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Our house is on the market, would you do this deal???


Guest KaciMI
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Due to husband's job we have moved to another city. We're renting until we decide when and where to purchase a new home. We put our house (mortgage is paid off) on the market. We're in Florida, which has a lot of houses for sale. The house is in a nice, gated golf community. Our house is average but completely upgraded to look new, including granite counters, pool re done, etc.

 

It has been on the market for two weeks when our agent presented to us a couple who want to do a lease purchase with option to buy. They're offering full price, plus $7000 deposit that is non refundable. SO if they don't buy the house, we keep the $7000. If they buy the house, we give them 40 percent credit from the rent. Which nearly covers the $7000 non refundable deposit. They will be leasing the house for $1100 a month, on a golf course, with pool. We already knew we could rent it for $1400... if we wanted to be landlords.

 

I really don't want to do the deal. However, my husband wants to. It ends up paying our rent over here for a year. However, don't need the money and I am not sure I want the house lived in and have to possibly put it back on the market in a year. I just didn't want to be a landlord.

 

Our real estate agent told us that he knows this couple and they're top notch. I told our agent, fine. But, to me, they're renters and I will be treating them like renters until they become owners and will want a credit check. And what about first and last rent, you know, all the normal things that are included in renting.

 

I'm not sure our agent likes this, but I am not sure I want to take the house off the market for a year... in case they don't buy it. If the house increases in value, they are lucky. If it decreases, we're not.

 

Am I being silly in this hard economy? The rent WILL cover most of our rent. It is possible that the house will sit on the market. I know that the agent said these are top-notch folks, but good people can land on hard times, too. I've just heard too many horror stories about renters. I don't mean to be insulting to renters... 'cause we're renting too!

 

You folks with houses for sale... would you do this? Or have you heard successful stories about lease options?

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It can be expensive to be a landlord, especially if you end up with a lemon tenant.

 

In your situation, if your going to rent, then rent at the going rate with credit checks and strong lease agreements, first and last months rent, etc. OR sell. Don't do some weird hybrid of both.

 

These folks could destroy your house and then not buy it. They take a year away from you where it could be sold and out of your hair. The pool is also a noteworthy liability if you are to be a landlord. You may need to adjust your insurance.

 

It is peculiar that they want to lease in order to buy. Usually that's a tell-tale sign of a credit or cash flow problem, neither of which you want to become *your* problem.

 

Your house has only been on the market two weeks? It's too soon to make crazy deals with people. Your real estate agent should want to sell, not lease. That's weird, too. He'd certainly make more money on a sale.

 

JMHO.

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I'm thinking they want to unload it before they buy our house. But thanks for replies. I don't want to rent, period. I want it sold. It is in perfect condition with expensive wood floors, I don't want any messes to clean up, later.

 

My husband thinks that the $7000 non refundable deposit is insurance that they'll take good care of the place. But I still don't want the problems that come with being landlords.

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If you don't have to do it to pay your rent, there is no way I would even consider it.

 

They have all the benefit, you have all the risk....and a lot of it.

 

What if they decide not to buy it and have done damage to the property? How about the pool, and the chemicals-what if they do serious damage? What if they have a cat that pees all over the rugs and they have to be replaced? A dog that scratches all the doors or chews the kitchen cabinets? What if they decide to stop paying rent and still live there, until they finally get evicted and forcibly removed? How long is that in your state? Here it is 3mths....do you have any idea how much damage can be done in 3months? What if there is a normal maintenance issue that they don't report and don't repair? Leaking roof, pipe or a falling down tree? What if they replace quality light fixtures with cheep ones? What if they sell the appliances and replacing them with cheaper versions? Who will be liable for repairs in the time they are there? $7,000 deposit may cover one of these things but not your time to deal with it.

 

My fil used to have lease option properties...these are all things that happened to him, and why he will never, ever, do them again. He found that people feel freer to make permanent changes to the property, if they think they are going to buy it. Things they wouldn't have done if they are renting. Then if they decide not to buy it...the owner is stuck with the changes they made....or maintenance they neglected.

 

You have already realized that there is NO benefit for you, and Lots of benefits for them. You will have tremendous risk, and the will reap the only rewards.

