Infotube.net: Homes for Sale - For Sale By Owner (FSBO) - Real Estate Listings

Unless you were alive when Herbert Hoover was sitting in the oval office, this is probably the worst home selling market you have ever experienced.   

Certainly, things are not horrible everywhere.  Charlotte, NC and Rochester, NY are holding on, but elsewhere, housing sales and prices are still falling, while inventories are growing.    

So, what should you do if life circumstances dictate that you MUST SELL your home in this market?  What actions can you take to beat out your competition??    Yes, the situation is painful.  But, if you have to sell, InfoTube can help.

5 Tips to Help You Sell, When you Have To Sell:

1. Don’t Spend Money.

Your house needs to make a good impression on buyers, but DO NOT spend money on big ticket items or home improvements.   Focus your attention and budget on a new paint job, deep cleaning and a lot of sprucing up.   But, absolutely, make all repairs.  

     2.    Don’t Sit on the Sidelines.

If you have to sell, now is the time.   Don’t make the mistake of hanging on, hoping prices will improve any time soon.   They won’t.   I expect another year to pass before we see any bottom in pricing.  Forget the market timing approach and put your home up for sale today.

     3.    Get Real.

Separate your emotional attachment to your home from your family’s financial best interests.  Selling a home is strictly business and should be treated as such.  

Don’t forget that smart home shoppers read the news.   Buyers expect a bargain, so give them one.  Don’t make the mistake of letting the house languish on the market.  Set a realistic price target for your home from the beginning.  Better yet, crush your competition and price your home 5%-10% below theirs.  Forget about pre-crash appraisals or the sticker price for those custom upgrades, those comparisons won’t fly, so don’t try it.

    4.    Early to Bed.  Early to Rise.  Advertise. Advertise. Advertise… Ray Crock

Whether your home is for sale by owner or by agent, you need to be active in the promotion of your property.   Your home should be advertised in the local classifieds, company newsletters, church bulletins, university or employee bulletin boards, bill boards or anywhere buyers are looking.

While local print advertising is important, don’t forget the power of the internet.   90% of all buyers begin their search for a home on the world wide web.    The internet is also the only means of effectively reaching out of the area shoppers and those from foreign countries.

Whether you are selling by agent or owner, take advantage of websites such as InfoTube.net, which offer a free home listing web page with photo’s.  Infotube.net also uploads its home listings to other websites and search engines, leaving a lot less work for you to do.   Other websites, such as craigslist also offer home listing services and should be utilized in your sales efforts.

Contact Why 6%.  Why 6% will guarantee that your home listing appears on all Realtor owned web sites, even if you are selling your home by owner.   The company also uploads home listing information to the local MLS, Realtor.com, Zillow, Trulia, Cyberhomes and others, in one easy step. 

     5.   Accept the Offer

If you need to sell now, you would be well advised to accept any reasonable offer from a qualified buyer.   It is easy to determine what “reasonable” is.  Ask your agent for comp’s or just review the asking and selling prices for your neighborhood on a website such as Zillow. 

If the first offer is low, but reasonable, you can negotiate, but remember the buyer has more power now.  Don’t blow a sale arguing over a few dollars.  Your home is only worth what someone will pay for it, which might be far less than what you think your home is worth. 

Best advise:  If the buyer makes an offer that is close, don’t counteroffer.  Sign the contract on the spot and congratulate yourself on nailing down one of the few buyers out there these days.  

   Thank you for visiting InfoTube.net.  Have a great weekend and best of luck on the sale of your property.

A frequent topic of lunch and dinner conversations these days is whether or not it is a good time to invest in real estate.    And, the answer to that question is “It Depends”.

“It depends”… on what time and investment mean.    

If you are attempting to time the market, you are actually speculating that price levels have reached a bottom and  that they will go higher in the near future.   While buying on price speculation is fine and can be highly profitable, smart speculator’s realize it is also risky.   Since no one truly knows the exact time that property values will reach their lowest level, smart speculators should gamble only with money they can afford to lose.

