You own it so no license needed.  Buyer pays all closing costs.

 exactly what I was thinking but my buy and sell numbers vary from yours. I just wanted other opinions before I started doing more due diligence.  I know the neighborhood extremely well since I live there. I look down on this house from my back deck.  I can't do all cash but financing isn't an issue.  

I've actually been telling him to stop being so impatient and stop trying to give the house away, but he wants it gone so he can buy something in the bay area where he moved to.

Realtor had nothing to do with this deal, this is a good friend of mine and I feel the Realtor deserves nothing since listing has ended and he has made no effort to sell house other than planting his sign in the yard.

My next step is to verify market rents.  What's the difficulty in finding tenant buyers for these type of houses vs lower end homes?

This is what I train my Lease 2 Own Students that are new.

Market Rent Investigation.

Start with Trulia and Zillow

Then go to the largest property management co, walk in and say:

"Uhm, heard you guys are awesome property managers, I have this property, I really dont get market rent, can I talk to a property manager?"

What do you think that receptionist is going to do?  Send you to a great "explainer of market rents"

They will want to sign you up, just ask questions why they are good at what they do.

have a map and a red pen

ask what are market rents for a 3 B, 4B, 5B

what increases rent, 2 baths vs 1 bath

garage

pool

etc

Originally posted by @Brian Gibbons :

This is what I train my Lease 2 Own Students that are new.

Market Rent Investigation.

Start with Trulia and Zillow

Then go to the largest property management co, walk in and say:

"Uhm, heard you guys are awesome property managers, I have this property, I really dont get market rent, can I talk to a property manager?"

What do you think that receptionist is going to do?  Send you to a great "explainer of market rents"

They will want to sign you up, just ask questions why they are good at what they do.

have a map and a red pen

ask what are market rents for a 3 B, 4B, 5B

what increases rent, 2 baths vs 1 bath

garage

pool

etc

 I've already learned a lot from you here on BP, I  talked to my (ex) Realtor immediately and she called in a favor with a big property manager here.  I'll be calling her tomorrow and getting rent information.  I just pulled up zillow, wanted to see what a house recently sold for up the street.  It was a foreclosure, worst house in the neighborhood that was in need of a complete refresh and it sold for 330k.  It's also 500 sqft smaller then house i'm interested in that is in immaculate condition.  Another interesting note, my house is listed as "2 units" on zillow, glad they let me know lol.  

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