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.

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.

So, you purchased your home a while ago and now that you look at everything it seems the whole place may be too big for you.  You’re not alone - a lot of homeowners are deciding this is just the market where they should be downsizing their living requirements.

The decision to sell your family home may seem difficult - but once its made you’ll face another chore:  getting rid of all that stuff and getting the home ready to sell.

Get Rid of the Stuff You Don’t Need 

One of the best approaches to getting rid of all that stuff is to have a yard sale.  A big one.  You’d be amazed at what people will buy and knowing some of your more cherished items are going to a good homes can help to ease the pain of getting rid of them.

If you come across something you haven’t used in 2 or 3 years - even if it is in great condition - you should get rid of it.  Either toss it, sell it, or donate it (so you can write it off on your taxes).

Kids rooms are a good place to start as they’ve likely outgrown most of the stuff they have in their rooms and closets.  If your kids are grown and out on their own - invite them over to go through their stuff and reminisce.  If they find something they want - then great.  Otherwise plan to get rid of it.

Clean it Out

If you’ve been in your house any number of years, even if you’ve kept is spotless, you can be sure there are places that need a good scrubbing (back of cabinets and closets especially).  You might even be better off if you hire a professional to come clean it all out.

Once the place is sparkling clean, you can make the decision on whether you need to replace the paint and carpet (this is highly likely).  Most homebuyers today are expecting a fresh coat of paint and a brand new carpet.  You can be sure that your competition down the street is planning on doing it to their house before they sell - so you might as well do it also.

Today’s Market

If you bought your house a number of years ago - you can be sure you’re not going to sell your home the same way you sold your first home.  A lot of today’s buyers often search the Internet first for any homes for sale and they only call an agent once they have things narrowed down.

Additionally there are other things that have changed in the homeselling process as well - including home inspections and all the different financing options.

If you’re ready to make this exciting move up or down in your life - please don’t hesitate to give me a call.