Are you trying to sell your house?It is possible to get top dollar for your home with a lease option.It's possible that the sale will generate some extra income.A lease option allows you to rent your property to a potential buyer and give them the option to buy at the end of the lease term.You can use a lease option to get people who want to buy a home but aren't quite ready to do so.
Step 1: Fix your home.
If you fix up your home as much as possible before advertising, you will get the largest number of offers.Poor stairs, broken windows, and leaks in the roof should be fixed first.The home should belivable at a minimum.You have to give your tenant enough heat and hot water.A deadbolt lock and locks on the windows should be enough to make the home sufficiently safe.There are standards for rental property.Ask for requirements at your local housing authority.
Step 2: Don't hesitate to consult an attorney.
Not every state allows rent-to-own agreements, so you should consult with a real estate attorney before putting your home on the market.You can find a real estate attorney by contacting your local bar association and asking for a referral.Even if you don't want to hire the lawyer, they should walk you through the process.Things can be simpler if you hire the lawyer.They can draft the lease option contract for you.Required closing documents will also be reviewed by them.
Step 3: There is a need to advertise.
It's not that common to have lease options.You will likely have plenty of potential buyers to choose from, because they typically receive an overwhelming response.You can put up a sign on the property to advertise the home.Make sure you mention that your home is rent to own.There are ads in the local newspaper.You can advertise online.You can post an ad on the site.You should have pictures of the inside and outside of your home.
Step 4: You can create an application.
You will need to thoroughly vet any applicants.All interested buyers should complete the application that you create.Make sure your application asks for the name date of birth of your Social Security Number.Current address previous addresses employment history (name, contact information, dates employed), gross pay at each job bank accounts, credit card debt, whether the applicants has ever been late with rent, and their signature authorizing a background check.
Step 5: Background checks should be performed.
If you want to do a lease option with someone you wouldn't rent to, you have to look at potential buyers as potential tenants.You should do a background check on all applicants.You probably don't want someone with a bad credit history, but at the same time you may want to be tolerant.Many buyers who choose lease options do so because they want to improve their credit score before applying for a loan.
Step 6: Take care of your own credit.
There is a risk in entering a lease option contract.You might lose your house during the rental period.The renter won't be able to buy the home and will have to move.Although lease holders with an option to purchase don't typically check a seller's credit, you may want to clean it up just in case.You should get a copy of your credit report.Make sure to dispute any errors with the credit reporting bureaus.As much as possible, pay off your debts.If you are in financial trouble, you can expect buyers to be leery of entering a contract with you.Paying down debt improves your credit profile.If you owe taxes or liens, pay them off.
Step 7: Pre-qualify your tenants.
It is a good idea to talk to a loan officer or mortgage broker about the potential buyer's prospects for obtaining a mortgage at the end of the lease.The longer the lease term, the more uncertainty there will be.When the option comes due, you want to know if your tenant can qualify for a mortgage.Ask the potential tenant to contact a mortgage broker.You should get a letter from the broker explaining whether the tenant will qualify.It is important not to enter a lease option agreement with someone who will never be able to get a mortgage.Renting to a person is a scam.The lease contract should make sure that the buyer is on track and that they are eligible for a mortgage at the option deadline.They would be in default of the contract and you could either give them more time or change it.
Step 8: The lease period can be set.
A tenant will lease your house.Most contracts last one to three years.You want to give your tenant enough time to save a down payment or clean up their credit so that they can get financing.
Step 9: Determine the amount of rent.
You can find out the market rent for a home of your size.In terms of size, location and amenities, look for comparable properties.In your lease agreement, make sure to identify the date rent is due, as well as what methods of payment you will accept.Determine how much rent you want to apply to the purchase price.You can decide if 25% of the rent will be used as a down payment.$250 a month for 36 months will be applied if the tenant pays $1,000 for three years.You should charge above-market rent if you apply a portion of the rent to the down payment.
Step 10: The security deposit needs to be stated.
Tell me how much you want from the tenant.You can use the security deposit to repair damage to the property.You should explain that the tenant will lose their deposit if they break the lease.