Investment, on the other hand, is analyzing each situation or property on its own merit to determine a good value.   And, while no one wants to pay too much money for a property, timing the exact lowest price point isn’t what the investor is focused on. 

So, what is the investor looking for??  What determines a good real estate investment??   

Many people believe that their home is an investment.   It can be, but it is probably not.  Unless you plan to rent out rooms, or use your house in a way that generates more income than expenses, it is not an investment.  It is where you live.

The only way to determine investment versus speculation, is to look what the property would rent for versus the cost to own it.   If the property would easily rent for more than the monthly mortgage, taxes, insurance and expenses, it qualifies as an investment.    If the monthly costs exceed the rental income, then the buyer is speculating and paying a premium to own the home.

Bottom Line:  Rent equals Value. 

If you’re a value shopper looking to purchase a home as an investment, don’t buy a property, if you could rent it for less money.   While buying a home from the heart is fine, remember that anything you pay above the market rent is not an investment.  It is speculation or self-indulgence.

The next time the dinner conversation turns to real estate investment, impress your friends and explain the difference between investment and speculation… 

Will they understand….it depends.

Thank you for visiting InfoTube.net.   If your dinner conversation happens to turn to real estate, please tell your friends about us.  We really appreciate it.

Average Days on Market

Source: Altos Research & Real IQ

An architect has designed an 80 story building that continually changes its shape by using the wind.   The “first if its type” building is under construction in Dubai, with a grand opening scheduled in 2010.  There are also plans to construct two more moving buildings, with one located in Moscow and another in  New York City.   

The building design is like nothing we’ve ever seen before.  It offers sweeping and constantly changing views, as the building exterior shape actually moves. 

The downside… being fabulous and cutting edge will not come cheap.   Rumors are circulating that residences will be priced around $3000 per foot.  

In today’s tight credit market, obtaining approval for financing BEFORE shopping for a home is a crucial step that borrowers must take.   Sellers and buyers are familiar with the phrase Pre-approved” or “Pre-qualified” for a loan.  Many of us assume they mean the same thing.  They don’t.  There is a huge difference between the two terms. 

Pre-Qualification:  Pre-qualification is not a loan commitment, it is a quick indication of whether a borrower should qualify for a loan or not, based solely upon the opinion of a loan officer.  With a pre-qualify situation, the loan officer peeks at the borrowers finances, pay stub and credit report and estimates the approximate amount of a mortgage that the buyer should be able to qualify for. 

The loan officer will usually issue a “pre-qualification” letter or certificate which indicates the borrowers finances have been reviewed and that it appears they could qualify for a mortgage loan.   It is not a guarantee that the borrower will actually be able to get a loan.

• It is easy to determine if you have received a “pre-qualification” letter.  If you have not signed an application and/or you have just given information over the phone…your approval is nothing more than an estimate or opinion made by a loan officer.
• If you have not paid non-refundable fee’s along with the signed application, you have not received a loan commitment by the lender.
• Pre-Qualifications should not be taken seriously by borrower or seller.   Pretty much anyone can get the favorable opinion of a loan officer these days, as they are paid only on commission.

Pre-Approval:  In the case of pre-approval, the borrower actually applies for a loan.  Pre-approval is a written commitment by the lender, not a loan officer, which states the specific amount of money the applicant is qualified to borrow.  Pre-approval involves a loan underwriter and takes some time to complete.  The file contains a detailed credit report, income and down payment verification, along with a confirmation that the borrower has the ability to pay closing costs.   

• If you have met your lender in person, completed an application and paid fee’s, you have started the process to become pre-approved for a loan.
• A letter of pre-approval states a maximum amount of money the borrower can obtain financing for.
• The property address will be added to the loan application and the appraisal will be ordered, once the borrower locates a property.
• The borrowers’ bank and employer will be contacted and the information submitted on the loan application will be verified.

 In Conclusion:

Unfortunately for seller and buyer, the terms pre-qualified and pre-approved are not interchangeable.  The difference between the two terms causes a great deal of confusion and problems.  

Please keep in mind that neither is a guarantee that a mortgage will be issued.  The home must qualify, too.  But, a borrower that is pre-approved for a loan, is the only type of buyer a seller should take seriously.  

