Lease Options…Great Idea Or Great Illusion?
June 28th, 2009 categories: Buyer Resource, Cotati, Foreclosures, Petaluma, Rohnert Park, Santa Rosa, Sebastopol
Lease Options may be a great way to purchase a home. You can give yourself the option to buy a property at a predetermined time in the future at a predetermined price.
Lease Options sound great right?
Lease Options are unilateral contracts, meaning one party has the ability to make the other perform…these are sometimes also called one-sided agreements. In this case, the optionee (one who receives the option to purchase in the future) usually pays the optionor a fee (consideration) in return for the right to buy in the future.
However, we find these to be somewhat of a great illusion as well. I have only seen a few of these deal come to a successful close. We find that it is extremely difficult for people to agree on a monthly lease amount, how much of that, if any, will be credited towards the purchase price, the up front price to be charged for the option, and the ultimate future price of the home..lots of moving parts.
Lease options can be used by buyers when the market prices are expected to increase, or go down. If prices increase, you have the option to buy at a predetermined price, and can easily figure out if there is equity. If prices decline, you have the option to walk away from the deal. Depending upon how much the option cost, this could be a very wise decision.
Sonoma County home prices have been declining since late 2006 or thereabouts, and it is unclear when the slide will end. There are a lot of mixed signals currently. Inventory is lower now than we have seen in the the recent past…a good thing. Prices are also down, also a good thing. Unemployment is increasing, which may cause more short sales, defaults and foreclosures…a bad thing. Homebuyer Tax Credits are also available to give buyers incentive to purchase. Currently, there are a lot of wheels in motion to help the Real Estate situation. Time will tell if these are the right wheels to be in motion, and when they will gain traction.
A well priced option can be a great thing to find, however it may be akin to a needle in a haystack. There are not many lease purchase options available, and finding one that fits what you are looking for is akin to finding a needle in a haystack.
I do seem to find more Lease Options in Santa Rosa than I do in cities like Rohnert Park, Cotati, Petaluma or Sebastopol. I cannot say why this is, other than my feeling that these are usually offered by investors who are looking to get some type of cash flow and will consider all buyer types.
Currently, we are seeing Sonoma County Home Prices that allow for a mortgage payment to be similar to a lease payment. We are seeing some amazingly low prices on Sonoma County Foreclosures, which will probably never be listed as Lease Purchase Options. This is a great scenario for home buyers, one that has nto been seen for about 20 – 25 years. We think that based on this fact alone, this may be a great time to purchase a home, whether it is through a lease option or a traditional purchase.
