Anne Arundel County Real Estate

I’m not sure why a lot of people are looking for this, but I’ve been getting a lot of inquiries regarding rent-to-own or lease-to-own arrangements.

With the recent changes in the FHA limits - credit in our area is easier to come by. Unless you have poor credit, you should really think about buying straight-up. And of course, I’d be happy to help you with that.

If you’re interested in a rent-to-own purchase, then here is some information for you:

For the Seller - From the Orlando Sentinel:

Lease-to-Own Primer

Lease-to-own agreements can help sell a hard-to-sell property during a sluggish housing market. Here’s how they work:

• A seller agrees to rent a property to an interested buyer for a set period of time, usually one to three years. At the end of the lease, the buyer has the option to purchase the home at a preset price.

• A portion of the monthly rent paid during the lease is usually counted toward the down payment. To cover that, the seller charges a rent increment or monthly premium of $200 to $300 compared to comparable rentals.

• Many owners also charge an option fee for taking the property off the market, usually 1 percent to 2 percent of the sale price. This may be applied toward the purchase.

• Sellers have no guarantee that renters will buy at the end of the term, but if they don’t, they keep the option fee and the amount of the rent that would have gone toward the down payment.

Source: Orlando Sentinel (03/09/08)

And for the Purchaser - From About.com

* Buyer pays the seller option money for the right to later purchase the property. This option money may be substantial or as little as $1.

* Buyer and seller may agree to a purchase price now or the buyer may agree to pay market value at the time the option is exercised. It is negotiable. However, most buyers want to lock in the future purchase price upon inception of the option.

* The term of the option agreement is negotiable, but the common length is generally from one year to three years.

* Option money is rarely refundable.

* Nobody else can buy the property during the option period.

* The buyer can sell the option to somebody else.

* If the buyer does not exercise the option and purchase the property at the end of the option, the option expires.

* The buyer is not obligated to buy the property.

Basics of a Lease Option

* Buyer pays the seller option money for the right to later purchase the property. The lease option money may be substantial.

* Buyer and seller may agree to a purchase price now or the buyer may agree to pay market value at the time the option is exercised. It is negotiable. However, most buyers want to lock in the future purchase price upon inception of the lease option.

* During the term of the lease option, the buyer agrees to lease the property from the seller for a predetermined rental amount.

* The term of the lease option agreement is negotiable, but the common length is generally from one year to three years.

* The option money generally does not apply toward the down payment.

* A portion of the monthly rental payment typically applies toward the purchase price.

* Option money is rarely refundable.

* Nobody else can buy the property during the lease option period.

* The buyer generally cannot assign the lease option without seller approval.

* If the buyer does not exercise the lease option and purchase the property at the end of the lease option, the option expires.

* The buyer is not obligated to buy the property.

Basics of a Lease Purchase

* Buyer pays the seller option money for the right to later purchase the property. This option money may be substantial.

* Buyer and seller agree on a purchase price, often at or a bit higher than market value.

* During the term of the option, the buyer agrees to lease the property from the seller for a predetermined rental amount.

* The term of the lease purchase agreement is negotiable, but the common length is generally from one year to three years, at which time the buyer applies for bank financing and pays the seller in full.

* The option money generally does not apply toward the down payment.

* A portion of the monthly lease payment typically applies toward the purchase price.

* Option money is nonrefundable.

* Nobody else can buy the property unless the buyer defaults.

* The buyer typically cannot assign the lease purchase agreement without seller approval.

* Buyers are often responsible for maintaining the property and paying all expenses associated with its upkeep, including taxes and insurance.

* The buyer is obligated to buy the property.

Doing a Lease Option / Lease Purchase
Hire a real estate lawyer to draw the documents and explain your rights, including those of possession and default consequences. The property might be encumbered by underlying loans that contain alienation clauses, giving the lender the right to accelerate the loans upon sale.

