By Robert Freedman, Senior Editor, REALTOR® Magazine
The news on housing has been good lately, with existing-home sales up for the last several months, but we’re still in a very difficult market, particularly with move-up homes. Not only have prices not recovered but financing remains a challenge and appraisal issues continue to pose hurdles to getting transactions closed. One quick look at the comments generated by our post a few days ago on the home valuation code of conduct (HVCC) makes that evident. (More than 135 comments have been submitted so far.)
For these reasons and more, it makes sense to start looking at lease-to-own transactions. In putting together a webinar on that topic to be held later this month, I talked to two specialists in the niche and what they had to say was eye-opening.
One of their main points was this: even though the market is recovering, the long-term trend points to a continued tough climate for borrowers. Households with less-than-stellar finances that could have obtained financing three years ago won’t be able to count on getting financing today or tomorrow despite improving conditions.
Given this, you might be tempted to say, “Fine, I’ll just work with households that I know can qualify for financing. Anyone else will be a waste of time — theirs and mine.”
But can you afford to write off such a large portion of today’s households, especially since these households still need housing?
This is where lease-to-own transactions come in. Structured right, they can get you immediate income from handling the rental part of the deal today and put in place a structure for generating later income as they move from renter to buyer tomorrow.
The key is in structuring the deals right, though. Lease-to-own transactions can be complicated. There are different ways to structure compensation. You need to get your documents right so each month the proper amount of money is credited toward the purchase. What do you do if the owner goes into foreclosure? Does the lease-to-own tenant have any options?
It’s complicated but not unreasonably so. If you think the lease-to-own niche is worth exploring, you might find the upcoming Webinar, which is free, helpful. It’s Thursday, August 27, at 3 p.m. Eastern Time. The two presenters are Brett Furniss, broker-owner of BDF Realty in Charlotte, N.C., and Wendy Patton of Limitless Options in Clarkston, Mich. Both are veterans of these kinds of deals and authors of books about doing them right.
Hre’s a link to the webinar registration page. It provides more details on them and what they’ll cover.