Lease Options as a Tool

We have only begun to write offers for lease options in the last 30 days. It is a tool that can match desperate sellers with reluctant buyers--and can also work well for the real estate investor. In prior years, few homesellers would have considered this alternative, but times are changing.

A recent example involved a motivated buyer with high income, but compromised credit (USC student loans). He offered the tranferred seller a non-refundable deposit of $3200 and somewhat-inflated rent of $3500 per month. All of the deposit and a percentage of the rent would apply to the purchase price 12 months later (good for the seller).

The buyer has the option to purchase the property at its appraised value 12 months later (likely a good thing for the buyer). This gives him a year to repair his credit and arrange financing. It also helps to diminish the fears about a declining San Diego real estate market. The seller, who had already moved out of the home, has mortgage payments covered for a year and a non-refundable deposit to pocket. The seller would have preferred a sale and the buyer would have liked to purchase in a more solid market, but this compromise buys time for both.

Marginal commissions for the lease option flow now, but full commission will if/when the transaction closes. Again this may not be the best solution; we would all have preferred a clean transaction. Markets don't always cooperate.