Sometimes sellers give the option money to their real estate agent as full payment of commission. Agents are not always involved in the exercise of lease options or fulfillment of lease purchase agreements and, even if you have retained real estate agent representation, you still need a real estate lawyer. Agents are not lawyers and cannot give legal advice.

In the event of a lease purchase, obtain all the disclosures and do your due diligence just like you would on a regular sale. This means:

* Get a home inspection.
* Examine the title policy.
* Obtain an appraisal.
* Read seller disclosures.
* Consider obtaining pest inspections, a roof certification, home warranty plan and hiring other qualified inspectors.

Lease Purchase Benefits for Sellers and Buyers

Lease purchase agreements are commonly offered by sellers of hard-to-sell properties. Think about it, if the property was easy to sell, the seller would sell it to a conventional buyer who would pay the seller cash.

* Sellers generally get market value at today’s prices and relief from paying a mortgage on a vacant property.

* Although the lease payments may exceed market rent, the buyer is building a down payment and banking that the property will appreciate beyond the agreed upon purchase price.

* Buyers generally make a small down payment, with little or no qualifying, making a lease purchase an attractive way to ease into the benefits of home ownership.

* Buyers also receive a forced savings plan since part of the lease payment is credited toward the purchase price at the end of the lease option agreement.

* If the buyer defaults, sellers do not refund any portion of the lease payments nor the option money and may retain the right to sue for specific performance.

For more information, contact a real estate lawyer or your local Anne Arundel County Realtor.

This story in the Washington Post: Mortgage Rates Change in the Blink of an Eye highlights the uncertainty in today’s real estate market.

A lot of factors go into making things uncertain right now. For instance, the media continues to foster the idea of a national real estate market - when no such market exists. All real estate markets are local or regional. And now that the government is working an economic stimulus plan through the system, more and more volatility is going to be present in the markets as the mortgage industry figures things out.

In the mean time keep the following in mind: if you’ve been in your house for more than three years, and you’re looking to buy another house that you’ll be in for more than three years - then now is an excellent time to move-up. Interest rates continue to be at or near historical lows, government backed lending limits have been raised to all time highs, and your house has still gone up in value (at least in Anne Arundel county and surrounding areas).

Have your lender keep an eye on interest rates and make sure you lock in your rate when the time is right. Locking in the interest rate on a mortgage loan before it goes to settlement can save you money if rates go up after you lock. At the very least, a rate lock allows you better plan for closing - since you’ll know what your interest rate and cash requirements will be at the settlement table.

Keep in mind however that lock-ins only last so long - usually 30 to 60 days - so if you don’t have a firm date for your settlement within that time frame you might have to pay extra to keep the locked in rate if interest rates go up. This is especially worrisome when it comes to new construction which may be delayed due to weather or other problems, and it can also be an issue if you’re buying a home but don’t yet have yours sold - but you need to in order to qualify.

Get yourself ready to lock-in at a low rate by getting the appraisal done early, providing all necessary paperwork to your lender, and staying in contact with your lender.

Once you get everything done and you feel comfortable with where the rates are today - be ready to act if rates drop to where you want them.

I spoke to one mortgage guy last week who said that rates dropped low but only for a few hours. He called up his clients and asked them if they wanted to lock (most did). A few said they wanted to think about or they wanted some additional information. By the time they were ready to make a decision, rates had already gone up again.

If you need somewhere to live, you have two options available. You can either rent or you can buy. Of course, there are other setups that you can look into, but all in all, these are your two best options. Although it may sound easy enough to choose, when it comes down to it, deciding to rent or own can be a very difficult decision. After all, there are some benefits and drawbacks of each one. You will want to make sure that you are sure of what you are getting into no matte which option you choose.

First off, take a closer look at what renting has to offer. The main benefit of this is that you will not have to pay any large sums of money out of your pocket up front. In other words, you do not have to pay for a down payment or closing costs. At most, you may have to pay a security deposit in order to protect the landlord. On the other side of things, when you rent a home or apartment you are not building any equity. You are basically paying somebody else for a space based on your lease. When you leave you leave. You do not have to sell anything, and you do not own any stake in the property.

