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I am dealing with a weird situation. DH and I are relocating for a new job, and our buyer's agent is a little wary about us wanting to do a short-term rental on a house we intend to buy. She thinks we will scare the seller off. But get this, the houses we are most interested in are vacant!
My husband and I are following the old "one bird in the hand is better than two in the bush" saying, and think any seller would jump on this scenario.
Our realtor thought we would be getting to live in the new house for FREE if we applied the rent to the final purchase price of the house!!! WHAT????
We plan on doing the final closing when our house (priced aggressively here) is sold. We are now being interrogated on whether our current house is priced correctly (answer - yes, but we aren't going to give it away), and why we are not using a realtor now (we know all the local ones professionally and state we are protecting them by paying a buyer's agent commission). By training, I'm a real estate lawyer, and have all the real estate documents I need to do the transaction (hell, I could even do the closing for the buyers if the lender would let me).
Frankly, I'd be leery of doing even a straight up lease with you let alone all the complications on a for-sale house.
Too much "future tense" for my taste.
...Our realtor thought we would be getting to live in the new house for FREE if we applied the rent to the final purchase price of the house!!! WHAT???? ...
Well, think about it. Say you pay $2000/mo rent for 6 months = $12K. You then purchase the house but reduce purchase price by $12K you paid in rent. So you lived in the home for 6 months rent free - the seller gave you back your $12K. Not a good deal for the seller. Seller could have rented it out without a purchase and kept the $12K.
Most rent to own deals require the buyer to put down a non-refundable deposit, plus pay above market rent with some portion to be applied to your down payment. No free ride.
I wouldn't do it either, too many assumptions. What's in it for the seller if your place doesn't sell, since you did mention the golden phrase "I'm not going to give it away".
What if the market dips again (as many are predicting it will) while you are selling your place - are you going go expect a reduction in price? Even if you do offer what it's worth now, will it appraise for your mortgage at that price?
The way I've been looking at this situation is that we would be pre-paying the seller. Quite frankly, neither of these houses are the seller's primary residence, and they are just sitting there empty. (The houses we are interested in are fully paid off.)
Our house is priced to sell (below tax value and below square foot comps in our neighborhood).
The other alternative is for my husband and I to live apart for a few months, and for me to live in corporate housing in another state while he stays here. We want to keep our family together rather than apart.
To play devil's advocate, isn't it possible that the seller's house would sit idle for six months? Maybe all those media stories about the worse housing market in decades is wrong?
I'm looking for a win win here, not to take advantage of anyone. We're starting to feel a little like Mary & Joseph when they went to Bethlehem.
Think of it like this from the seller's perspective. They could rent it out and collect all the rent money and then sell it and collect all the sale money. In your situation they would only be getting the sale money.
Here are the problems I see
1) This could drag on forever. While you feel you have a competitively priced home that may or may not be true. I have no idea. I have just seen many "competitively priced homes" sit for a long time. I always ask to see a copy of the CMA done for the property for sale before telling my clients that taking a home sale contingency is ok. I also check on the marketing of the listing agent because if it is bad that can kill a home contingency sale.
2) This is prime real estate season in most areas. You are asking them to take a leap of faith on a FSBO during a horrendous market. Most sellers would balk at that alone, regardless of your status as an attorney.
3) If your home fails to sell and you decide to move on, they get what...a headache trying to collect rent from someone that hasn't paid anything yet?
4) You are dealing in ambiguities. If your house doesn't sell for a year, their purchase price keeps going down. They could potentially net less with your plan. Who would do that?
You are a seller too selling in one of the worst markets in decades. Don't you think the sellers are going to think about that too?
If they own them outright do a land sales contract with a two year balloon. Then pay off the LSC when you close on your house. Why do this crazy rental thing when you don't have to?
i would hate to sell to a lawyer, but lease to sell would scare the bejeezus out of me thinking the lawyer would find all sorts of issues once living in the house that would make the chances of our original deal highly unlikely....... this may not apply to you. But, you have to understand that sellers are in the most vulnerable position. Add the fact that you want to lease before closing and apply all payment to reduce the final selling price.....not a lot of incentives there for the seller.
We bought a St. Joseph's statue today, and already have an interested party.
And contrary to popular belief, some lawyers ARE nice AND honest. Don't be scared of all of us!
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