 

If you do decide to do this, then I would make it conditional that the house will be appraised now, and the condition noted on all items, including property. When the house is sold, and depreciation of appraised value will be added to the selling price. SO if they cut down all the trees and depreciate the property $20,000, that same amount/condition is still going to be reflected in the selling price. SO, they must understand that the appraised price, may not be the selling price in the end. (That way they don't do things to purposefully decrease the value-like remove chandeliers/appliances/amenities and replace them with cheaper versions to decrease the value).

 

Do not do it with out a professional lease! Not one provided by the Realtor!

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If they are serious about it they won't balk at a higher up front payment and market rent. I would probably consider it depending on how the market is in your specific area but I would want rent at the market rate ($1400) and a $10,000 nonrefundable payment. Either that or I would consider a $7000 nonrefundable payment and a 6 month lease. I would also include standard rental clauses (for pets, damage deposits, etc).

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Due to husband's job we have moved to another city. We're renting until we decide when and where to purchase a new home. We put our house (mortgage is paid off) on the market. We're in Florida, which has a lot of houses for sale. The house is in a nice, gated golf community. Our house is average but completely upgraded to look new, including granite counters, pool re done, etc.

 

It has been on the market for two weeks when our agent presented to us a couple who want to do a lease purchase with option to buy. They're offering full price, plus $7000 deposit that is non refundable. SO if they don't buy the house, we keep the $7000. If they buy the house, we give them 40 percent credit from the rent. Which nearly covers the $7000 non refundable deposit. They will be leasing the house for $1100 a month, on a golf course, with pool. We already knew we could rent it for $1400... if we wanted to be landlords.

 

I really don't want to do the deal. However, my husband wants to. It ends up paying our rent over here for a year. However, don't need the money and I am not sure I want the house lived in and have to possibly put it back on the market in a year. I just didn't want to be a landlord.

 

Our real estate agent told us that he knows this couple and they're top notch. I told our agent, fine. But, to me, they're renters and I will be treating them like renters until they become owners and will want a credit check. And what about first and last rent, you know, all the normal things that are included in renting.

 

I'm not sure our agent likes this, but I am not sure I want to take the house off the market for a year... in case they don't buy it. If the house increases in value, they are lucky. If it decreases, we're not.

 

Am I being silly in this hard economy? The rent WILL cover most of our rent. It is possible that the house will sit on the market. I know that the agent said these are top-notch folks, but good people can land on hard times, too. I've just heard too many horror stories about renters. I don't mean to be insulting to renters... 'cause we're renting too!

 

You folks with houses for sale... would you do this? Or have you heard successful stories about lease options?

 

You have many concerns and don't want to be landlords. Don't do it.

Edited by lynn
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I'm thinking they want to unload it before they buy our house. But thanks for replies. I don't want to rent, period. I want it sold. It is in perfect condition with expensive wood floors, I don't want any messes to clean up, later.

 

My husband thinks that the $7000 non refundable deposit is insurance that they'll take good care of the place. But I still don't want the problems that come with being landlords.

 

I wouldn't do it. While the 7000.00 deposit is nice it's no guarantee. My dh is a contractor and 7000.00 worth of damage is not that much. If you are moving to another town I would not want to rent, too much headache. I would wait, especially since it is paid off.

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I'm actually KaciFl, but had to register again, as I have a new server. I couldn't remember my old password and couldn't retrieve it from WTM board, as I no longer use my old email. So, I'm starting over. I'm the one whose husband lived away from us for 4 years and would come home on weekends.

 

This is probably another reason why I don't want to rent the house... I don't want any excuses to move back there without him.

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Well, as someone who would presently love to find someone who would take a lease-with-the-option-to-buy, I disagree with some of the points here. It *doesn't* mean they are a credit risk or what-have-you. It could mean other things; for us it means that once my husband was laid off in April we went back to being self-employed. He's been working steadily since then, but the bank requires TWO YEARS of being self-employed before they'll consider loaning to you -- even though we were successfully SE for 11 years in this same field! We haven't missed a house payment, we are both working, we have better than average credit -- we just can't get a mortgage loan right now.

 

The $7000 IS nice and shows that they are very serious. And you want to sell to someone who is very serious so you know they're more likely to take care of the place (in their heads, they are approaching this as a PURCHASE not a rental; even if you feel like a landloard. They will think of the house as theirs and take will probably take care of it accordingly).

