Today’s economy has undoubtedly raised the level of uncertainty for buyers and homeowners. Will home prices decline further or have we hit bottom? No one wants to pay too much for a home or sell their property for little. An uncertain job market and economy make many people hesitant to leap into home ownership. Many seeking to own a home face another obstacle in getting a mortgage. Many banks now require larger down payments. Renting a home with a lease option may provide an excellent way for a renter to become a homeowner in just a few short years. If a seller has the ability to wait-out the sale, a lease option may make sense.
In a lease option contract, sellers and buyers negotiate most items, and, the contract commonly ranges between a year and three years. A lease option provides a number of very attractive features that help make buying and selling a home a little easier. One positive aspect of a lease option is the potential to lock in a purchase price at the outset of the lease. This factor can benefit both parties. Everyone will know how much the house will sell for at the end of the lease period.
For the buyer, a lease option offers a place to live while saving to buy a home. However, one of the primary benefits of this type of lease is that a portion of the rent payments will be credited toward a down payment at the end of the lease period. This money won’t be returned if the buyer decides not to purchase the property or can’t qualify for a mortgage.
For the seller, they benefits from the rent money received during the lease; and, a tenant in a lease option often maintains the property better than a typical renter. After all, the tenant plans to become the owner of the home at the end of the lease. Also, a lease option includes a first and last month’s deposit, as well as an additional upfront payment. A buyer who cannot complete the purchase usually loses the deposit and upfront payment. If the tenant doesn’t purchase the home and did not care for the property, the upfront payment and deposits protect the seller.
Before signing on the dotted line of a lease option contract, both the buyer and seller need to do some extra homework. A real estate attorney should review the contract to ensure the contract treats each party fairly. It’s also important to get a home inspection and appraisal to be sure the home is in good shape and worth the sales price stated. A lease option is a serious commitment, so everyone involved needs to clearly understand all the details of the arrangement.
Use care when entering a lease option agreement to purchase a home. A lease option offers a great chance for a potential buyer to gain extra time to build up an adequate down payment and lock in a good sale price. It also offers a taste of the benefits and challenges of home ownership. In the meantime, the seller collects rent and gains a responsible tenant for their property. Although the seller keeps any upfront money paid, a lease option provides an out for a buyer if their circumstances change. In these uncertain times, a lease option can offer an excellent opportunity for both the buyer and seller of a home.
CONTACT ME FOR A CURRENT LIST OF PROPERTIES IN CLEVELAND’S WESTERN SUBURBS THAT OFFER LEASE OPTIONS (ROCKY RIVER, WESTLAKE, BAY VILLAGE, FAIRVIEW PARK, LAKEWOOD, OLMSTED FALLS, AVON AND AVON LAKE).
January 8th, 2012
For the 60+ homeowner, a home reversion plan can be the perfect solution for securing the money they need to do the things that they want to do. What is a home reversion plan? Does the homeowner need to repay the borrowed money?
For homeowners who have reached the age of 60, using home reversion plans to access home equity is an affordable option that can ease financial strain. This type of plan involves a process in which the homeowner trades a portion of the equity in his home to a reversion company in exchange for a sum of cash. The homeowner determines how much of the home equity he wishes to trade to the reversion provider. It is possible to trade a portion of the home’s equity or the entire amount.
The homeowner may also determine whether he wants to receive all of the money at once or in monthly installments. Some homeowners opt to receive all of the money in order to maintain control of the funds. The money can be placed into a bank savings account, checking account, savings bonds, or CDs. It can be invested in stocks or simply placed into a safety deposit box until needed.
For those homeowners who have difficulty managing their finances, the option to receive monthly installments is generally a better one. With monthly installments, the homeowner can receive enough money to cover his monthly expenses, allowing him to live a stress free existence, while still having enough money to use throughout the remainder of his life.
Interest is not charged with a home reversion plan. The homeowner never needs to repay the money to the reversion lender until the home is sold. In the event that the homeowner decides to sell the property and move into a retirement facility, the money is repaid at that time. If the homeowner dies, the individual who inherits the property is responsible for repaying the lender for the amount of money that was borrowed through the home reversion plan.
