Real estate markets across the world are suffering right now. Sellers can’t sell their homes and buyers can’t get mortgages. As real estate agents, it’s a lot harder to earn a living now. Gone are the days of listing a home and expecting it to sell – it is time to get creative to not just survive but actually thrive in this economy.
What is a Lease Option?
Lease options are a way to buy and sell homes without an immediate conventional mortgage. It gives your buyers who can’t qualify for a mortgage right now the opportunity to get into a home right away while they improve their credit and build up a down payment while living in the home. It gives your sellers the ability to beat their competition, which we know in these kinds of markets, competition is great. Sellers can reach a far greater pool of potential buyers. They will likely be able to sell their home quicker and for a better price. For some sellers it may be the ONLY way they can sell their home in this real estate market.
How Does a Lease Option Work?
A lease option works like this: The buyer and seller agree to an option which gives the buyer the right to purchase the home during a set period of time. During this option period the buyer leases the home from the seller. By the end of the option the buyer must either purchase the home or forfeit their option fee. While the option is valid the seller may not sell their home to anyone else.
Advantages for the Seller
Here are some of the advantages to your home sellers when selling on a lease option:
1. Allows them to beat their competition. How many listings have you lost because the home sat on the market and never sold?
2. The seller can collect rent on their home while it would otherwise sit vacant.
3. They can often receive a higher purchase price.
4. They can sell their home in a down market when they otherwise might not have been able to sell at all.
5. Allows the seller to actually sell their home instead of just renting it. Have you lost any full commissions because the home was just rented instead of sold?
Advantages for the Buyer
Here are some of the advantages to your buyers when buying on a lease option:
1. The buyer can get into a home now, even if they can’t currently qualify for a mortgage. How many potential buyers have you turned away because they couldn’t qualify for a mortgage? No longer!
2. They can improve their credit and build up a down payment while they are already living in their future home.
3. They are not obligated to purchase the home at the end of the option if they decide the home is not for them, that homeownership is not for them or if the real estate market changes significantly.