 

Where I think they're missing it is that usually with a Lease Option not only do they put some $$ down up front (that will go toward the down payment), but the rent is *also* HIGHER than a market rent -- definitely not less! Then you take some out of the higher rent to put aside and add that to the up front amount -- this is basically a forced savings account that you are "holding" for them. It makes sure they have cash for the down payment when the purchase time comes. If they DON'T buy, then you keep all this!

 

Another thing is that in a lease option, you can negotiate things like upkeep/maintenance (make it their responsibility, not yours) and property tax (you can even have them pay that, although you'd have to see legally if this is allowed). You don't HAVE to necessarily handle the regular "landlord" stuff.

 

Of course you would want a lawyer to draw up the appropriate papers, and to make sure everyone's on the same page. I do think you can give it a little more time to see if you get an offer since it's only been a couple of weeks, but a lease with an option to buy isn't always a "bad" thing!

 

(Also, as someone who owns a house they're selling, but one we thought about renting out instead, we would have considered a lease option to buy!)

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If you decide to do it, they need to be able to prove that they can buy this house when the time comes. They need a preapproval from the bank before they move in, and I'm not sure what you are listing your house for, but $7000 does not seem like enough earnest money. Perhaps, $7000 now and other sums to be paid towards a downpayment every other month. If they have a house to sell first, who is to say they will be able to sell it in the time allotted in the lease.

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I wouldn't do it. But if you think you might want to then the first thing you need to do is contact a good Real Estate Attorney IN THAT STATE. One of the things happening here in FL is people have gotten lease with an option that isn't written up right for the owner of the property. What has happened is people have moved into the houses and then not paid. The courts have said the new people "own" the house and the original "owners" are holding the mortgage. So, instead of a simple eviction to get the non-payers out of the house (which takes usually 60 days) the original owners are having to go through foreclosing on the people that wanted the lease-option. Foreclosure is a totally different ball of wax. It's time consuming and expensive (lawyer and court costs, filing fees, sheriff, lots of fees), plus you're still paying the mortgage and have to fix anything they destroy.

 

We are landlords, but I would not rent while not living near by. It's very hard. I also would not rent a house that is in great condition. Every time a renter moves out of one of our homes we spend a ton of money to get it back into the shape it was in before they moved in. Because dh and I are handy and live near by we are able to do a lot of it ourselves. Also, we rent out one house with a pool and we carry an extra million in insurance just in case there is ever an accident in the pool (even though our tenants do sign a waiver and we don't rent that house to anyone with non-swimming children, and it's separately fenced from the rest of the yard).

 

Also, when we moved down here (from MI) we did not sell our house for almost a year. We would not have rented it out, it's just not worth the hassle.

HTH (welcome back!)

Melissa

Edited by Melissa in FL
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NO WAY!!

 

We did this about 7 years ago. Almost the exact same thing, dh changed jobs, we moved out of state(also to a rental), put our house up for sale, etc. Our house wasn't selling and a couple offered us $6000 down and would close within 90 days. We let them move in and treated them like renters. They seemed like neat, nice people. They only had a cat and had 3 teenagers.

 

To make it short, they couldn't get financing and ended up trashing our house. It was VERY hard to get them out. It was horrible. They did much more damage then $6000. Ripped flooring, holes in walls, carpet stains, water damage to our ceilings, etc.

 

Not long after we got them out, dh's job didn't work out. We were able to move back to our house and had to fix all of the damages. We were thankful to still have a home to go back to though!

 

Go with your gut feelings!

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Ask for a non-refundable $35-70 for a background check. Look up past bankruptcies, judgments, leins, bad credit, and criminal background. Also verifies employment. I used to be a landlord -- 4-plex was 1 hour drive and a PAIN in the butt to maintain or answer calls from tenants. You may need to take the rent to pay someone to look after the house as a "manager". Real Estate agents do this -- but in my experience they charge a LOT of $$$ for something I could have gone to Home Depot and did it for 1/4 of the bill he gave me. It was a rip off. (???)

 

After being a landlord for many years and dealing with good/bad tenants -- IMO, we had 1 out of 4 tenants who were solid good joes. The other 3 were late on the rent, trashed the place, or we ended up evicting them. Our units would be vacated at the end of the lease and it was expensive to get them back in shape for rental (30 day process). Fresh paint, new carpet (pets can do major damage -- don't ask me how I know this), tile work if needed, electrical/plumbing repairs, etc. Again, you spend a lot of $$$. Come tax time, it is a deduction for the upkeep and expenses. But oh what a pain. We had a million dollar umbrella liability waiver on top of our commercial property insurance for the property (4 units). Auuuuugh. We made a tidy profit when it finally sold. But it is a LOT OF WORK.