May 21st, 2011
The current real estate market seems to be driven by a continual influx of foreclosed, bank-owned properties. Should prospective homeowners consider buying one of these properties instead of new construction or one of the higher-priced homes currently up for resale? Here are a few pointers on what to do if faced with this decision.
Continue Reading February 2nd, 2011
Rumors are flying with respect to a Home Sale Tax buried within the Health Reform Bill. The answer is NO.
As always, our association (National Association of Realtors) works diligently in not only supporting homeowner’s rights, but also tracking issues of concern. Here’s a recent excerpt from our news feed that should help clear up some concerns:
“Contrary to reports and newspaper articles circulating widely on the Internet, there is not a 4.0% “sales tax” or “transfer tax” on the sale of a home included in the recently signed health care reform bill. The analysis underlying these reports is incorrect and fails to take into account the interplay of the bill’s provisions with already existing real estate tax laws that remain unchanged.
What was included in the health bill is a provision that imposes a new 3.8% Medicare tax for some high income households that have “net investment income.” Any revenue collected by the tax is dedicated to the Medicare hospital insurance program. This new tax will only apply to households with Adjusted Gross Income (AGI) of more than $200,000 for individuals or more than $250,000 for married couples. Since capital gains are included in the definition of net investment income, an additional tax obligation might result from the sale of real property.
In the case of the sale of a principal residence, the existing $250,000/$500,000 exclusion from capital gains on the sale of a principal residence remains unchanged. Consequently, even when the AGI limits are met, the new tax would not be applied to all capital gains that result from the sale of a home. Rather, it would only apply to any home sale gain realized in excess of the $250K/$500K existing primary home exclusion that pushes the filer’s AGI over the $200K/$250K adjusted gross income limit.
The new Medicare tax will not take effect until January 1, 2013.
For more information on the new Medicare tax, please consult NAR’s Health Reform Q&A on this and other provisions of the new health reform law located at:
www.realtor.org/healthreform
October 14th, 2010
Since the signing of HR 2454, the American Clean Energy and Security Act of 2009 (aka “the cap and trade” energy bill signed on 6/26/09) rumors have been flying.
The most rampant seem to be:
1) Homeowners will be required to obtain “federal energy audit certificates” before selling their home; and
2) Homeowners will be required to update their homes, per the federal government’s compliance levels, before selling or transferring real property.
This is false… at the federal level. I say this with caution, because the House-approved Bill leaves the decision to states as to whether or not they wish to require energy audits, disclosures, etc. For additional information on this topic, visit the following sites:
http://www.govtrack.us/congress/bill.xpd?bill=h111-2454
http://www.snopes.com/politics/business/captrade.asp
http://www.realtor.org/government_affairs/gapublic/american_clean_energy_security_act?lid=ronav0019
April 3rd, 2010
I’m very pleased to roll-out a new service. Market Snapshot is fully automated and provides you with customized, interactive MLS property reports, packed with LIVE market information, community and school data, plus charts and graphs.
It’s never been easier to track your home’s value or obtain market conditions for a specific location.
It’s simple, easy and free. Complete the form below. In about 30 minutes you’ll receive your report.
January 20th, 2010
Curious on how to find foreclosures?
It’s simple, with the right direction. Once a property has been foreclosed upon, it’s forwarded to the Sheriff’s office to be processed and sold at auction. Most counties, not all, make this information readily available online (see links below.) NOTE: Ohio is a “Caveat Emptor” state. It’s imperative that you take the time to read the Terms of Sale.
If you’re looking for properties that are bank-owned or nearing foreclosure, such as “short sales”, call me. In addition to maintaining a list of foreclosed properties, my office maintains lists of “short sales” and bank-owned properties (including HUD homes.) Given the climate of today’s economy, our agents have streamlined the process and are privy to the various requirements and steps that must be adhered to when purchasing these homes.
Here are a few links to follow:
Use a trusted Buyers’ Agent and know your rights! Not sure what that means – call me.