On the other side of things, buying a home means that you are going to more than likely need money for a down payment and closing costs. There are some loan programs that may work with you as far as the down payment is concerned, but generally speaking, you are going to need some money in order to finalize the transaction. But of course, when you own you will be building equity in a piece of real estate. And if you are lucky enough to finally pay your home off, you will be in a position to live mortgage free. This is a day that a lot of people look forward to.

As you can see, there is no way of saying if you should rent or own. You need to decide what benefits you the most, and then make your move. The decision should be yours, and after doing research into both options, you should be able to make up your mind.

Are you currently in the middle of a rent to own property deal? If so, you know that one of your options may be to walk away from the property when your lease ends. As you can imagine, this is something that a lot of people do. And when it comes down to it, the ability to walk away is one of the biggest benefits of getting involved with a rent to own property. But of course, you need to make sure that walking away is the right choice to make. In many cases, you may think that leaving the property without purchasing is the thing to do, but a bit more detective work may show you that you are wrong.

First and foremost, before you sign a rent to own property contract you need to make sure that you will have the chance to walk away without buying if you so desire. The biggest mistake that you could make with a rent to own property would be to not have this out clause in your contract. If you do not have the right to leave after the lease is up, you are not really taking full advantage of what a rent to own property has to offer.

The main reason for leaving a rent to own property instead of buying is if you are not happy about what the home is offering. But before you jump the gun, make sure that you take two things into consideration. First off, you need to make sure that you are comfortable walking away from the deal. In other words, if you walk away you may not be able to find something better elsewhere. In turn, you will find yourself wondering why you left your rent to own property. Additionally, you must also make sure that you have somewhere to go. Moving from one rent to own property to the next is never a good idea. If you are not going to buy the home that you are in, you should simply decide to either rent or own. This will help you to make the most out of your money as well as your real estate deals.

If it is in your contract, you have every right to walk away from a rent to own property. Just make sure that you are comfortable doing so before you make a final decision to leave the property.

Are you interested in a leaseback program? If so, you probably know what these are all about. On the other side of things, you may have never considered a leaseback program if you have no idea what they have to offer.

Just like anything else in the world of real estate, with a leaseback program you are going to have to deal with both pros and cons. There are some people who feel that this is a great way of doing business, and others who would rather invest and do things in another way. Simply put, a leaseback program is one of those real estate deals that you will have to decide on with the help of nobody else.

So what is a leaseback program? Generally speaking, this is when you buy a property, and then lease it back to a company that specializes in property management. In turn, they will then rent the property at an agreed upon price so that both parties can make money over time. In most cases, a leaseback program has an initial lease that lasts somewhere in the 10 year range. Of course, this can change based on the way that you do business, as well as what you are interested in accomplishing. Based on the price of the home, the net income on a leaseback program is typically five percent per year. But once again, this is not set in stone. As you can imagine, this number can fluctuate greatly based on the type of investment you have made, the company you are working with, the rental place, etc.

Now that you know the details of a leaseback program, you need to determine whether or not this can help you to succeed within the real estate industry. There are other ways that you can make money with real estate, but a leaseback program is definitely an option that you should consider. This is a great way to earn some income through real estate if you are willing to get involved with what a leaseback program has to offer.

Getting started with a rent to own property is not as hard as you may think. The most difficult part of this process is finding a property that is being offered as rent to own. As you can imagine, there are a lot of properties that are for rent and just as many that are up for sale. But when it comes to finding a rent to own property, you may have your hands full. This is especially true depending on the part of the country that you live in.

As mentioned above, the first step to getting started with a rent to own property is to find one in your area that you are comfortable with. The best way that you can do this is by using the internet as well as local resources such as the newspaper. Once you find a good resource that lists out rent to own properties, you should be well on your way.

Once you have located a rent to own property, the next step is to get in touch with the landlord, and then take a closer look at the property. This will give you all of the information that you need in order to make an informed decision. Remember, you can move into a rent to own property, but decide to leave if it does not suit your needs as you thought it would.