Edited by tex-mex
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One thing you should consider too. If you don't have a mortgage on this property and are selling it for more than you bought it for, you may loose your homestead exemption if you rent it for ANY amount of time. You would have to talk to a lawyer, but this is my understanding. If I'm right, you'll have to pay taxes on the money earned instead of taking the exemption.

Melissa

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you have a 50/50 chance of it working out. and you are the one with all the risk here if they pull out of renting early or even choose not to buy later.

 

we moved cross country with a house we just bought before moving and had to rent it. I rented to a coworker at the time who was going to assume the loan. we did rental papers, had the home warranty in place so she could call for repairs, and I was ok with things.

 

but it was STRESSFUL. I had no clue what was going on back at home. she was in and out of her relationship with her husband and they almost did not buy the house(!) at the end but I didn't learn all this until years later. The only reason she did was she knew me personally and felt she had to follow through. we had a title issue years later I had to help pay to fix. She called with repair issues all the time. And she mailed her payment on the first. I got it by the 5th and then had to send payment....it was always tight getting it on time.

 

it was stressful. I wouldn't do it again.

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I wouldn't do it.

 

Interest rates are at record lows. Property is priced at a good value, not inflated. Why don't they want to buy? If they won't buy, rest assured someone will. If they want to rent, let them find a rental property.

 

You're absolutely right to "treat them as renters", complete with background checks, etc. There's something a bit odd about their "deal". They'd be better off buying, unless they have awful credit. If they have awful credit, don't rent to them.

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I wouldn't see why not to if the market in your area is bad... How many other homes are for sale in the area? How long have they been on the market?

 

I would love to be able to do this as a renter.... We are most likely moving to a new state in the next month and we rent now. With Hsing and only one income it is hard for us to save money to put down on a home and also moving to another area we wouldn't want to buy until we were more familiar with the area.

 

However we are awesome renter if I say so myself.... Our rent is always on time. We make normal repairs as if we owned the place and we have been hear for 3 years. It is not the best home or in the best neighborhood but we can't afford anything more and we treat it as if we owned.... Even though we don't own it, this house is still our HOME and we want it to be treated as such.

 

Don't shoo them off just yet..... feel it out, maybe meet them and get some references where they live now. you never know the situation it may be the best bet considering the market.;)

 

Just my 2 cents,

HTH's

Kate

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I just remembered another person who has a simlar experience:

 

 

Dh's bestfriend is a contractor. He built a house to sell. It was on the market for a while through all this craziness in the economy. He finally accepted a similar situation.

 

The family paid a $40,000, non-refundable deposit, $2000/mth rent. They were very well qualified and were waiting for a house sell to go through.

 

6 months later, they both lost their jobs. They found that their own home had dropped so much in value, that they could no longer sell it, and they couldn't afford the expenses of two homes with the job loss. They gave it back to the contractor.

 

They:

 

ruined the carpets (cat urinated-everywhere and scratched holes down to the pad).

Ruined the hardwood (extensive water damage in the kitchen-floor had to be removed).

Rewired the house (we assume for their telecommuting jobs-so now the switches are no longer logical and will require rewiring back)

Drilled holes in the walls for electronics.

The jacuzzi style tub no longer works (?)

The cut down trees, chopped them up for firewood (then offered to sell it back to the contractor---hmmmm it was his own trees!)

Re-landscaped part of the yard, and created a mysterious empty box with posts.

The house has to be repainted inside due to damage. It has a large open floor plan, so it all has to be repainted not just areas.

Deck wasn't sealed this year (house is in an area that gets a lot of snow), so now it is getting damaged.

 

 

and these are all that I know of!

 

 

The house has now dropped more than $40,000 in value and he has used a huge portion of that to do repairs. He has spent a large amount of time repairing, and fortunately he can do a lot of the work himself. Otherwise, I wouldn't be surprised if all the $$ would be gone.

 

Everything (!), looked great when it started. They were more than qualified. Circumstances changed.

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