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Todd, just curious- what happens to the poor slug that grossly overpaid for the house, when it's time to sell for them?  I like the lease option idea, but not at above market value.

Hi   Todd !

Thanks for sharing this info with us. Keep posting !

Lauie,

The buyer doesn't over pay for the home at all, it appraises perfectly fine. Sometimes he even does better than he could with a traditional bank. With owner financing the owner is making their extra money with the interest they are getting from the payments just like a bank would. The buyer if they could get a loan they would. Even if they could get a loan, what is their interest rate on a 80/20 loan, 7.5% and 12%? With the owner doing the contract it is usually 7 or 8%, still better than the bank offered and the closing costs are lower also.

With a lease option, you base the price on estimated future market price. Our present market increase here is at about 10-14%, but I usually get the owners to raise the price on 5-7% per year for the contract. That way if the market should slow down, we still have a cushion. The buyer is getting a chance to buy the home of their dream and they are getting downpayment assistance with the lease option. They get their down payment and $100 of each monthly payment applied as either down payment or closing costs. If the home does rise more than 5-7% they also get the appriciation. I have one buyer right now looking to execute the option early, so he can sell the property and we estimate he will make about $25,000 on the property. (The seller is happy also, He made $1,400 a month and is selling the property for $25,000 more than he could have last year.)

If you need further information on Lease-Option or owner financing, please feel free to read my blogs.

Todd

Very interesting- as mentioned, the lease options seem to be a good tool.  Thank you for the clarification- I'll read some of your addt'l posts.