January 11th, 2010
As part of the governments action to stimulate the real estate market, President Obama has signed the bill that includes both an extension on the current $8000 First Time Homebuyers Tax Credit and an expansion by first, increasing the income limits for first time buyers; and second, by providing a $6500 tax credit to current homebuyers who wish to purchase a new or existing home.
From a recent article released by NAR (National Association of Realtors), here are the basics:
The legislation “Extends the First-Time Home Buyer Tax Credit of up to $8,000 to first-time home buyers until April 30, 2010. Expands the credit to grant up to $6,500 credit to current home owners purchasing a new or existing home between November 7, 2009 and April 30, 2010.
Who Qualifies for the Extended Credit?
- First-time home buyers who purchase homes between November 7, 2009 and April 30, 2010.
- Current home owners purchasing a home between November 7, 2009 and April 30, 2010, who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight.
To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.
If you or your client purchased a home between January 1, 2009 and November 6, 2009, please see: 2009 First-Time Home Buyer Tax Credit.
Which Properties Are Eligible?
The Extended Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.
How Much Is Available?
The maximum allowable credit for first-time home buyers is $8,000.
The maximum allowable credit for current homeowners is $6,500.
How is a Buyer’s Credit Amount Determined?
Each home buyer’s tax credit is determined by tow additional factors:
- The price of the home.
- The buyer’s income.
Price
Under the Extended Home Buyer Tax Credit, credit may only be awarded on homes purchased for $800,000 or less.
Buyer Income
Under the Extended Home Buyer Tax Credit, which is effective on November 7, 2009, single buyers with incomes up to $125,000 and married couples with incomes up to $225,000—may receive the maximum tax credit.
These income limits have changed from the 2009 First-Time Home Buyer Tax Credit limits. If you or your client purchased a home between January 1, 2009 and November 6, 2009, please see 2009 First-Time Home Buyer Tax Credit.
If the Buyer(s)’ Income Exceeds These Limits, Can He/She Still Get a Credit?
Yes, some buyers may still be eligible for the credit.
The credit decreases for buyers who earn between $125,000 and $145,000 for single buyers and between $225,000 and $245,000 for home buyers filing jointly. The amount of the tax credit decreases as his/her income approaches the maximum limit. Home buyers earning more than the maximum qualifying income—over $145,000 for singles and over $245,000 for couples are not eligible for the credit.
Can a Buyer Still Qualify If He/She Closes After April 30, 2010?
Under the Extended Home Buyer Tax Credit, as long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close.
Will the Tax Credit Need to Be Repaid?
No. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during this three-year period, the full amount credit will be recouped on the sale.”
November 10th, 2009
In this weeks release, the MMG report (Mortgage Market Guide) provided valuable insights into the upcoming interest rate trends…
“BE WILLING TO MAKE DECISIONS.” General George Patton. And that’s exactly what the Fed did last week at their regularly scheduled Federal Open Market Committee meeting. But just what did they decide…and what do their decisions mean for home loan rates?
The Fed said they are going to ration out the remaining commitment of Mortgage Backed Security purchases through the first quarter of 2010. There will be no additional buying, but instead, a longer weaning off of the program. There was some speculation about the Fed increasing the amount of buying above the $1.25T committed to, and last week’s statement is the Fed’s nice way of saying “no.” They will not be buying more in quantity, but what they will do is attempt to provide a smoother transition to normal market conditions.
It is a given that once the Fed ceases its purchases, that interest rates will climb significantly higher…most likely back above the 6% area. So instead of a hard transition with a large bump in rates, the Fed is attempting to allow rates to gradually rise. This means that waiting to purchase or refinance will very likely mean a higher interest rate.”
If you’re a buyer and wish to take advantage of the market conditions, please take time to seriously consider the facts and the overall upward trend in real estate sales over the past few months.
Bottom line, call your Realtor today. If you’re not working with a Realtor, please contact me direct. Even if you are outside of my area of expertise (NE Ohio) I would be more than happy to discuss your real estate needs and assist you in working with a professional from your local area.
September 29th, 2009
Previous Posts