                      Your Credit Score has a huge effect on your life and personal finances.  Your credit score not only determines your ability to borrow money at all, but also directly affects the costs of borrowing money.  

Under today’s scoring system, an individual with a high credit score can get a loan for cars, houses, vacations, credit cards, etc. at a much lower rate of interest (ie: lower monthly payments) than a person with a lower score.   To save real money every month…take our advise and boost your credit score with the following 7 Tips.

1. Less Isn’t More:  When it comes to your credit score. Lenders like to see different types of credit in your history file including credit cards, car loans and personal lines of credit.   Lenders are looking to see how you handle different types of debt repayment.
2. Don’t Close Accounts:  Keep your old credit accounts open, even if you have paid the loan in full.  The more available, unused credit you have, the better your score will be.  Your older, established accounts are also more valuable to your credit score and raise your score more than newer ones. 
3. Raise Your Credit Limits:  While it helps your score to have a lot of available, unused credit, opening a new credit account will drop your score in the short term.  A good strategy is to ask your credit company to increase your current credit limit on a regular basis.  A high line of available credit is valuable, whether you need the additional credit or not. 
4. Your Net Worth, Income and Savings Don’t Matter:  The only thing that matters to your credit score is what lines of credit you have open and how you use them.   A cash paying millionaire will likely have a lower credit score than a maid or gardner who use credit.
5. Small Balances and Lots of Cards are Better:  Since you credit score is sensitive to how much “available” credit you have, having small balances on a number of credit cards is better than having a big balance on one card only.  As a rule of thumb, you should only use 30% of the available credit on any one card.  70% of your credit limit should be available and unused.
6. Don’t Shop Around or Apply for Credit:   As ironic as this sounds, your credit score drops each time you have an inquiry to your credit report.   Lenders see inquiries as borrowing activity, whether you accept a loan or not.   (Note: Pass up the come on’s from department stores who offer you 10% off your purchase for applying for a store credit card.   A 10% discount is generally worth far less than the points lost due to the inquiry.)
7. Watch the Calendar:  Pay attention to due dates and minimum payment requirements.  While “pay on time” sounds basic, it can be difficult for many of us to do.

    Finding and keeping good tenants is top priority for any property manager and landlord.   A good tenant is money in the bank.  They pay on time and you don’t hear from them for another 30 days.  On the other hand, a bad tenant can be nightmare that you can’t wake up from.

As a real estate professional, I have managed my own properties and those of my clients.  During that time, I learned a lot about the value of fostering good relationships and the importance of a well thought out lease agreement.  

 A good lease recognizes potential problems or events where misunderstandings can occur.  It spells out in pure language what the remedies and expectations are for both parties.  Remember that a good lease can make life a lot easier for landlord and tenant.  If you do not have a lease agreement, you can get a free copy of a residential lease by clicking here.

Please review the following idea’s and topics for successful landlord/tenant relations.  Consider adding any clauses to your lease that clarify confusion about expectations or address situations that may leave room for interuptation.

