For sellers having a hard time unloading their property, lease-to-own options are an increasingly popular way to get a deal done. NY1's Jill Urban filed the following report.
While there may be a lot of buzz about the hot market in Manhattan, the sales market in the rest of the city is not necessarily as hot.
There are plenty of sellers having a hard time selling, either because of a lack of interest or interest from buyers who just can’t get a mortgage.
So many turning to a creative ways to make a deal, and one is a lease-to-own option.
"Rent-to-buy or lease-to-own as we call it in some places is when you use money to rent a place that goes towards the purchase of it at some future point in time," says Rutenberg Realty Co-Founder Paul Purcell.
Purcell says this option can be a win-win for buyer and seller if it's done right.
Here, the buyer can pay rent while putting money towards the down payment, and the seller has a guaranteed buyer at the end of the rental term.
There are, however, some risks.
"There are risks inherent with both people, and I think the first piece of advice I'd give someone is to make sure you both have good lawyers," Purcell says. "I think that it's really important for the seller to make sure that the person can ultimately afford to pay the monthly amount of money that's agreed upon, that the person's trustworthy, that they're going to perform to the degree that you believe they can and that they're going to take good care of your home in the meantime before they've actually bought it."
The big risk for the buyer is if for some reason he or she can’t ultimately buy the home. The buyer would forfeit all the money that has gone towards the home each month.
Then, there is the risk of value.
"There's a little bit of a gamble for both parties," Purcell says. "In the case of the buyer, if the house value goes down during the terms of the lease before they purchase, that’s not a good thing. For the seller, if the house value goes up, they're leaving money on the table."
Now for the buyer, there is a way increase value.
For those looking at a home that needs some TLC, but the owner doesn’t want to fix it, the buyer can put some sweat equity into it during the rental phase that could actually increase its value, making it worth more than the agreed upon price by the time they close.
So for buyers and sellers who are having a hard time, a lease-to-own option could be one way to get a deal done.