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Lease the home, and re-evaluate in a year. If the market prices start jumping, the home becomes even a better bargain. If prices fall, you can just walk away. It is kind of a win-win situation for you.
The purchase price is what Home Partners pays for it, plus closing, plus 5% appreciation. Home Partners generally purchases the homes under market value so as long as the home appreciates as expected it's a fair deal, but if not, then we have no obligation to buy and can just get purchase another house.
I just wanted to get some more info on the HomePartners program from you
So they will buy the house for 256K and if you choose to buy it after one year, your price is 278K?
I was under the impression that each year you wait to buy, the price goes higher another 5%?
After year 1 : 278K
After year 2 : 291.9K
After year 3 : 306.5K
After year 4 : 321.8K
After year 5 : 337.9K
Or did I misunderstand the program?
And if you choose to purchase, do you use third party financing or do they require you to finance through Home Partners? (I'm asking this because I would wonder what happens if there is an appraisal done and it's less than HomePartner's scheduled appreciation and sale price).
I will be honest - If you do not have $$$ saved for a downpayment now and a 6 month emergency fund along with some funds to furnish/fix on a home purchase, then I wouldn't consider it. You need to focus on paying down existing debts and saving money to position yourselves better.
I just wanted to get some more info on the HomePartners program from you
So they will buy the house for 256K and if you choose to buy it after one year, your price is 278K?
I was under the impression that each year you wait to buy, the price goes higher another 5%?
After year 1 : 278K
After year 2 : 291.9K
After year 3 : 306.5K
After year 4 : 321.8K
After year 5 : 337.9K
Or did I misunderstand the program?
And if you choose to purchase, do you use third party financing or do they require you to finance through Home Partners? (I'm asking this because I would wonder what happens if there is an appraisal done and it's less than HomePartner's scheduled appreciation and sale price).
Thanks!
Tamlyn,
Home Partners will determine the market value of the home and then try to get a slight discount since they will be paying cash. Your purchase price for the first year will be HP's purchase price + closing costs + any "make ready" costs the company has to pay to get it ready for rent+5% appreciation. It then appreciates 5% every year until the 5th year.
The closing costs for my home were pretty negligible all considering and if you choose a home in fairly good condition, the make ready costs should be negligible as well. On the house I'm about to lease, the closing costs were just shy of $3K and I can't imagine that the make ready costs would be that significant since the house was pretty much already move-in ready. (the 278K figure was the maximum they estimated I would have to pay. The actual price will probably end up being significantly lower).
If you exercise your option to buy, you have to secure your own financing. They are not a mortgage lender. If the house doesn't appraise for the agreed upon Year 1 price then you have to pay the amount over the appraisal in order to close. If you don't want to pay more than the house appraises for, you are relieved of your obligations to continue leasing and can find another home to lease or purchase.
I think the Home Partners program is a fair one. They are taking a big risk buying a house and then leasing it out. If the market crashes, then they are the ones potentially stuck with a underwater house. You as a potential buyer are able to lock in a house at a certain price while you are getting financing together or just trying to figure out whether you like a particular neighborhood or not. This is a big perk in markets where houses are appreciating rapidly. Yes you have to pay for things like repairs and closing, but you would have had to do that anyway if you had bought it outright.
The good thing is that since Home Partners pays cash they are able to get the houses at slightly less than market value. You can also rest assured that they WILL NOT overpay for a home. They are stuck with it and they want to be sure that they can sell it if you don't exercise your option. They are also sticklers about repairs, so you will also be sure that you are getting a structurally sound house. They have been pit bulls during the negotiation process. They only purchase homes in neighborhoods that are likely to appreciate, so I'm thinking that the appraisal won't be an issue for most.
I would consider what happens if the movie studio cuts back? In NC, they have had a studio in Wilmington for about 30 years. It closed for a while about 20 years ago, then they started filming shows and movies there again after a couple of years and in increase in the incentives. NC has ranked 2nd or 3rd behind California many years in productions. However, a new legislature was voted in recently and they severely cut back the tax credits for productions and at the same time, Georgia raised theirs. Now productions are moving there. But it could easily happen in GA as well.
I would consider what happens if the movie studio cuts back? In NC, they have had a studio in Wilmington for about 30 years. It closed for a while about 20 years ago, then they started filming shows and movies there again after a couple of years and in increase in the incentives. NC has ranked 2nd or 3rd behind California many years in productions. However, a new legislature was voted in recently and they severely cut back the tax credits for productions and at the same time, Georgia raised theirs. Now productions are moving there. But it could easily happen in GA as well.
I think for our purposes we will be safe. The movie studio has just completed building and there's plans to expand. GA is fully committed to building the movie industry in the state at this point so in all likelihood that will not change unless something drastic happens. So I think we will be good housing wise for the next 20 years or so at least.
GA is definitely enjoying the benefits of the film industry moving here with all of the jobs, tax revenue, etc. so I can't imagine that they would not continue to support it.
It's really a shame what happened in NC and the film industry there.
Don't! We did this with our last house and lost everything. We knew, like you do, it was the nicest house in the neighborhood, but thought it would be our forever home. Things happened and we moved. We lost $70,000.
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