Selling Your House In A Sluggish Economy Using Seller Financing, Land Contracts or Lease Options

March 24, 2010 - PRLog -- Using a Lease Option or Land Contract may be the perfect solution to selling your house fast in our sluggish economy. If you've tried listing with a realtor, selling your house yourself or considered renting, this might be a refreshing and realistic alternative to getting the job done.

There are plenty of buyers who cannot get qualified for financing right now (the result of our economy). There are also plenty of sellers who can't get their home sold (also the result of our economy). The solution is to bring the two parties together in a win-win that can benefit both parties.

The problem quite often is that your realtor may be determined to finding a qualified buyer who is able to get financing right now. Or if you are trying to sell your own home without a realtor, you may not have the skill or knowledge to seperate the qualified from the unqualified buyer. Even if you feel your situation isn’t what you would consider ‘desperate’ or ‘out of control’, sitting on an empty house just doesn’t make sense. What if you can design an alternative to the issues surrounding your house selling problems? An alternative that would bring you a fair market purchase price, eliminate commissions or fees, bring you debt relief from the mortgage payments while you’re waiting to close on the sale and provide freedom from repairs and maintenance? Would that appeal to you? This leads to what we feel is a very quick, realistic solution to selling your house...selling on a land contract or lease option to buy.

In many cases, a buyer may truly WANT to own a home but their financing or credit will not allow them to purchase outright. This is where some form of temporary seller financing can create a solution that is acceptable to both parties. The two most common types of seller financing known through real estate circles are Lease Options and Land Contracts.

Some people call it Seller Financing or Owner Financing. In some states the structure is more commonly known as a Contract For Deed. Here in Ohio, we call it a Land Contract.
There are also structures known as a Lease Options. Or some people call it a Rent-To-Own program. There are items the two sales strategies have in common and there are distinct differences between the two as well:

What is a Lease Option?
A lease option (also known as a rent-to-own in some areas) is a combination of renting and purchasing. Primarily, It involves a buyer who would need some time before a purchase is possible. This person would rent the property from an owner until they are in a position to purchase the subject property. Secondarily, a lease option serves as a delayed sale with the purchase price being pre-determined upfront prior to the tenant/buyer moving in. Typically, there is a set amount of time that a seller will allow the tenant/buyer to exercise their option to purchase the property...anywhere from 1-5 years.    

What is a Land Contract?
In common layman’s terms, a land contract is an installment sale where a buyer agrees to make payments directly to the seller until the purchase price is paid off. This usually involves an interest rate (typically higher than market rates) with the seller acting as the bank. However, the deed (legal ownership) does not transfer to the buyer until the buyer pays off the entire amount due to the seller. Generally, the loan with your buyer will be amortized over 30 years (or whatever term you can negotiate with the buyer) and contain a ‘balloon payment’ which may be due in 2-5 years after the Land Contract is originated. After the balloon payment is paid to the seller (typically by the buyer refinancing with a bank), the seller is then obligated to convey the deed. A land contract is, to a greater extent, a commitment made by the buyer to eventually refinance the property into their name so they can acquire legal ownership. A Land Contract can be used even in cases where you may have an underlying mortgage of your own.

Let’s take a look at the two sales strategies and what they have in common:

Similarities Found In Lease Options and Land Contracts:
1. In both cases, the seller will usually receive full market value for the home with the purchase price being predetermined at the time the contracts are drawn up. Since the seller is flexible on the terms, they can afford to be firm on the price. This really helps in those situations when a house may contain little to no equity; many times there may not be enough equity to pay a realtor.
2. In both cases, the buyer will be responsible for making a payment directly to the seller.
3. Both agreements contain a maturity date which varies from 1 year up to 5 years, with the normal time frame being 2-3 years. The time frame can be adjusted to fit your needs along with what you feel your buyer may need. This is what allows the buyer the time necessary to cure credit issues, build up down payment money, secure more time on the job, etc.
4. Both agreements require the buyer to maintain responsibility for maintenance and repairs on the property while living in the home…..no matter how large or small, the maintenance and repairs are the responsibility of the buyer.
5. Both agreements contain a non-refundable option fee or down payment. This money is yours to keep and non-refundable to the buyer, per your agreement.

Both sales strategeis have pro's, con's (very few cons), similarities and differences....too many to detail in this short press release. There are certain educational components when preparing to sell using either strategy that can save you a pant load. There are steps you'll need to take when it comes to protecting yourself in structuring a Land Contract or Lease Option.....the least of which will be the importance of seeking good legal counsel.

Here is an excellent question you might want to ask yourself: "Isn’t it better to use a Lease Option or Land Contract to create a future sale than to not sell my house at all?" Kind of like saying a bird in the hand is worth more than two in the bush. In this market, you can find more people who WANT to own (but aren't currently qualified) than you can find that ARE qualified and just happen to love YOUR home over all the others saturating the market right now. Makes sense doesn't it?

CONCLUSION:  Don't be caught with your head buried in the sand like a lot of sellers today. Many people think they're immune to the severe decline that we've seen in our recent marketplace. Now they're not going to come out and actually admit to this thought process. But when they've had their property listed for sale for 6-18 months, and they feel they can sell their home for the same price they purchased it for 3 to 4 years ago (and using conventional means, like a realtor), they might just be living in la-la land. Here in Ohio, we've seen at least a 15% decline in most areas.

If you've had your property listed with a realtor for 6-12 months or longer (and we work with sellers who had their properties even listed for two years or longer), now is the time to think outside the box. A lease option or land contract can provide a ‘top of the market’ price for your area at the time you are selling. The old rule of thumb is that if you are flexible on terms, you can be firm with the price.

Seller financing, whether it be a Lease Option or Land Contract, can create a win-win for both seller and buyer. This is a sales strategy that works especially well in slow or ‘buyers’ markets’. Keep in mind that in the end both seller and buyer want the same thing..buyers want to own and sellers want to sell. Seller financing is an incredible strategy that has worked well for hundreds of thousands of sellers and buyers alike.

There are many, many more details on how this can work effectively for you and your market. Email us anytime if you would like a copy of our report entitled "The Lease Option or Land Contract Solution to Selling Your House FAST in Today’s Sluggish Economy”. My email address is mark@move-soon.com.

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Butler County Homes can assist both buyers and sellers. We are constantly looking for additional properties to add to our inventory. Call us if you would like us to consider purchasing your property. We can discuss the qualifications of your house through a simple phone call. We are located in Ohio but can work throughout the country.

We have an extensive buyers list that is growing and being updated daily....all of them are buyers who want to quit renting and own a home. Generally the homes we offer to individuals or families that want a home to live in will be drop-dead gorgeous. We have a number of financing possibilities including Lease Options, Land Contracts, Rent-To-Own, etc. When we enter into a lease option, land contract or rent-to-own with you, we are more concerned about your current situation than your past. We believe bad things can happen to good people.

Sellers and buyers alike can reach us at 513-417-3447 or email at mark@move-soon.com