Lease with option to buy, who benefits more? (sales, real estate market)

[Encinitas]

At this time, who benefits (short and long term) when it comes to houses for rent with option to buy (rent paid will go towards the purchase of the house) the renters or the home owners?

Will soon be in this position (renters with option to buy). If we decide to buy the house it bill be priced with the fair current value of the house. Is it still negotiable? Who decides the "fair current value of the house?" And how can I find out if it is truly the current fair value? I can't imagine just taking his brokers word for it.

How much time do I have till the prices of houses start to go up again (1 or 2 yrs?)

[Nea1]

Originally Posted by Encinitas

At this time, who benefits (short and long term) when it comes to houses for rent with option to buy (rent paid will go towards the purchase of the house) the renters or the home owners?

Will soon be in this position (renters with option to buy). If we decide to buy the house it bill be priced with the fair current value of the house. Is it still negotiable? Who decides the "fair current value of the house?" And how can I find out if it is truly the current fair value? I can't imagine just taking his brokers word for it.

How much time do I have till the prices of houses start to go up again (1 or 2 yrs?)

Lease with option can be a good thing for both, but yes you need to get an realtors opinion of your own and not just trust his broker, they could inflate the price. Housing prices are freaky. One in my neighborhood, which houses here usually sell for 250-325000 just listed for 364000. I about choked when I saw that. Not worth it.

[CodyW]

Housing prices?

I keep hearing that the market will start to rise again in January. I don't know why people think this - But until we know, think January.

[cmist]

Originally Posted by CodyW

Housing prices?

I keep hearing that the market will start to rise again in January. I don't know why people think this - But until we know, think January.

I sure hope so...

All I keep reading is how many people are moving to AZ, and how many people LOVE it here, but yet I don't know of many houses that seem to be selling...

Are all the newcomers renting?

As far as the lease/purchase option thing goes, usually the seller benefits.

Think of it like this... People that can offer cold hard cash will usually expect the best deal from a seller.

On the opposite end of the spectrum, a buyer that can't get financing from a regular banking institution is in the WORST position. Normal buyers with cash or financing can buy any home at all on the market, but the lease purchase buyer is limited only to those listings that offer special terms. For that concession, buyers will probably pay dearly.

[dolamiti]

Waiting till 09 is bull. The market is already starting to pick up. Arizona has always been the "lead dog" and always will be. We have a beautiful state and the people are wonderful. The best buys right now are in southern chandler (85249) Check out the homes under $350,000. Most of them appraised just 6 months ago for over $430K. Wow! Sure wish I had some extra cash.

[Bummer]

Originally Posted by Encinitas

At this time, who benefits (short and long term) when it comes to houses for rent with option to buy (rent paid will go towards the purchase of the house) the renters or the home owners?

Will soon be in this position (renters with option to buy). If we decide to buy the house it bill be priced with the fair current value of the house. Is it still negotiable? Who decides the "fair current value of the house?" And how can I find out if it is truly the current fair value? I can't imagine just taking his brokers word for it.

How much time do I have till the prices of houses start to go up again (1 or 2 yrs?)

A real "toughee", Encinitas

If I were in your shoes I would only enter a Lease Option Agreement with a Predetermined Selling Price including Down Payment, etc, as well as a Predetermined Date for the purchase transaction. Also, determine exactly what percentage, if any, of your rent payments will be applied towards the purchase.

To leave these points "open" could be a disaster down the road.

Good Luck

[dmiller01]

I really hope the market picks up too since I own investment property, but I really think it will be several years. Everything I read about the real estate market says late 2008/early 2009. If that is the case, you don't want the option to buy since the price is fixed. You'll end up not exercising the option and losing your initial fee for buying the option. If however, you think the market is going up, then buy the option.

It's up to you, but if you want to buy and hold I would just do that instead of buying the option. But if that's the only way you can buy a house (because of your downpayment, credit, etc.) then do it because no matter what, being a homeowner is certainly advantageous to renting regardless of the market!