1. Get Paid on Time:   Obviously, leasing property is a business and the landlord needs to be paid.   A positive way to encourage on time payment is to offer a discount of $25-$35 for rent paid on or by the 1st.   Also, include a $25-$35 late penalty clause for rents received after the 5th.
2. Cut Repair Expense and Calls:   Charge a $50 deductible for all repair calls.    I have found this invaluable in getting small things done by the tenant versus having to call a repair man to fix a minor item.
3. Repair and Maintenance Clause:  Specify that the landlord is not responsible for damage or repairs caused by the tenant.   (This clause saved me $100 last month for a garbage disposal failure that resulted from woody flower stems that clogged my disposer.)  In addition, spell out expectations for lawn and shrub care, trash removal, etc that the tenant is responsible for.  Include all remedies and charges for non-compliance in writing.  (If your home has central heat and air, provide the appropriate number of filters for the rental term and advise the tenant in writing about the schedule for changing the filters.)
4. Occupancy Clause:  State the number of tenants that can live at the property.   Insert a $50 per month charge for each occupant over the maximum number agreed to in the lease.   The number of people on your property affect the wear and tear, utilities, etc.   Make the tenant understand that if you rent to 2 people and 3 live there, then the rent goes up.
5. Pets:   If you agree to accept pets, describe and specify the pets you are allowing on the property.  Include a $50 per month rent increase for any additional pets that were not a part of the original lease agreement.   (Note:  If you rent to people with pets, always get a separate, additional deposit for the pet.  Pet deposits are not a part of the property security deposit.
6. Security Deposit:   Ask for a security deposit amount that is higher or lower than the monthly rent.   This will eliminate confusion by the tenant that the security deposit is the last months rent.
7. Expenses:   List all expenses that each party is responsible for.   Tenant shall pay electric and gas.  Landlord shall pay water and trash pickup.  Etc.
8. Applicances:  Attach a list of all appliances that are provided with the property.   A list can be essential at checkout, if your microwave is missing.
9. Tenant Insurance:  Advise the tenant in writing that they need to obtain insurance protection for their contents.  Further, add that the landlord bears no responsibility for personal possessions or losses of personal property.
10. Nuisance, Noise and Illegal Activity:   Most leases have boiler plate clauses for these items, but add any clause that is applicable to you, your property or your homeowners association to the lease agreement.
11. Move In/Out Inspection:  Have a Move In Checklist and photo’s of the property condition at the time the tenant took possession.    Have the tenant acknowledge in writing that they agree with the content list and the condition of the property at the time of inspection.   Use this move in checklist when you perform a checkout walk-thru.   This step can eliminate a lot of battles about security deposit refunds.
12. Smoke Detectors:   Address the number, location and inspection date for all smoke detectors.   Instruct the tenant that damaging or removing smoke detectors is a violation of the lease.  The tenant also has a duty to report any problem that arise with the smoke detectors during their occupancy.
13. Safety Issues:  At the walk-thru, show the tenant where water and gas cut off valves are.  Also, point out cut off’s at sink and toilet faucets.   Advise the tenant about any water penetration or flooding concerns.  Explain the electric fuse panel.  Instruct the tenant about lighting pilot lights for fireplaces, water heaters and furnaces.   Safety is job 1, so make sure everyone knows what needs to happen in the case of an emergency.

Landlording is a business that moves along much more smoothly if everyone understands what is expected of them.  For more information about landlording responsibilities and rights visit the law center at Nolo Press.

Thank you for visiting InfoTube. net and email any questions or responses to tommi@infotube.net

I have received a lot of questions about property management, lately.   Yesterday, we addressed what it is that a property management company does, along with a list of criteria to help you determine if you need a property manager at all.

For those of you who need or want a professional property manager, today we offer up some good interview questions designed to give you insight and help you identify what  it is that you need to know before you sign a contract.

Questions to Ask When Interviewing a Property Manager:

