Buyers Guide - Part 2 of 2
Work With a Real Estate Agent
In most cases real estate agents are going to want to sell a home because they don't get paid until the sale closes. However, it doesn't hurt to explore homes listed through an agent in some cases. Homes that have been listed for more than 120 days make good rental possibilities, as are homes that are at risk of being unlisted through an agent.
Once you have found the ideal combination, the home you want and the seller that's willing to move forward, it is time to make an offer! The offer will include a great many terms and points and will include three contracts. These are the Rental Agreement, Option Agreement and Sales Contract.
Here is a general overview of what to expect. This is a scenario for illustrative purposes only. Your contract may look quite different. Before doing anything we strongly suggest you contact a real estate / contract proficient lawyer.
$150,000. This is part of the Sales Contract. In some cases this price can be negotiated. This is typically the most important piece of the deal for the seller. If you make an offer too low you may jeopardize the deal from the get go. If you negotiate option credits your purchase price may be less in the end.
Rent per Month:
$1,250. This is in the Rental Agreement.
1%. This equates to $1,500 based on our example and is in the Option Agreement.
$750 a month. Assuming the seller does not need a fair amount of cash flow, it is in the buyer's best interest to make sure this amount almost offsets the monthly rent. This allows you to build up a considerable credit to apply to the final purchase price. For example, over 3 years this amount would add up to a $27,000 down payment.
36 months. In the actual option agreement you will have a specific date and year. The option period can be shorter or longer depending on the needs of the buyer and the patience of the seller.
Seller pays. This is in the Sales Contract with a note to pro-rate taxes to the date of sale.
Repairs and Maintenance:
Seller pays. This is included in the Rental Agreement.
Closing Costs Contribution:
Seller to pay up to 2% of the Purchase Price towards the buyer's closing costs. This is part of the Sales Contract. It is typical for the seller to cover a certain percentage of the closing costs. This can be negotiated. In some cases the seller may pay all of the closing costs.
$1,250. Buyer pays this and it is typically one month's rent. This would be in the Rental Agreement.
Seller pays. This would be in the sales contract. If applicable, the seller would be responsible to pay all HOA fees during the time of the Rental Agreement and is pro-rated in the Sales Contract.
This is where you would include any stipulations like the seller leaving appliances. These details are in the sales contact.
The terms will vary in each contract. The buyer and seller will need to reach an agreement for how their specific lease option will work. Once all paperwork (Rental Agreement, Option Agreement and Sales Contract) has been agreed upon and reviewed by a qualified lawyer the documents will be signed by both parties. At this time initial payments and deposits will be made and the buyer will take their keys to begin moving in to their new home.