Lease With The Option To Buy?
One of the most frequently asked questions I get from prospective buyers is if I have any lease to own or rent to own options. The question comes up so often as I find people are generally tired of leasing however have the idea of purchasing a home in their minds. They may not be in a position to purchase now whether the reason is due to bad credit or lack of down payment, regardless the goal of owning a home is there. People really see how renting is a waste of money, know buying is a good idea, but they are not quite there just yet. This is where Home Partners of America comes in to play to fill this niche.
Now let me be the first to tell you I highly do not recommend a person get in to a lease to own property, for many reasons. Check out this blog post here, on my reasons, and let me just say I do agree with it in very few cases… just not the majority of the time.
What makes the Home Partners of American program so interesting is they are a legitimate company doing it the right way & even better than I could have expected. That is where I am on board and have worked with them to help some of my clients. The vast majority of the lease to own programs I do not recommend for that reason, the programs are not in the buyers best interest and are very much seller friendly.
So what does Home Partners of America offer?
HOW IT WORKS
Home Partners of America will offer to purchase a home on the market for sale in their selected areas and meets their criteria & lease it to you with the option to buy. You agree to lease it, they buy it, you move in and you have options to purchase it in a one year, two or three. If you decide you don’t want to buy it, then you move on like nothing ever happened.
The first step to participate in the program is to get qualified with them, which is handled via their website. They have a dedicated team to take care of this for you and work fast, sometimes as fast as a few hours. Now realize they are qualifying you not to buy the house but to lease it, so if your credit isn’t perfect that is fine, remember this is their exact niche audience they are targeting.
For many people there are 2 reasons why they may not qualify to buy a home on their own… bad credit and no money for the down payment or closing costs. Home Partners of America realizes this so they are aware of that when you go to apply, so don’t let that hold you back. This is really designed for those who are working on both credit and down payment but just aren’t there.
Approval & Home Search
Once you are approved a couple of things happen, you are given an approval amount they are willing to lease to you per month. So for example maybe they give you an approval of $2,000 a month, you will use this to search on their site for homes. They have a site they send you to view approved homes in their criteria… and this isn’t just a few homes but many of the homes on the MLS for sale. It is actual live listings for sale they have access to through the MLS. What will be different than other websites are the homes will be shown in their rental amounts Home Partners of America will offer that home to you.
An example would be if you see a home at 123 ABC Street, listed on the MLS for $230,000, however in their site it would appear as a rental amount they are willing to lease it to you for. So it would show up as the rental rate for the home… example $1,850 per month. So Home Partners of America will buy it and turn around then lease it to you for $1,850 per month… how simple is that?
Option To Buy
So where does the option to buy come in to play? At the same time you are searching Home Partners of America will also give you an estimate of a sales price option to purchase the home in one, two and three years.
Let me explain. Right up front Home Partners of America is showing you their estimated sales price in one, two, or three years from the time you lease with them. Those numbers you see are only estimates, by the time they actually purchase the home and get it ready to lease to you those figures are finalized. Why just an estimate? Simply put when you are searching they are estimating based on the list price, however we know the list price may not be what they actually purchase it for, it may be less or more. Plus you have to consider if they spend money on getting the home ready for you such as painting, carpet or other expenses, those are considered in to the option price.
So right from the start you know what to expect for a lease payment as well as a sales price if you decide to purchase the home, how awesome is that!
3 Year Options
Home Partners of America will give you the option to purchase in three year increments right up front. You will know what the sales price is after year one, two and three. For each year it goes up by a certain percentage, so keep in mind it doesn’t stay the same. They are accounting for a slight appreciation, don’t forget they are a business and looking for a return.
My thoughts on the program is that it is fair because they are seeking a nominal return in my opinion. Right now I am seeing properties in my area appreciate much faster, if not twice as fast than the percentage they are adding. So in turn you could actually benefit more from the actual market appreciation compared to the appreciation they are offering to you , but it doesn’t matter to them.
What If I Want To Move?
If you decide to move after the lease then you move, it is that simple! That is the true beauty of this program, you are not tied in to this property, which allows for flexibility on your part. Also your budget and needs may change by the time you are ready to buy a home. The flexibility of this program is the beauty which works in your favor.
Why I Recommend It
The program is legit, plain and simple while most programs are not. This is the only program I recommend or will be involved when it comes to lease to own options. All other programs I do not agree with because it leans more in favor of the seller rather than the buyer.
The program doesn’t require you put down a large down payment for a lease, in all fairness it is only a lease up front. The option you have is to purchase is just that, an option, not something you are tied to.
What Are The Cons?
Rents in my opinion are a bit above market rent when compared to similar homes. I would imagine this is a form of getting a better return on their risk and investment.
Option to buy price is not set in stone up front, there are factors that cause this to go up or even down such as the final sales price and make ready expenses. The good news is you will have a good idea of the range up front so really it is not way off. Clearly if you want new paint, flooring and other repairs then it would only be fair that it add to the sales price in the option, so it is not any kind of mysterious premium they are adding it is fair.
The pros in my opinion outweigh the cons by far, the reality is the risk they are taking is rather high. I would have expected a higher cost or some sort of gotcha moment somewhere when working with them but I never came across it. They are fair, transparent, tell you their plan up front and you decide if it works for you or not.
I find if you are working towards getting your credit up to par or even saving for a down payment and are not there yet, this program would be worth considering. Others may be frustrated with the slum lords they keep coming across in the rental inventory and want a better home to lease, this works for them. Assess your situation on where you stand and what your goals are and see if this fits for you.
If you have questions about the program that I didn’t cover or maybe would like more information please do not hesitate to contact me. I would be glad to answer your questions and share my experience with Home Partners of America with you.
Again I hope this was of value and maybe you picked up a tip or two. My goal is always to be a resource and educate my clients so they can make informed & educated decisions.
Have questions about this or other topics, don not hesitate to contact me.
Luis Cuevas, Realtor®
RE/MAX Cross Country
1990 Justin Road
Highland Village, Texas 75077
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