Step 11: You can choose the type of option.
You can give the buyer two options.The lease option agreement means that the renter has the option to buy at the end of the rental period.The choice gives your tenant more control.There is a lease-purchase agreement.Your tenant is obligated to buy at the end of the rental period.If the tenant does not purchase the home, you will agree on what happens.The tenant can continue to rent the home even if they lose a down payment.
Step 12: The lease option fee should be decided.
The amount of money your tenant will give you is known as the option.You and your tenant can negotiate the amount of the standard rate.You can go higher or lower with options, but they are usually 3% of the purchase price.If the purchase price is $150,000, you might want your option to be $4,500.Is the option fee non-refundable?Typically, it isn't.You pocket the money if the tenant doesn't exercise their option.It is important to agree if the option will be applied to the price of the home.Generally, it does.
Step 13: The deadline is for exercising the option.
When the lease agreement is signed, the option usually begins.Tell them how they can exercise the option through a letter.An extension can also be granted.The tenant might not be creditworthy by the end of the option.If they are working hard to get a mortgage, you might want to extend the option.
Step 14: The purchase price can be chosen.
The purchase price of the home will be explained in your contract.When you sign the contract, you and your tenant can agree on the purchase price.You might want to set the price higher than the market value to account for rising property values.The price will be set when the lease ends.The option that works best for you.The second option is available in a real estate market with rising prices.A certain price can be set if the house is purchased within one year, a higher price if it's purchased in the second year and even more so if you buy it in third year.
Step 15: It is necessary to assign responsibility for maintenance.
Repairs might be needed during the lease.If you want the tenants to pay, include language in the contract.Tenants are usually responsible for minor things like mowing the lawn and basic interior or exterior maintenance.Major repairs, such as replacing the roof or foundation, are not done by the tenant.You can set a dollar amount for maintenance.The homeowner can require the buyer to pay property taxes, insurance, and homeowners association fees.Since you are responsible for them until the sale goes through, you might want to keep paying.Make sure you have landlord's insurance.You can talk to an insurance agent.A home warranty will cover expenses if the home needs a major repair or replacement over a period of time.
Step 16: Don't take any loans against the house.
Your tenant will want a promise that you won't do reverse mortgage or get a home equity line of credit.If you default on the loans, you might lose your home.The buyer will not be able to buy the house.You could hire a company to hold the money.Rent payments would be used by the company to pay your taxes, insurance and mortgage.These transactions could be handled by a property management company.
Step 17: You should draft your agreement.
Since this is a legal contract, it is best to have a lawyer review your draft to make sure there are no gaps.You will need to draft your agreement if you didn't hire a lawyer.Sample contracts can be found online.Make sure you include all of the terms you would normally have in a lease agreement, such as reasons to evict someone, in your lease option agreement.
Step 18: The contract should be signed by you.
The contract will not be binding until you and the buyer sign it.You can either give the original to your lawyer or keep it in a safe place, such as a safety deposit box.
Step 19: Excellent records to keep.
As you collect your tenant's monthly rent payments, you need toAccurately record the amount paid and the date.If you apply a portion of the rent to the purchase price, you need accurate records.You can enter information in a timely manner by keeping a spreadsheet.
Step 20: Stay in touch with the tenant.
You should be in contact with your tenant as the option expires.Do you know if they are considering purchasing your home?Since they will need to finance the purchase, they should begin investigating mortgages.It's possible that you need to make your tenant assess their credit score during the purchasing process.
Step 21: Sell the house.
You can proceed with the sale if the tenant exercises the option.To get the paperwork drawn up, contact your real estate lawyer.The time it typically takes to secure a mortgage will be taken into account.The buyer should do all of the regular due diligence, including a home inspection, even if they didn't sign the lease before.disclosures about the house were mandated by the appraisal title search.
Step 22: The house should be put back on the market.
Tenants can choose not to exercise their option.You can rent the home, enter another lease option, or try to sell it.You could enter another lease if you liked renting.You should review your contract to make sure you don't have to give back the rent credit.The agreement should have been drafted so that you didn't.