A lease-purchase option to buy can be a big win for both homeowners and tenant-buyers. On the tenant-buyers side, it means time to save up, a chance to own their dream home and a place to live in the meantime. For homeowners, it means consistent monthly income and a big payoff a few years down the line when you sell.
The lease-purchase program, an option that most homeowners are unaware of, is a way for homeowners to get out from under-crushing mortgages by selling homes to non-traditional homebuyers for top prices. When homeowners come across hard times that have impacted their ability to repay the mortgages, their options are generally limited to refinancing or selling the home to pay off the mortgage. Homeowners want to get out from under their mortgages and move on, but what if they cannot sell their homes? Sometimes houses need many repairs, the style of the house is outdated, or the homeowner is underwater on their house and cannot afford to pay the realtor commission fees.
Rent-to-Own (Lease-Purchase Option)
The lease-purchase option, sometimes called rent-to-own, is the solution. Rather than requiring a buyer to finance the purchase and pay off the existing mortgage right away, this option places buyers in homes as tenant-buyers and uses a lease-to-purchase agreement to make monthly payments on the mortgage. The seller retains complete ownership of the property until the lease-purchase contract is satisfied and the mortgage is fully paid.
This opens the field of potential buyers significantly. Buyers with credit issues cannot get a mortgage in the current credit market, but they can still lease the home. When their credit score improves, or lending practices ease, tenant-buyers qualify for a mortgage and buy the home. In the meantime, their lease payments allow the homeowner to pay the monthly mortgage, and the tenants take care of all necessary maintenance and repairs on the home that they are lease-purchasing.
The Demand for Lease-Purchase homes is Always Strong
The key to this option “is finding the right buyer.” A lease-purchase option is a huge mistake when poorly screened tenants allow the property to fall into disrepair. It also causes a terrible financial problem when poorly screened tenants break the lease and move away. In that situation, the legal owners still have to make the monthly mortgage payment and do not have the lease income to do so. Finding the right tenant-buyer is critical.
The demand for Lease-Purchase homes is always strong, but it is not an option that realtors embrace. Shona Buys Homes has not only embraces the program — we have perfected it. Our screening criteria are rigorous. We only accept potential buyers into our program when our mortgage broker reviews their applications and projects. The applicant will qualify for and obtain a traditional mortgage in 24 months or less.
All Rent to Own Applicants are Thoroughly Screened
Applicants accepted into Shona Buys Houses lease-purchase or rent-to-own program are screened with a complete background check, a check with previous landlords, and income and employment verification followed by a rigorous review by the mortgage broker. Applicants who do not meet all criteria are not accepted into the program.
The company then enters the accepted applicants into a Credit Repair Program for the lease-purchase period to help them qualify for traditional mortgages at the close of the contract. They report the tenant-buyers lease payments to all three credit bureaus, which positively impact the credit scores. This is not a common practice, and it is one of the reasons that Shona Buys Houses’ program is so successful.
No Cost to the Home Seller to Offer a Lease Option
There is no cost to the seller with this program. The homeowner also saves 5% – 6% on realty fees. The tenant-buyers also pay all fees associated with the lease-purchase option. During the entire process, sellers retain full title to the home, and the tenant-buyers mow lawns, clean leaves from gutters, make any other necessary home repairs and even pay the taxes. Because sellers retain full title to the home, sellers also retain all of the great tax benefits of homeownership during the entire lease-purchase process.
Benefits Lease-Purchase Program
The lease-purchase program enables homeowners to collect lease-purchase payments that are significantly higher than market rental rates, sell for top dollar, and get out from under a monthly mortgage. At the same time, repairs and maintenance are taken care of by the tenant-buyer. It’s a great program when sellers connect with the right tenant-buyer, and the key to that is to connect with someone who is an expert in the program.
For more information or to schedule an interview, contact us.