| Okay, you are trying to sell your home, but the market | | | | there for a while. This equity can makes things a little |
| is really soft right now. So you need to be creative. | | | | dicey sometimes. |
| You finally found a potential buyer. That person | | | | Lease Option |
| absolutely LOVES your home and wants to buy it, but | | | | Quick Explanation: This provides the buyer the option |
| they don't have enough money to buy a home | | | | to buy your home at a specific price, and he or she |
| outright. Plus, this person's credit isn't good enough to | | | | has a certain predetermined amount of time (usually |
| qualify for a loan. They need time to repair their | | | | between 2-5years) to exercise that purchase price. |
| credit. | | | | Meanwhile, this person pays you an upfront fee, |
| What can you do? | | | | albeit smaller than someone with a land contract. |
| Two possible solutions are to sell your home to | | | | Also, this person pays you monthly, usually at above |
| someone on a Land Contract or a Lease Option (also | | | | fair market rent value to help prepare this person for |
| called rent to own). Either of these provide the buyer | | | | the upcoming mortgage. If your buyer does not buy |
| time to improve his or her credit enough to qualify for | | | | your property before the lease option period expires, |
| a loan to purchase the home from you outright. | | | | then you still have your property. |
| Land Contract | | | | Upside: You get to collect an upfront fee, and you |
| Quick Explanation: The buyer buys the property and | | | | receive monthly payments. Each payment does not |
| gets everything EXCEPT for the deed. The seller | | | | affect the outstanding balance. This person has paid |
| holds onto the property deed until the final payment is | | | | for the right to buy your property; they have not |
| made. The buyer makes payments toward the | | | | bought your property, yet. You do not have to |
| purchase of the home, and the seller charges | | | | refund the buyer his or her option consideration money |
| interest. Often, the land contract will have a balloon | | | | nor any monthly payments provided to you. |
| payment at the end of a period, anywhere from two | | | | Downside: You have to pay for property taxes and |
| (2) to ten (10) years, forcing the buyer to get a loan or | | | | major repairs. (Of course, you can get around this |
| lose the property. | | | | buy requiring the "renter/buyer" cover the first $500 for |
| Upside: As a seller, you no longer have to pay | | | | non-major repairs, and you get an insurance policy |
| property taxes. The repair costs belong to the buyer, | | | | carrying a $500 deductible.) The upfront fee usually is |
| too. You get to collect a sizable upfront payment, | | | | smaller for a lease option than a land contract. |
| usually around 10% of the purchase price. You | | | | Benefits: Why Consider Either |
| receive monthly payments from this buyer. So you | | | | The biggest benefits for a seller to consider either of |
| get upfront money and positive cash flow (hopefully). | | | | these is that (a) it opens up the market since more |
| Downside: The monthly payments you receive | | | | people are in position to be able to buy your property, |
| remove part of your equity, and each payment | | | | and (b) you can usually sell this at a higher price since |
| reduces the big prize at the end when the buyer finally | | | | this person has fewer choices. Plus, you should get |
| pays you in full. Also, if things don't work, you | | | | paid for the inconvenience of not receiving all of your |
| probably will have to refund the buyer's equity, which | | | | money immediately. |
| can be a big chunk of cash if the person has lived | | | | |