How To Get Realtors To Bring You Lease Options By Tony Seruga, Yolanda Seruga And Yolanda Bishop At Isnare.com Ezine Articles

Property investors have a valuable resource sitting right under their noses, but many either ignore it, or dismiss this potentially valuable tool without even exploring their options.

The resource in question is your realtor. Many investors are too quick to dismiss the realtor as not having the best deals, or their best deals are done before the property hits the open market.

While it is true that real estate agents tend to focus on the retail market, they are in business to make sales, and that can often mean thinking outside the square, for both the realtor and investor.

Remember, the agent not only has sales skills, but will pick up valuable information in the normal course of their business. A good agent will know what properties are coming on the market and, more important, which properties would best qualify for a lease option transaction, as opposed to a traditional outright sale.

And that's where you, as an investor, enter the picture. If you put the time and effort into helping an agent understand the lease option process, they will soon be coming to you with proposals.

A lease option consists of two elements, the first of which is the lease. This is a contract for use and possession of the property, thus creating a lessor/lessee relationship.

The second element provides a purchase option, which is a unilateral agreement where the seller agrees to give the buyer the exclusive right to the leased property.

It can be a win-win situation for all parties, including the agent, particularly in situations where the seller doesn't need their equity out, or they don't have any equity in their home.

First, you will generally have to educate the agent about lease options. Select a small number of successful realtors, write to them, outlining what you propose then follow it up with a personal presentation.

Spend some time networking and getting to know the agent so you build up a personal relationship. You want to reach a stage where the realtor will automatically call you if a seller suggests they will rent their house.

What you are really doing here is leveraging the agent's knowledge. Realtors liaise with sellers regularly, so they know who is in trouble, who can rent, and which homes are vacant.

Your relationship with the realtor will only grow, if they are paid – promptly! No professional operator will wait years on payment for work they have done, so be prepared to give the agent a percentage of the commission upfront, when the lease option is signed.

If you're a really serious investor, you may consider becoming a licensed agent yourself. This allows you to receive commission and gives you access to a database of comparables – data you need to buy and sell.

Be aware that an option is not the same as a regular contract. A regular contract is a bilateral agreement that legally binds both parties to an agreement, while an option only binds the seller.

Lease Options are not an arrangement to sell like contracts for deeds are. They are strictly a lessor/lessee agreement, meaning that if the tenant decides not to use their option to purchase, the owner will benefit from any market appreciation.

A lease option is a technique that involves gaining "control" of a property, but not ownership—just the right to possess a property now and purchase that property at some future date with terms you define today.

A lease option is attractive in a situation where sellers have reasonable debt and can be considered a low risk of defaulting. Conversely, sellers with a heavy debt burden are in financial trouble of some sort and you need to get the deed by either buying the property outright, or making the sale "subject to".

The main point is, you must get this person's name off the title as fast as possible or you could get caught up in their mess, particularly if a creditor puts a caveat on the property and has to be paid before you can take up the option to purchase.

Sellers with good debt are motivated by different circumstances – a change in their life, job transfer, building a new home, etc. They are good prospects for the lease option.

It's unlikely a seller will happily volunteer the fact that they are in financial difficulty, so it is up to you to always research the title before doing the deal to make sure that person is the name on the title and that there are no hidden liens on the title.

Consider this example of when a lease option should be applied. A professional person (such as a lawyer) builds a new home. The old home is worth $250,000 and our lawyer friend owes $150,000, giving him/her $100,000 worth of equity.

The lawyer isn't behind on payments and doesn't need the $100,000 cash out for the new house. The old home is on the market and vacant, but hasn't sold. The lawyer can afford the repayments on both houses, but doesn't want to be making extra house payments.

He/she may be out of pocket each month by making payments on a vacant house, but our lawyer friend isn't just going to hand over the deed and let someone else be responsible for the mortgage, not when he has all that equity invested in the property.

As an investor, you don't want to be handing over a large amount of cash for the title, so the perfect solution for both parties is a lease option.

Say you take out an option on the house for $180,000 and make payments equal to the lawyer's mortgage commitments. You then sell the property for $220,000 on a 2-year lease option with payments still covering his mortgage payments.

At the end of the term, you make a $30,000 profit, the lawyer hasn't had to worry about mortgage payments for a couple of years, he gets his equity back in cash, and the buyer gets a home they may not have been able to afford earlier – a win-win situation for all parties.

Published At: Isnare Free Articles Directory http://www.isnare.com
Permanent Link: http://www.isnare.com/?aid=132519&ca=Real+Estate

Important Notice DISCLAIMER: All information, content, and data in this article are sole opinions and/or findings of the individual user or organization that registered and submitted this article at Isnare.com without any fee. The article is strictly for educational or entertainment purposes only and should not be used in any way, implemented or applied without consultation from a professional. We at Isnare.com do not, in anyway, contribute or include our own findings, facts and opinions in any articles presented in this site. Publishing this article does not constitute Isnare.com's support or sponsorship for this article. Isnare.com is an article publishing service. Please read our Terms of Service for more information.