“Will You Please Buy My House? I’ll Pay You $5,000….” – Don’t Be This Seller

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Would you rather sell your house for full price + rental income or pay a Buyer $5,000 to take your house?  If you own a home that is “underwater” or have little equity read this story.

Underwater House

As many of you know, in addition to owning REsolutions Real Estate Services I am also a REALTOR who focuses on Commercial, Luxury and Investment real estate transactions (check out www.PortfolioPropertiesRE.com).  Conventional residential real estate is not the core of my business but at times it’s a better option for Buyers or Sellers who raise their hand for our Rent To Own or Rent To Sell program.  I want to share a story that highlights just how beneficial a Lease Option transaction can be to a seller.

I recently got a call from a great couple who wanted to buy one of our Rent To Own homes but it had sold in a matter of hours to another great retired couple who are just a few months from qualifying for a VA loan and closing.  After talking to this couple I realized that they were closer to qualifying than they thought so I recommended they speak with our preferred lender and pre-qualify.  Sure enough, they qualified for a conventional loan so I recommended we look at some conventional listings on MLS to see if we could find a suitable home for them.  We found a great house in Salem that had been on the market for nearly a year with only a small price reduction.  We looked at the home and they absolutely fell in love.

When it came time to make an offer I ran a Comparative Market Analysis and made an amortization table to see about what the Seller owed on the property and it was apparent they were “underwater” or had negative equity in the home.  The loan was originated in 2007 and because the market dropped (Salem is a lot better of than many neighborhoods) they owed more on the house than they could sell it for.

We made a fair offer which was countered at the top of my Buyer’s price range but well below the market comps.  After only a small concession from the Seller we firmed up a contract with a 30 day closing.  When its all said and done the Seller will have paid brokerage commissions, closing costs, etc. and will still have to bring over $5,000 to closing in order to pay off the debt on the house. 

Had this Seller known about our Rent To Sell program and been educated on the benefits of Lease Option transactions we could have bought their home for full asking price and not only would they not have to pay commissions, they would get to keep 100% of the rental income to pay down their own debt until the Tenant Buyer closed. 

 

Side by Side Comparison of Selling to Lease Option

Selling Traditional Route Lease Option
List Price $159,900 $159,900
Less negotiated discount (3%) ($4,797) $0
Less Realtor Commission (6%) ($9,306) $0
Buyer asks to pay for closing costs (3%) ($4,653)
Misc Costs – fixing inspection items, carrying costs (2%) ($3,102) $0
Option Deposit  (3%) $0 $4,797
Investor Profit ($4,797)
Credit the Dep Back to Buyer @ Closing ($4,797)
Less 30% Rent Credits ($1,300 rent) $0 $0
Net Cash Flow ($100/mo) $0 $900 DIFF
Subtotal $138,042 $156,003 $17,961
Net Present Value after year 1 NA $152,883 discounted 2%
Net Present Value after year 2 NA $149,825 discounted 2%
Additional Money in Seller’s Pocket After Two Years Using Lease Option $11,784

 

If you’re selling a home but you don’t have much or any equity please go to www.Rent2SellVA.com and learn more about our services.  Don’t bring a check to closing. 

Chad Corbett

President – REsolutions Real Estate Services  www.REsolutionsVA.com

REALTOR – Portfolio Properties, Wainwright & Co. REALTORS  www.PortfolioPropertiesRE.com

This post was written by

Chad Corbett – who has written posts on www.REsolutionsVA.com.
Chad Corbett is a REALTOR, an Investor and a Consultant offering a variety of creative solutions and "outside of the box" services to both Buyers and Sellers. In addition to owning REsolutions Real Estate Services as an Investor, Chad owns Portfolio Properties Real Estate as a REALTOR. For somewhat-conventional real estate guidance focusing on Luxury Homes, Commercial Assets and Investment Properties throughout the country visit www.PortfolioPropertiesRE.com.

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