1.  Monthly Cost:   Most managers charge a monthly fee to maintain, watch and care for your property.  Fee’s can vary widely, but generally you should expect to pay 5%-10% of the monthly rental for the management fee. 
2. Vacancies and Leasing Fee:  Most managers charge a fee for procurring a tenant for a vacant property.  This fee offsets the managers costs for advertising, showing the property and the time spent with paperwork.   The leasing fee can vary, but generally agents charge 1/2 of the first months rent for a signed lease with an approved tenant.  
3. Contact Information:   This is a big issue for me, as reaching my manager, if necessary, is essential.   I require that my manager uses email (my preference for non-emergencies) and also has a cell and office phone with voice mail. 
4. Accounting:   State laws dictate the rules of procedure for mailing checks to you and how security deposits are handled.  Verify that the company is licensed and fully compliant with your state association of Realtors.  Check with reporting bureau’s, such as the BBB, to see if any compliants have been filed against the management company and the status of resolution.   Get a committment in writing about the mailing schedule for rent checks and monthly expense statements before you sign.
5. Repairs and Maintenance:  Determine who handles maintenance and repairs for your property.  Does the management have in house service or do they subcontract the work?   Ask what services they can provide and which do they need to hire out?    You will also need to know the billing rate or how the repair charges will be based.   I usually allow my managers to make repairs up to $100 without contacting me beforehand.  This is up to you, but note that you can set a maximum with your manager.
6. Reserves:  What is the required cash reserve for anything that comes up?  Most managers will charge a reserve that is refundable if unused.
7. You’re Fired:  What is the termination policy, in case you discover that the relationship isn’t working out?  Find out what it will take to terminate, before the trouble starts.  Many companies charge a fee for early termination of the management agreement.
8. Statements:   Does the company provide monthly or quarterly accounting statements?  I personally don’t do business with companies that don’t provide a monthly accounting.
9. Yard Work:   Does the company have a lawn service that tenants can use?   Do they handle leaf and snow removal?  Landscaping or removing trash or debris?  If so, how much do they charge and how is it billed?  This type of service is a real plus for single family homes, especially those with treed lots, locations in storm areas or others with cold winters.
10. Property Checks:  Does the company have a drive by schedule for the property it manages?   Do they verify that the property is in good condition and leasing terms are adhered to during the lease term?
11. Advertising:  You want your property advertised.  Ask where they advertise the property?  They should use yard signs with an InfoTube or InfoBox, have a good website with a lot of photo’s of the property, upload your listing to free rental websites and make use of local classifieds.
12. Evictions:  Sad, but something landlords have to address upfront.  Does the company handle all evictions?  They should.   If so, what are the costs to evict a tenant?
13. Section 8:  Properties that qualify for affordable housing assistance should have a manager that is qualified to handle all the rules and regulations, so ask.  You never know when you might buy a piece of property that requires knowledge of the laws.

When interviewing property managers, these are the questions you will want written answers to before you sign any agreement.  

Tomorrow, we will look at little clauses and common sense items you can add to leases to protect yourself and your property.   They are also tools that your property manager will appreciate, should you decide to hire one.

If you are one of the millions of homeowners that have been unable to sell your home, one viable option that may be worth consideration is renting your property.   If you have entertained the idea of becoming a landlord, one of the first decisions you must make is whether to try it on your own or hire a property manager.  

While hiring a property manager can be great asset for your new, “involuntary” rental business, it can also be an expensive nightmare.   Carefully, review the factors to determine if you need a property manager, and if so, how to find the one that is right for you.

What does a Property Management Company Do??

Management companies deal with prospects and tenants.  They market your rental property, collect rents, handle maintenance and repairs,  respond to compliants and take care of evictions.   A good company saves you time, money and worry, giving you a peace of mind that your investment is in good hands.

Do you Need a Property Manager??

Hiring a property manager has many benefits, but it can be expensive.  In addition, relying on a third party is not for everyone.   Ideal candidates for professional management include:

• Distant Landlords:  If you don’t live near the property, management can be invaluable, if not necessary, for many issues that will arise.
• Hands Off:  If you hate the idea of meeting and interviewing tenants, receiving late night calls about stopped up plumbing or view rental property as an investment…you probably need a manager.
• Too Busy:   If you don’t have the time to landlord, work, and take care of the family, then management may be a good way to spend your money.
• Lots of Property:  The more rentals you own, the more you deserve a manager.
• Section 8 or Affordable Housing:  If your property participates in one of these programs, the rules are extremely complicated.  It is usually worth hiring a manager that has experience with your particular housing program to insure full compliance.
• If you Can Afford It:   A manager is always a great option, if you can afford the fee’s.  Typically, managers receive 5%-10% of the collected monthly rent for the management of the property.   In addition, most charge a fee equal to 1/2 of the monthly rental amount for procurring a new lease.  (If the property rents on a yearly basis, the leasing fee would only be paid once per year.)

How to Find a Good Property Management Firm??

• Referrals from trusted colleagues or friends is always best.
• Check out the website of the National Association of Residential Property Managers.  Click on Search Property Managers.
• Visit the Institute of Real Estate Management and click on Find a Member.

