I received a call from a motivated home owner who has a house in NC. They have been trying to sell for five years and had it listed with two different real estate agents. They had it under contract at one time and the buyer backed out. They've had the price dropped from 190k to 170k. They say they just want out from under the mortgage payment which is 909.00 per month. It's 4 beds, 2 baths and 1900 sqft. The house is still listed but, is not selling. I'd like to get the house on terms just not sure what to offer. Anybody have any ideas?
Yeah, this is a great candidate for lease option or a wraparound mortgage. If you do a wrap you should work with a mortgage originator or title company, they'll help you get all the right docs in order.
Sounds like a great lead!
If its a house that nobody wants evidenced by no one buying it in 5 years you have to question if you want that to become your problem. Let us say you could successfully lease option it, that makes you responsible to make monthly lease payments. You would need to find good renters that would stick to a new lease if you could lease it and make sure that they would and could make the lease payments to you so that you could then in turn make your lease payments to the owners. Talk to local real estate agents and see if you can get a feel for what can or needs to be done to make the house more marketable. You will need a good exit strategy, one you are sure will work. If it was me I would stay away from a house that just won't sell. Check out what the comps are in the area for that house.
Its easy to get into a bad deal and hard to get out of it without hurting yourself financially so whatever you decide you have to make sure it does make good sense. Often times its easy to get taken in especially if you listen to real estate gurus that convince you of all the great deals they made and are making through lease options but the reality is that you still need a good property that people want to have and live in and the fact that is has not sold in 5 years tells me so stay away . There are many deals to be made out there without adding that no one likes or wants that house.
Just make sure it is a good "buy". There is a "reason" the house isn't selling. Figure out the reason and than MAKE sure you STILL want it! If so the above suggestions are great ideas. The last thing you want to do is have someone else's problem become your problem!
Thank you all for the quick response. They have been renting the house, not sure as to why they don't want to continue. The house sits on 2 acres of land and is surrounded by woods and there is a subdivision about 15 minutes away and the houses in the area are selling for approximately 100 sqft. Lease option sounds like a good plan
Oh I forgot to mention that the house has a VA loan and the owner is a bit leery creative financing. I just did some quick research on lease options still not sure how they work. Can anybody share their experiences and enlighten me on how the process works ?
I coach lease options, pm me
The fact that the house sits on 2 acres puts it outside of the mainstream real estate market such as you would find in a heavy populated residential area or closer to a down town where you would find allot of people interested in the house vs seeking those that particularly would want more land around them and be far away from others.
If you can lease option this house you could then probably also lease option other houses where you could find allot more people interested. Let us say you did find one tenant and they did pay you the lease payment on time what about getting the next tenant in there? How sure do you feel you could easily find another tenant. You would ideally want a tenant that would want to purchase the house eventually, someone that really loves the place.
Lease option: You lease the house with the option to buy it making sure you have the right to sublease it to someone else who truly does want to buy it and will be working to save up their money, clear up their credit but somehow serious about buying it eventually. When that tenant is then able to buy the house they pay you for it and you pay the current owners. You would want someone who can show you that it will not be that long before they will be able to and truly do desire to buy the property so you are not stuck in your own lease long term. It is possible to get control of the house through a lease option but you leave yourself at risk of your tenant defaulting on you leaving you stuck with the payments. Ask yourself if you are truly able to make the payments should your tenant default.
Honestly you only have a short time to work with a lease option because the current owners obviously want to get out of the property completely. How long will they lease to you? How confident are you that you will be able to find a tenant that will lease it from you and be able to buy it outright or get the finance they need to buy it from you?
Keep in mind that there are inherent risks with lease options that could eventually make your credit take a bad hit or cause you to lose money.
You might try a (Subject to) existing financing which basically means the current financing will stay but you take over the responsibility to keep up the payments and you can affect the credit of the current owners.
You obviously do not have experience in doing these kinds of deals and are not aware of the many ways things can go wrong with them. How strong are you currently financially. If you are not currently financially strong stay away from making these kind of deals and try your first lease option with a house that is far less expensive. Remember the current owners want out of their financial situation so try to make sure you have a good and solid solution for them otherwise you will both have problems and since you do not currently have any problems of your own with that house why risk it?
There is plenty on this site on lease options just take the time and make the effort to educate yourself about it. You will not make a good impression if you get in a situation where you will have to explain to the current owners all about lease options and what to expect out of it if you yourself are not completely confident about it. As you said they are already concerned about creative financing or creative ways of getting out of their current situation. You might even ask a local real estate agent to explain lease options to you. Just admit you are not ready to use lease options as a tool to get control of property until you are well seasoned in the use of lease options or at least your understanding of them is thorough and you know for yourself what you are getting yourself into.
Why would you want to lease opt?....There are several reasons to a lease opt...The main one is you can purchase the property at today's price if your assuming the value is going up...
Lease opts consist of three agreements... a lease, and option to purchase and a purchase agreement.
In the lease your going to want to be able to sublet
In the option your going to want some or all of the rent to apply to the purchase when or if you exercise the option to purchase.
and in the purchase contract you going to want the best deal you can get
Why not do a Sub2? you get the deed... you can rent it... sell it or live in it.
Read my blog on how to do a Sub2 which protects the seller and buyer
Great Bill thank you for the input on Sub2. There is always something to learn.
Thank you everyone for the input. I looked at lease option and sub 2. I am in talks with the homeowner and will keep you posted.
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