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What in your experience is the cost of the lease option?
We are looking at a 215k home, but the owners stated they were told to ask for 20k as the lease option by a friend. Everything we have read, including an attorney friend says that 2-5% is what usually goes for the option price.
What in your experience is the cost of the lease option?
We are looking at a 215k home, but the owners stated they were told to ask for 20k as the lease option by a friend. Everything we have read, including an attorney friend says that 2-5% is what usually goes for the option price.
I want to know what a fair cost would be.
Thanks!
There is no such thing as "fair."
Negotiate for something that is "acceptable" to both sides.
I can see where the seller is coming from. The vast majority of lease option deals do not close, and the seller wants assurance that you are deeply vested in the transaction.
I would think that 10k would be pretty invested. They are underwater on their mortgage from what I understand so my first thought was they wanted so much to get a bailout from that. However, doesn't the 'option fee' go into escrow?
Also, what kind of protection do we have as the buyers if they stop paying their mortgage? Are we just screwed?
I would think that 10k would be pretty invested. They are underwater on their mortgage from what I understand so my first thought was they wanted so much to get a bailout from that. However, doesn't the 'option fee' go into escrow?
Also, what kind of protection do we have as the buyers if they stop paying their mortgage? Are we just screwed?
You have a real estate attorney to write the contract, don't you?
The contract should detail each of the parties' representations, expectations, and protections.
Don't give up a nickel, let alone thousand$ until your attorney tells you what you are in for.
If they are behind on their mortgage, and run the risk of losing their home to a bank, I would not give them any amount as part of a lease/option deal. I might reconsider if all amounts were completely held in escrow or there was some other arrangement where I wouldn't stand a chance of losing money. But if you are trusting that they will make good on their mortgage and not lose the house altogether, you might have better odds in Las Vegas.
Excellent advice ^^^^^. DO NOT GIVE THE SELLERS A DIME. Have that money held in escrow by an attorney, and you need stipulations that cover default, foreclosure, ect in regards to what happens to that lease option payment.
If you give them the money, and they then default and foreclose, you could sue them, but do you honestly think they are going to have an extra $10k laying around to pay you back?
That's exactly what I thought.
I would never do it if it wasn't held in escrow during that time.
However my original question still stands. Assuming all is on the up and up, I get legally covered via contract and escrow. What is a 'fair' or 'usual' amount to pay for the lease option?
Location: Mokelumne Hill, CA & El Pescadero, BCS MX.
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I would also suggest recording your lease option so that your right to purchase is protected just in case the seller/lessor happens to default on their mortgage.
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