Re: Lease Option / Realtor Question - Posted by Lee Allen
Posted by Lee Allen on September 19, 2011 at 01:39:45:
The way that the deal is structured you do not need a real estate license.
Here is an example of a deal that I have done before.
The owner of a house has been transferred to another state and he needs to be at his new job in 60 days. The owner has had 2 different agents
try to sell his house for
$159,000 for a year. The owner even tried to sell it FSBO for $145,000 and couldn’t get any buyers.
This house appraised for $155,000 in 2006 when he bought it.
The problem is that other houses that are just like the one that the owner have sold for $135,000. The most that his house will appraise for
in this market is $135,000.
There are several foreclosed homes in his area that are being sold for $110,000.
The owner must have $145,000 because this is what is owed on the mortgage. The bank will not accept a short sale on the house. The owner
doesn’t have any money in
savings nor can he carry the cost of a vacant house and pay for the new apartment that he will be living in.
Several agents have told him that the will list the house for $135,000 and will only charge him a commission of $8100. The owner will only net
about 124,900 after
Realtor fees and closing costs. That means that he will have to bring $20,100 to closing in order to sell the house.
The owner does not have that kind of money nor does he want to be an out of state owner that has to hire a local property management company
to rent out his house.
The owner has even had a property manager try to rent out the property for $800/mo. The property manager advertised it for 6 months but
couldn’t get it rented. If the
property would have been rented the property manager wanted 10% of what the property was rented for. The owner would have netted $720/mo and
the owner would be
responsible for paying for repairs and maintenance. The mortgage on the property is $1050/mo. The owner would have to come up with $330/mo to
cover the mortgage.
SOLUTION:
I approach the owner and negotiate a purchase of his house with the following conditions.
- I will lease the house from him for $1050/mo for 5 years. At the end of 5 years I will purchase the house for the balance that is owed on
the mortgage. The seller
will not have to pay any real estate agent fees.
-
The property will be managed and maintained by me with the exception of major systems. The seller has a home warranty that covers
the major systems so he isn’t worried. The seller is responsible for paying for the home warranty every year until the house is finally sold.
-
I also have the right to assign this contract to another buyer with the owners approval.
-
I find a buyer that has OK credit but for some reason he cannot get a mortgage today. The buyer only has $4000 to put down.
The owner agrees to allow me to assign the contract to the new buyer.
-
I sell the deal to the new buyer for $157,000. The buyer only has $4000 to put down and I agree that I will take back a note for $9,000 at
9% that is payable over 5
years. The buyer will pay me $189.02/mo for 60 months.
-
The buyer leases the house for $1050/mo for 5 years. The buyer takes care of any small maintenance issues.
-
At the end of 5 years the the buyer get a refinance loan for $144,000 on the property. The old mortgage balance is $131,835. I get another
check for $12,165
This was a Win/Win/Win/Win solution for everyone.
The seller was able to get the house sold
The buyer was able to get a house
The Realtor made $2500 on an house that couldn’t be sold. He wouldn’t have made anything.
I got paid $27,506.20 for knowing how to structure the deal
A Real Estate License is not needed because I am a principal of the deal and I am selling my personal property (the contract).