[wit-nit]

Follow bummers advice.
When you sign a lease with option to buy, the price is usually determined at the signing, not negotiable at the end of the lease.
And you may want a real estate lawyer to set up the conditions for you so you can save problems down the line.

[brownshoe]

When you are looking for a lease-option or lease-purchase home, make sure all the details are in the contract at the beginning. I know of some "sellers" who will want to leave blanks to "fill in later", usually to their own benefit. They'll take your non-refundable option fee (which could be in the thousands!) and walk with it because of some shady contract language. And then you are left without your money, and a house. You definitely want to have your own agent (or hire a real estate attorney) to look over any contract to make sure that you are protected.

We were on the selling side of a lease-purchase deal not too long ago. We wanted to sell the house originally, but the market was not the greatest. And there was a tremendous amount of interest in buyers wanting to do a lease-purchase. We set it up like this: Our buyer had to give us an option fee ($3500) which was clearly stated in the contract as non-refundable; if for whatever reason they were unable to purchase the home at the end of the lease (12 mos.) then that money was non-refundable. The deal was set up with two contracts-one for the purchase and the other for the lease. The purchase contract had everything that would be standard in a "straight" purchase deal-the price of the house, sellers contributions, purpose of their option fee, their agreement to start to securing financing. The lease portion had normal rental terms-rent per month, late fees, length of lease, etc. If they did purchase it, the option fee went towards their closing costs. We did not charge above-market rent, with the additional rent going towards their closing monies. It did not work out; we demanded possession of the house in lieu of an eviction due to nonpayment. They left 6 mos. early, we rec'd half month's rent, and we kept their option fee.

What we considered the benefits of the lease-purchase:
-We were able to collect a higher amount at move-in, that could possibly off-set if anything were to go wrong with the deal
-We had tenants in the home who were hoping to purchase it, therefore they took really good care of the house
-Since we would have had to come out of pocket anyway had we sold the house, we were able to hold onto that money for a little while longer, plus still claim the mortgage interest, prop. taxes, etc. on our taxes

What the buyers considered as benefits:
-They were able to get into a home that they could focus on purchasing in the near future
-The price of the house was set; they could purchase the house a year later at "last years" prices

You may find more homeowners willing to do lease-purchases now. Quite a few have already bought other homes without selling their current one, and can't swing two mortgages for much longer. They may be more willing to work with you on agreeable terms; they just want to be able to get rid of the house someday.

Good luck!

[saltonre]

Originally Posted by Encinitas

At this time, who benefits (short and long term) when it comes to houses for rent with option to buy (rent paid will go towards the purchase of the house) the renters or the home owners?

Will soon be in this position (renters with option to buy). If we decide to buy the house it bill be priced with the fair current value of the house. Is it still negotiable? Who decides the "fair current value of the house?" And how can I find out if it is truly the current fair value? I can't imagine just taking his brokers word for it.

How much time do I have till the prices of houses start to go up again (1 or 2 yrs?)

Hello,
I was researching lease purchase options and came across the blog.
A CMA needs to be completed on the home. This can be done by a Realtor using the MLS system. It will help determine what has sold, not sold and sitting there because the seller still thinks its 2005 or what properties have contracts on them. CMA means Comparative Market Analysis.
The thing that bothers me about lease purchase agreements is the fact that a pre-determined sales price is agreed upon long before the sale actual occurs. So the CMA that is completed now may have no bearing on what the fair market value is 1 yr, 2yrs down the road.
To comment on your other question-"who determines market value"; the buyers do in a market that has lots and lots of inventory because they have lots and lots to choose from! In a market that has very little inventory it is usually the seller that determines the value but ultimately it is what the buyer ( usually forced into a bidding war to win the property) is willing to pay.
There is still a lot of inventory in the valley but there has been a slight decline. It will be a while before the trends start to level off. There are some great loan programs that have come out recently and after the stimulus package is signed I hope to see more! I mean mortgage rates are under 5% for 30 yr fixed!

I hope this helped to answer some of the question.