In conclusion, hiring a property management company can be a fantastic option, or not.   If you have decided to hire a property manager, or if you would like to learn specifics about what you should ask beforehand, please check back with our blog on Tuesday, July 1st.  

The topic will be “What Should you Look for When Picking a Property Management Company”? 

An interesting 2 minute video from CNN News offering a unique approach to selling your home FAST.  In 5 days, as a matter of fact.

Another unforeseen problem buzzing around foreclosures and the bad economy is the dramatic increase in the mosquito and garden pest population. 

Many entire neighborhoods now feel the sting, as millions of vacant properties, along with those owned by cash strapped homeowners, have turned overgrown lawns, swimming pools, hot tubs, water gardens and koi ponds into insect breeding grounds.   

Before you light the citronella candles or coat yourself in insect repellent, consider heading to your local garden center for relief.   Some plants are natural insect repellents and keep summer bugs away, while improving the curb appeal of your home.

NATURAL “BUG OFF” PLANTS

Marigolds–Marigolds don’t have the greatest smell, but mosquito’s and other pests literally hate it.  The bright, inexpensive and easy to grow annual is a proven workhorse in deterring pests around patio’s porches and vegetable gardens.

Catnip– In addition to being a favorite of your beloved feline, catnip is 10 times more effective than DEET when it comes to repelling the universally hated and dangerous mosquito.   The annual plant grows easily in a sunny, dry location like the one found around most patio area’s.

Lemon Thyme–  Smells and Tastes Great to Humans.  Its lemon scent is a wonderful to smell as you walk or brush by and its lemon flavored leaves can be used in salads or recipes calling for lemon or lemon zest.  This perennial grows great in most climate zones, requires little to no watering and thrives with a little sunshine.

Lemon Basil–  Is another plant that smells great to people and is delicious to eat with summer tomato’s.  Lemon Basil is a tender annual that needs watering.  It is does self sow, but buy starter plants versus sowing seed packets for the best results with this yummy option to a pest problem.

To learn more about natural insect deterrents and repellents click here.

This video is a fun way to experience home prices since 1890.  Feel the pull of appreciation and the drop of depreciation on this fun wild ride through the US real estate market.

Click Here to Take a Ride:

Purchasing a home is a huge financial undertaking that requires organization and complex calculations before you begin your home search.  

We found a new website by HGTV named Frontdoor.com, designed to make home buying an easier task.    Frontdoor.com provides a user-friendly free toolkit for homebuyers and sellers that is packed with handy tools.  Check out the rent vs buy calculator, home selection tips, financial calculators, home tour check lists, how to advice and much more. 

If you are in the market for a home, take a minute to visit the HGTV Frontdoor website this weekend.  In our opinion, it eliminates a lot of the confusion about the daunting task of home buying and frees up your time for more house hunting. 

One of the unintended consequences of high fuel prices is the apparent effect upon home sales, urban planning and a shift to inner city living, as people flee the suburbs to cut their commute time and expense.

A new report, Driven to the Brink, issued by CEO’s for Cities, a non-profit group, points out the fact that high gas prices have been an overlooked factor when evaluating the reasons behind the housing crisis.   The report finds that the decline in home prices has been more severe in metropolitan areas and suburbs that require lengthy commutes, and where there is a lack of public transportation.

That sentiment was also reflected in a poll of 900 Coldwell Banker agents.  96% of the agents surveyed reported that rising gas prices were a major concern for buyers and 78% said high fuel prices were driving demand for city living.

As real estate prices and sales volumes are studied, it certainly seems that the price of driving a car is changing the definition of location, location, location.   Homes that are close to public transportation, jobs, schools and shopping are selling, even in today’s “buyers market”, as home buyers place greater importance on cutting gas bills and commute times.

What this means to sellers, buyers and investors is that people are looking at where the home is located in a new way.  They are considering the price of gas and driving time before purchasing.   Drivers paying $4.00+ per gallon for gas, do not take commutes for granted, nor will the allure of new construction, granite counters and stainless appliances pull them out to the suburbs, away from their jobs and schools.

