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Creative Financing in a Tough Market - North Georgia Lease Purchases
By Karin Elliott | December 29, 2007
I’m getting a ton of real estate calls regarding anything but good old fashioned “I am prequalified and want to buy a home within the month!”. Many of these folks ask about a lease/purchase. With the curent real estate market across the country, we are getting a lot more calls regarding creative financing. Buyers are itchy to move for one reason or another, and they know the lenders are starting to pay attention to loan applications. Simply put, for one reason or another, these buyers do not want to have to jump through these new hoops from the lenders. Truth be known, I’m still worried that the Columbia House is going to come after me for my one penny record collection when I was 15 years old!!!
Are lease purchases a bad idea? It depends. The common pattern I see with many lease purchase offers is that they get to a certain point, and then they seem to fall apart. The theory is simple: Buyer promises to lease the home for said amount of time, and then promises again to purchase it at the end of the lease period. The Buyer puts down a non-refundable deposit and agrees to pay rent for the lease period. There are contracts signed, a lease contract and a purchase contract. There are items to be negotiated such as taxes, POA fees and maintenance. The Sellers are happy to get some relief in the sluggish market and the Buyers are happy to have a year to get their finances together. In contrast, the Sellers are concerned because the “purchase” has a possibility of falling through with a minimal amount of down payment, and a home that could possibly be in worse condition than when it started.
To my Buyers I say, give it a try, the worst thing the Sellers can say is ‘no’. To my Sellers I say “Approach with caution”. It is a necessity to ask for a credit check. Chances are that there is a credit problem. This is not always a bad thing. A lot of credit issues can be repaired over time, and many of these Buyers may be perfect tenants. In contrast, when we first moved to Big Canoe, we leased a home with an option to buy. We decided not to exercise our option (the list of reasons isn’t all that long, but is was enough to persuade us not to buy), and regardless of the fact that we fulfilled our lease obligation to the penny, our landlord felt he was “doing us a favor.” I still don’t quite get what that favor was, but my point is there are two sides to the coin. Often, these deals just won’t work. To EVERYONE I suggest this is absolutely a transaction that you want a real estate agent or attorney handle because it is a lot more complicated than a normal purchase. Unnoticed loopholes can leave you in a world of hurt after the fact. Chances are that the some 15 pages of paperwork will seem like trouble in the beginning, and everyone is better off having all their bases covered. Let me sum this up by saying that in a slow market, Sellers willing to be creative may very well improve their chance of selling their home. The process just needs to be handled carefully and with due diligence.
Here is a list of homes for possible lease purchase in the North Georgia Community of Big Canoe:
Please feel free to contact Karin Elliott at (770) 655-4303 regarding these homes or via email.
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