How to Sell Your House in a Sluggish Economy Using Seller Financing, Land Contracts Or Lease Options
“How to Sell Your House in a Sluggish Economy Using Seller Financing, Land Contracts Or Lease Options.”
– Priscilla Marquez
In the coming weaker economy coming, using a Lease Option or Land Contract can be the ideal way to sell your home quickly. This could be a welcome and practical alternative if you’ve tried using a broker, selling your house yourself, or thought about renting.
There are many buyers who are not now eligible for financing (the result of our economy). There are also many sellers that are unsuccessful in selling their property (also the result of our economy). The answer is to find a win-win situation where both parties may gain from coming together.
The issue arises frequently when your agent is focused on locating a qualified buyer who can obtain financing immediately. Or, if you’re trying to sell your house on your own without the assistance of a broker, you might not have the expertise or knowledge to distinguish between qualified and unqualified buyers. Even if you don’t think your circumstance qualifies as “desperate” or “out of control,” it doesn’t make sense to sit on an empty house. What if you could provide a solution to the problems that surround your home selling issues? A different option that would enable you to pay a fair market price for the property, do away with commissions and other costs, relieve you of your mortgage burden while you wait for the transaction to close, and save you from upkeep and repairs? Would you find that appealing? This brings us to what we believe to be a very rapid and practical way to sell your home—selling it under a land contract or a lease with the option to purchase.
Many times, a buyer may sincerely WANT to own a home, but their financing or credit prevents them from making an outright purchase. This is where a temporary seller financing arrangement may be able to produce a workable solution for both sides. Lease options and land contracts are the two most popular forms of seller financing that are well-known in the real estate industry.
It’s also known as owner financing or seller financing. The structure is more frequently referred to as a Contract For Deed in various areas. We refer to it as a Land Contract here in Ohio. Another type of structure is a lease option. Or they may refer to it as a rent-to-own program. There are some things the two sales methods have in common and there are also some things that set them apart:
A lease option is what?
A lease option combines renting and buying, and it is also referred to as a rent-to-own in some places. It mostly concerns a buyer who would require some time before making a purchase. Until they are able to buy the targeted property, this person would rent it from the owner. Secondarily, a lease option functions as a postponed sale because the purchase price is decided in advance, before the renter or buyer moves in. Usually, a seller will provide the tenant/buyer a predetermined window of time—anywhere between one and five years—in which to exercise their option to buy the property.
A land contract is what?
In plain English, a land contract is an installment transaction in which the buyer consents to pay the seller immediately up front until the purchase price is paid. In most cases, the seller serves as the bank and charges an interest rate that is frequently higher than market rates. However, the buyer does not acquire the deed (legal ownership) until the seller has received full payment from the buyer. The loan you have with your buyer will typically have an amortization period of 30 years (or any other length you can agree upon with the buyer) and include a “balloon payment” that could become due 2–5 years after the land contract is initiated. The seller is then required to surrender the deed after the balloon payment is made to the seller (usually by the buyer refinancing with a bank). In more ways than one, a land contract represents the buyer’s promise to eventually refinance the property into their name so they can obtain legal possession. Even in situations when you might have your own underlying mortgage, you can employ a land contract.
Land contracts and lease options have similarities:
1. In both scenarios, the seller will often receive the home’s full market value because the purchase price has already been agreed upon when the contracts are drafted. The vendor can afford to be firm on the price because they are lenient with the terms. This is extremely helpful in cases where a home may have little to no equity; frequently, there may not be enough equity to cover the cost of a realtor.
2. The buyer will be in charge of paying the seller directly in both situations.
3. The maturity dates of both contracts range from one year to five years, with two to three years being the typical period. You can change the time frame to suit your needs and any requirements you believe your customer may have. This gives the buyer the time they need to fix their credit, accumulate down payment funds, acquire more employment, etc.
4. Both contracts stipulate that the buyer must continue to bear responsibility for all property-related upkeep and repairs while residing in the house, regardless of how big or minor they may be.
5. A non-refundable option fee or down payment is included in both agreements. As agreed upon, this money is yours to keep and is not transferable to the buyer.
Too many pros, negatives (very few cons), similarities, and contrasts exist between the two sales tactics to cover them all in this brief article. When it comes to safeguarding oneself when designing a land contract or lease option, there are some educational components and precautions you’ll need to take—not the least of which is the significance of hiring competent legal representation. It can require some work on your behalf to find a real estate lawyer who is well-versed in land contracts and/or lease alternatives because there aren’t many of them.
An nice question to consider asking yourself is this one: Isn’t it preferable to construct a future sale via a lease option or land contract rather than not selling my home at all? In a similar vein to the proverb “a bird in the hand is worth two in the bush,” In this market, there are more people who WANT to own a home than there are eligible buyers who happen to choose YOUR property to all the others that are now filling the market. Does this make sense?
Conclusion: Avoid being trapped with your head in the sand like many sellers in today’s market. Many people believe they are immune to the tremendous drop that our recent market has seen. Now, they won’t actually acknowledge to having this mind process. However, if they believe they can sell their house for the same amount they paid for it three to four years ago after having it on the market for six to eighteen months (and utilizing traditional methods like a broker and a currently-qualified buyer), they might just be living in a fantasy world. Most locations in Ohio have had declines of at least 15%.
The moment to think outside the box has come if your property has been listed with a realtor for six to twelve months or longer (and we work with sellers whose properties have even been listed for two years or longer). When you decide to sell, a lease option or land contract may offer the “top of the market” price for your region. The conventional wisdom holds that you can be firm with the pricing if you are flexible with the terms. Whether it is a Lease Option or a Land Contract, seller financing should benefit both the seller and the buyer. This is a selling technique that performs well in sluggish or “buyers’ markets.” Remember that both the seller and the buyer ultimately desire ownership, while the seller desires to sell. A fantastic tactic that has benefited many of sellers and buyers alike is seller financing.
There are a ton more specifics on how this might benefit you and your target market. If you would like a free copy of our report titled “The Lease Option or Land Contract Solution to Selling Your House FAST in Today’s Sluggish Economy,” send us an email at any time at [YOUR EMAIL].
[YOUR NAME] is the author of this article and [TITLE] of [YOUR COMPANY]. Since [YEAR], [YOUR NAME] has been a working real estate entrepreneur.
You can help both buyers and sellers using [YOUR COMPANY]. All of the purchasers on our long list, which is constantly expanding and being updated, want to stop renting and become homeowners. The homes we often provide to people or families looking for a place to reside will be breathtakingly beautiful. We provide a variety of financing options, such as lease options, land contracts, rent-to-own, and more. We are more interested in your present circumstances than your past whether we get into a lease option, land contract, or rent-to-own agreement with you. We think that even nice individuals can experience negative experiences.
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