Any advice for lease/purchase or rental listing? (Duluth: hardwood floors, for sale)

[Doctor_T]

Hi everyone,

We've been trying to sell our house in Duluth for the past 8 months with no luck. Quite a few showings, but no offers. We live in a huge subdivision (maybe 1000 homes?) with A LOT of inventory - both new and used. The house is beautiful and we are at the low-end of the price range for the neighborhood. We've already lowered the asking price several times. We're getting very frustrated at the prospect of "giving" the house away (I know - join the club), so we're thinking about doing a lease/purchase or rental - since we'll likely be paying two mortgages for a while - UGH. Also, if we can ride out the real estate storm for a year or two, maybe prices will rebound a bit - who knows?

Anyway, I'm looking for advice on marketing/listing a house for rent or as a lease/purchase. The house is worth around $700K, so I think we could position it as a corporate executive relo, or an upscale rental. Any ideas of where to start and where to "list"? Is there a definitive or well-known website that handles lease/option and upscale rental properties? I just don't know where to start! Thanks in advance for your ideas!

[Twinkletoes]

I think your real estate agent can add "lease/purchase option" or something similar to the listing. That way, you could still offer it for sale until you get a renter. That would really appeal to an executive who is here for a two-year contract, or something along those lines.

Someone in my neighborhood did that and they had a renter 3 days after putting up the for sale sign. Good luck!

[spacelord75]

Wow - reading your post brought back some very recent, painful memories. We were on the market for exactly one year (plus 2 weeks) and also marketing our home as lease-purchase. Granted, ours was a townhouse going for $250-270k, but I will relate our experiences anyways. We were close on 3 such deals and in each case, the potential buyer/lessor flaked out. In one case, the guy (he was actually a loan officer...probably unemployed now) had such bad credit when we requested a "pre-approval" to show it was at least possible for him to qualify within the next year, that it killed the deal. Candidate number two actually wrote up a contract, which we countered, and then we never heard a word from them....ever. Candidate three did not even get to the contract phase and basically disappeared.

As for renting, it could be tough. Executive rentals are not overly prevalent and, just like the house selling market, the house renting market is uber-competitive. Just look at how many new entries pop up on craigslist on any given day. The good thing about having such a high priced property is that the renters are LIKELY to be fairly responsible and probably won't cause more damage than they pay in rent (not kidding...this can happen - think hardwood floors and water damage), BUT the chances of covering off your mortgage is slim to none.

Not trying to be Debbie Downer here, but this market is horrible. If you believe some people, we could be sitting at 1998 prices in the year 2012. Also, think about how many people are doing the same thing - ie, renting "till things pass" - and how many additional homes will be on the market when they all think things have passed (or their ARMs are set for reset) and they flood the market. The problem with our market is not going away anytime soon - the big problem is, and you will see this if you do market research for setting a rental price - the P/E ratio for real estate is out of whack. In other words, the price of homes (ie, mortgage) greatly exceeds the earnings (rental income potential) because everyone and their brother was able to get a loan for whatever they wanted and it hyper-inflated prices. Normal people cannot afford homes anymore, and prices won't stop coming down until they can.

I feel for you - I lived with double mortgages from June 1 of 2007 until last month. It impacted every facet of my life, but it was also a strong character builder in terms of remembering what it was like to not have tons of disposable income. Just be wise and, if it were me, I would cut my loses and go for the lowest possible price I could stomach. The worst thing that can happen (which happened twice to me) is to miss your window and have foreclosures pop up under you - you absolutely cannot compete with them and it will just be a waiting game for them to be picked up, which could take months.

Good luck.

[Doctor_T]

Thanks for the replies, I really appreciate it!

We currently have a realtor, and we have the lease/purchase option as part of the listing - so I guess we have that covered.

As far as covering the mortgage, that would be nice, but at this point I would take any rent amount that was reasonable - even if the mortgage isn't covered. Any port in a storm, you know?

My big question is, does anyone know of any resources that target potential renters or people looking for a lease/option? Is there one particular website (like a Craigslist, or a Realtor.com) where people advertise properties that are available for rent or lease?

Thanks again for any responses!

[rachel123]

Hey, good post. Well, I'm actually going through this situation now with a lease/purchase and this is NOT good for a buyer. Maybe the market where you are at is different than California but this did not work for us.
You see when we didn't qualify for a loan, we opted for the lease option, problem is, its a declining market! We were not educated on this. Nor were we told buy the realtor or seller (obviously) of the declining market. We were going to be first time buyers. Not anymore. They locked in a price, unbeknownst to us in the contract and home prices started dropping like crazy. Now any money that we saved during our lease/rental time will hardly make a dent on our down payment. Seller is not willing to come down in price, meaning that we would have to come up with the difference that the bank would not pay on the loan. OUCH! Not possible. Nor would we want to make that possible. Who wants to pay more??? Making it virtually impossible for us to qualify for a loan on the previous house value. Nor would there be equity if we pay more than the value of the house.

Each month we were paying toward our mortage as the agreed option amount, which was conveniently non refundable to us. Seller keeps all. Including down payment. Maybe would have worked several years ago but this market is all over the place. Totally unpredictable.

If you do this, only do an option agreement for the lease. Dont lock in the price of the house. Do not do the purchase agreement at the same time. Dont lock in the house value or atleast warn your buyer of this so they can make an educated discision and decide to back out. In my opinion, with all the economical problems and interest rates on the rise, house prices going down, an election coming up... to many variables making it not beneficial potentially for either buyer or seller. Or make clauses in the contract that protect both parties. Dont be greedy. Possible 50% back to buyer if something goes wrong and option for buyer to get out of the contract should the numbers continue to work out of favor of the buyer. Something...