Lease Options
By Elizabeth Dougherty
Whether you are thinking about optioning
or exercising your current option, there are
a few things you should know before you
make any final decisions. Tax advantages,
market conditions and home values are
just some of the factors that should be
considered.
Let's pretend you already have an option
on a home. About a year has gone by and
now it's time to exercise it. You've already
gone ahead and bought that giant sized
television and built a new barbeque pit.
Of course, you could pack up all your stuff
and move, but is it worth it? Maybe.
Two years ago, and even a year ago it was
a different market than it is now. There
has rarely been a better time to purchase
a home. Concessions are being offered
by builders, there's a healthy selection of
homes on the market, and lenders have
more financing options available than ever
before.
It never hurts to take a look at what's
currently available and ask yourself a few
questions. What's the value of the home
you are in compared to others on the
market? Are the elements of your contract
more favorable to you or the seller? Would
you save money by buying another home
when factoring in moving costs and the
loss of the option money you have already
forked over?
Pull out your contract and take a look at it.
You may be able to renegotiate the terms
and get a better deal. The sellers will have
to consider whether or not they should
try and work with you. If they don't and
you move, they'll have to put the home
back on the market and make it ready for
showing. They'll probably have to paint (at
least the inside), shampoo and/or replace
carpets and do some landscaping. If there
is an underlying mortgage, the payments
will have to be made by the seller for as
long as the home remains empty.
Of course, you may not have an option
and are just out looking right now. Are
you considering a lease option rather than
purchasing now? Consider this; generally,
the seller retains the tax advantages to
owning the home during your option
period. Also, if the terms of the contract
are not tightly written in your favor, the
seller may be able to turn around and sell
the home to someone else, keeping your
option money and selling the home at
an increased market value. For instance,
if you make late payments or don't keep
up the property there might be a contract
provision that voids your option.
What about repairs? After you move
in and before you exercise the lease
option, who pays for things like plumbing
mishaps and roof leaks? Who takes care
of the lawn? If something breaks are you
permitted to fix it yourself or do you have
to use a repairperson authorized by the
seller? Who pays for property taxes and
homeowner's insurance during the option
period? What does the insurance policy
cover if the home is not owner-occupied?
The best advice is read every word of a
lease option before signing it. As we have
said before here in HomeSeeker, words are
important.
Elizabeth Dougherty, a resident of
Auburn, is a former Real Estate Broker
and Mortage Broker. She can be
reached at EADougherty1@aol.com.
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