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I think I disagree here. Lease options are more beneficial to sellers in decling markets because it makes the option less valuable.... To be honest I don't see why the buyer would want to do one in this case. I also think most of the time the price is laid out in the begining, and the buyer can take it or leave it when their tenancy ends(and either purchase or lose the option fee). In my area the option fee is paid upfront.
No we agree, but the OP is saying that the seller would need to agree to a "price to be determined 90 days prior to close." Why would a seller do that in a declining market?
It works the same way here, the option fee is paid upfront and non-refundable and then an additional increase occurs in rent which is credited towards the down payment if the option is executed.
No we agree, but the OP is saying that the seller would need to agree to a "price to be determined 90 days prior to close." Why would a seller do that in a declining market?
The OP claims it was the attorney that recommended it. Attorneys aren't arbiters of fair.
Wouldn't you take out a lease option in a declining market if you found someone willing to sell it?
The OP claims it was the attorney that recommended it. Attorneys aren't arbiters of fair.
Wouldn't you take out a lease option in a declining market if you found someone willing to sell it?
No, I'd try to sell as quickly as possible and I'd never agree to do a lease option or contract with a price TBD. For that matter, I don't know who would.
The OP claims it was the attorney that recommended it. Attorneys aren't arbiters of fair.
Wouldn't you take out a lease option in a declining market if you found someone willing to sell it?
As a buyer? No way. The house will be worth less than what we agree upon at the time of executing the lease. If the seller refused to come down at a later day, I'd be out my option money and the increased rental payments. That's a bad financial move. Why would I do that?
Attorney's don't buy and sell houses. They can write whatever they want in the offer. Only a dimwit would encourage their seller to take an offer like that.
As a buyer? No way. The house will be worth less than what we agree upon at the time of executing the lease.
I don't know what you mean by executing and the OP established that the price would not be set at the time the LO is established.
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If the seller refused to come down at a later day, I'd be out my option money and the increased rental payments. That's a bad financial move. Why would I do that?
Isn't the option money the increased rental payments? In any case, you wouldn't do it. I have reasons why I would. I assumed they were universal reasons.
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Only a dimwit would encourage their seller to take an offer like that.
No kidding.
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Originally Posted by thisiswater
What if the market improves as most Realtors insist it will?
Then you're going to rent the house while the value goes up. When it's time to exercise the option, if you choose to do so, you've paid rent plus the cost of the option and now you have to pay more for the property than you would have if you had bought it initially.
I don't know what you mean by executing and the OP established that the price would not be set at the time the LO is established.
Isn't the option money the increased rental payments? In any case, you wouldn't do it. I have reasons why I would. I assumed they were universal reasons.
At the time you execute the lease (meaning both parties sign an agree), you execute the option at the same time. The option has the agreed upon purchase price at the time of signing the lease. That's kind of the point. A seller knows that they will get X dollars from the house in 1-2 years when the lease expires and the option is available. Out here we typically have option money AND increased rental payments. I know some places have a much larger option payment, but it seems to work better here locally if there is smaller option money upfront and smaller increases in rent. So we do both.
I wouldn't do a lease option as a buyer in this market in that price range. A $500-$600k home? I couldn't recommend that any buyer engage in a lease option in that price range in my area. It's better to just rent and save that additional option money rather than waste it on a property that is declining in value.
What if the market improves as most Realtors insist it will?
If you think your local market is going to improve dramatically then it makes little sense to not lock in your home price now for the option. Why would you want to pay more for it later?
Of course the market will improve. The only question is when it will improve...2012, 2015, 2020? Improve is also subjective. The market is improving to me if foreclosure notices are dropping. Is the market good, healthy, normal. Nope. Just improving. If local agents are telling you that your market is improving, make sure you know what their perspective is.
Who should have to take a chance that the market will go up or down?
If I were a seller in this market (and I just was) you bet I'd take a rental/lease option from a solid tenant/buyer. Yes, I take my house off the market, but I'd be getting close to double what I could charge in rent. Frankly, I'd like to be getting some income from my house rather than have it sit and go stale. But that's just me.
Having thought about this for a time, I'm never buying again! I've learned that, for us, renting is like hiring someone to do all the stuff we never want to do again while we enjoy the fruits of the ll's labor.
Just another way of looking at things. I felt very differently when we had small children and wanted to stay in one spot for a long time and nest. Now I just want to have fun before I get old.
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