If you are ready to sign an agreement with the landlord, make sure that you carefully read over the contract that you are presented. You must keep in mind that your rent to own contract will govern how things move forward from day one. For instance, this contract will tell you how much you will pay each month, when the lease is up, etc. You need to make sure that you are completely comfortable with each aspect of the contract before you decide to move forward with a rent to own property.

When it comes to getting started with a rent to own property, the steps pretty much move forward in a linear fashion. As long as you are not in a hurry, you will be able to find the perfect rent to own property sooner or later.

Can’t yet afford to buy? Still need a place to live? Want to rent but also want to build up a little nest egg? Rent to Own may be the solution.

There are many benefits that go along with rent to own real estate.

If you are thinking about this type of transaction, you will definitely want to know about these benefits before you do anything. After all, one look at these benefits and you are sure to get a better idea as to what this type of real estate has to offer. Of course, there are some drawbacks to be aware of, but for the most part, rent to own real estate is a good thing to look into for a lot of people.

The main benefit of rent to own real estate is quite simple. Since you will be renting the home before you buy, you will have the chance to decide whether or not you like what it has to offer. This is something that you cannot do if you buy a home. Simply put, if you buy you are stuck with what you get; there are no two ways about this.

Additionally, rent to own real estate means that you do not have to have a lot of up front money. For instance, there is no down payment or high closing costs to pay when you are ready to complete the deal. This may not seem like a big deal to you, but paying these up front costs are something that a lot of people cannot afford.

To go along with this, you will be able to save this money to use for something else.

Finally, do not forget about the flexibility that is offered by rent to own real estate. What does this mean, you may ask?

You will have the ability to walk away from a rent to own real estate deal if you desire. Of course, you will have to do this before you move onto the buying portion of the contract, but it is possible. As mentioned above, you have the flexibility to walk away if you do not like what the house has to offer.

As you can see, there are many reasons that you may want to consider rent to own real estate. As you can imagine, this is not the perfect deal for every buyer. But to get the most out of your money, you should at least consider rent to own real estate.

The best markets to pursue a rent to own option is in a market where houses are sitting on the market longer - and sellers are getting anxious. And 2007 looks to be that kind of market.

Contact me today if you’re interested in looking for some of these deals.

One option to buying a house when you can’t get a mortgage for the full amount is called owner financing (or seller take back).

There are many details to consider if you are going to get involved with owner financing.

Remember, this is not the same as getting a loan from a bank or mortgage lender. If you are going to get involved with owner financing, that is perfectly fine. But with that in mind, you need to make sure that you are aware of the details that surround this type of deal. Remember, when you are not working with a bank or lender, things are going to be a bit different. While this may not bother you, some people feel that owner financing is a bit too risky.

All in all, this is a decision that you will have to make on your own.

The first thing that you must consider is how long you will have to pay your loan when dealing with owner financing. With a traditional 30 year fixed rate mortgage, you more or less know exactly what you are up against. But with owner financing, this may be far from the case. Make sure that the term of you owner financing is detailed in depth so that you do not end up getting the bad end of the deal in the long run.

To go along with the owner financing term, you also need to take a closer look at the interest rate that you are going to pay. Just like a loan that you will get from the bank, you are going to have to pay interest to the owner. Of course, this should be negotiable, but with owner financing you usually have to pay a higher rate. This is common because it goes a long way in protecting the owner of the property.

But speaking of protection, what are you doing to keep yourself safe? When dealing with owner financing, you need to make sure that you know what you are getting yourself into. Is the owner somebody that you can trust? Are you afraid that they are going to leave you hanging? The best way to avoid a skeptical situation is to not get involved at all. But if you are going to, make sure that you take the time to have a perfect contract in place.

As you can see, owner financing is not something that you should jump into without thinking about what you are doing. Take your time when deciding if owner financing would suit your current financial situation.