In conclusion, gas prices are changing real estate values and the shift appears to be permanent.  Vibrant cities with good public transportation have become a lot more valuable, while rural area’s and suburbs, built on $2.00/gallon gas, have lost their appeal.    This shift is a tremendous opportunity for cities and developers who remix land uses, add higher density housing and better transporataion.

If you are selling or buying a home, you must understand the impact that gas prices have on the definition of location.  You may quickly discover that the rising price of gas means living near the train station is the best thing for your bank account and your home appreciation.

Lease Options, popular in the 70’s and 80’s, are resurfacing  as financing options in the 2008 housing market.    For those unfamiliar with lease options, I will outline what is a lease purchase or lease with the option to purchase?  What are the benefits and drawbacks?  What are the things to watch for? 

NOTE:  Please keep in mind that the information is an overview and is not meant to be construed as legal advise.  Buyers and Sellers should always consult an attorney before signing any legally binding document.

ABC’s of a Lease with an Option to Purchase:

• The buyer pays the seller an option fee for the right to purchase the property on or before a future date.  The amount of the option fee may be substantial or as low as $1.00.
• The purchase price can be fixed at the time of contract or set at the fair market value at the time the option is exercised. (Note:  Most buyers will lock in the future price when the option contract is signed.)
• During the Lease Period, the buyer leases the property from the seller for an agreed upon rental amount.
• The term of the lease option is negotiable, but the term is usually from 1-3 years.
• The Option Fee is generally non-refundable.
• If the buyer does not exercise the option to purchase the property at the end of the lease, the option expires and the seller keeps the option fee.
• Usually, a portion of the rental amount is applied to the future purchase.  (Example:  If the lease is $1200 per month, the seller will apply a credit of $200 per month toward the future purchase price or down payment.)
• The buyer can not assign the lease option without seller approval.
• The Buyer is not obligated to buy the property.

ABC’s of a Lease Purchase: 

• Includes all the standard terms above with the following exceptions.
• The option money is non-refundable and does not apply toward the purchase price or down payment.
• No one else can purchase the property unless the buyer defaults or the option period expires.
• The buyer is responsible for maintenance, all expenses for upkeep, taxes and insurance.
• The buyer is obligated to buy the property.
• The Seller can sue for specific performance in the case of buyer default on a Lease Purchase.

Benefits for Sellers and or Buyers:

• Lease Purchases or Lease Options are usually offered by distressed homeowners or builders. 
• The Seller can often get a higher price than they would with a normal sale.
• The Seller is able to sell the home in a slow market.  Think about it, if the property was easy to sell, the owner would sell it out right for the cash.
• The Seller benefits from locking in today’s prices and gets relief from paying the monthly mortgage.
• In theory, the Seller gets a renter that keeps up the property.  Since the renter intends to purchase the property, they should take care of the home, as if it were theirs.
• The Buyer builds equity through a forced savings plan, as a portion of rent is credited to him, even though the lease payments may exceed market rents. 
• The Buyer hopes to build equity, if the property appreciates during the option period.
• Buyers usually make a small down payment, with little to no qualification, which makes lease purchase a good way to ease into home ownership.
• If the Buyer defaults, the Seller does not refund any portion of the lease payments or the option fee. 

25 YEARS OF REAL LIFE EXPERIENCE:

I have written dozens of Lease Purchase or Lease Option Contracts during the 1980’s real estate crash in Texas.  During that entire period, I never saw one person actually  purchase the property they had an option on. 

The primary reason is often the reason they try to buy with a lease option in the first place…they can’t qualify for a loan.  The second reason for default was that prices continued to fall during the option period and they could buy another home for less money.   The third reason was that the property was in poor condition when they leased it and things became worse with the passing of time. 

If a Seller can not sell, then a lease option or lease purchase may be a sales tool to consider.  They generally generate more monthly cash-flow than renting alone and an option fee is the sellers to keep.  

But note, history proves by a large margin that the tenant will not become the owner, unless their credit situation has improved and the property values increase above the option price.

Bottom Line:  Chances are that 95% of the time, the Seller will get their house back at the end of the option period.