Those Darn Lease-Purchases!

Every so often I get questions from buyers about doing a Lease/Purchase. A buyer client asked how it works, so I thought I'd address it again.

Many times buyers think that a Lease/Purchase and a Lease/Option are one and the same. They are not. A Lease/Option is a regular lease. At the end of the lease, the owner/seller, if he/she so chooses to sell the property, gives the first opportunity to the tenant/buyer to buy it. No money is paid to the seller as a down payment, and no monies paid as rent is applied to the purchase price.

The benefit of this type of agreement is that is "holds" the house for the tenant, IF the seller/owner is satisfied with their payment history. It allows for the tenant to save up money for a down payment, and it allows for the tenant to 'experience' what is wrong with the house while living there. Under this situation, the owner/seller/landlord is still responsible for all repairs and maintenance, something that will end once the buyer/tenant purchases the property.

A Lease/Purchase, on the other hand, is a Purchase and Sale Agreement that is already in place, but the closing is in the future (usually six to 12 months away), and the terms are altered in favor of the seller/owner. Since this is a risky transaction for the seller, much more is required of the buyer. In addition, the buyer must KEEP UP the house as if it is their own property. Things such as a dishwasher breakdown has to be repaired by the buyer. A leaky faucet must be repaired by the buyer as well. But since this is still a lease, the seller/owner still has the right to inspect the property at reasonable hours with reasonable notice.

Most times, there is a larger down payment for a Lease/Purchase than a buyer would make in a normal sale. This down payment is anywhere from $5000 to 20% of the purchase price. Most times, it is NON-REFUNDABLE to the buyer should the buyer be unable to secure financing. Part of the rent may or may not be applied toward the purchase price. That amount may be as small as $100 or as much as 50%-75% of the rent amount. Most of the time, owner will not apply a large portion of the rent to the down payment because of what they owe on the property.

Both of these situations are used when the buyer has impaired credit. Credit can be affected by a number of things such as a bankruptcy, previous short sale, debt that they cannot repay due to medical bills or other high debt, etc. And because of risk, sellers will usually only sell at "their" price, which is usually the list price of the house.

Sometimes sellers agree to a Lease/Purchase or a Lease/Option because they are soft-hearted and want to help out their fellow man. Other times, sellers who engage in Lease/Purchase agreements do so expecting the buyers to loose their down payment.

Lease/Options and Lease/Purchases are different from Owner Financing. Sometimes Owners will finance a purchase. The closing occurs just like in a mortgage lender-backed situation (typically 30-45 days). Owners typically amortize (base payments on) 30 years (360 months), but may require the buyer to refinance the house within 36 months of the sale.

Lease/Purchases, Lease/Options, and Owner Financing are sometimes tricky. You'll need a good agent to help you with those, whether buying or selling.

The Big Event - Kick-Off 2012!

It's our annual Crye-Leike kick-off and we celebrated a GREAT year! 2011 was a tough year for real estate, even though we still landed at the top of the heap. Over &750 million in sales for Middle Tennessee alone is nothing to sneeze at!

CONGRATS, Crye-Leike agents. We're still #1 in Middle Tennessee. (Number 2 is at a distant $400 million in sales.) We're part of the best family of Realtors in the biz!

And a BIG THANK YOU to my clients (I'm privileged to work with the best) who helped us get to where we are!

Kudos to Carolyn Davison

It was just a little over a year ago that our office administrator announced she was leaving for the the Florida sunshine. She was near and dear to our hearts, but a few weeks later, we were blessed with Carolyn Davison.

Carolyn came to our office ready to work. She proved to be a quick learner and she is very organized. Carolyn is affectionately known to some as "the mom" in the office, but I regard her as more of a sister. She is pleasant as well as efficient. She has a positive attitude, seeing the best in everyone. She is always willing and eager to genuinely help anyone and everyone. Never have I ever heard her say a negative thing. Carolyn is a quiet, assured leader who understands people and knows how to pull the best out of us all.

THANK YOU, Carolyn, for doing an incredible job and for being an incredible friend. You are THE BEST!

Crye-Leike Number One Again

Nashville Business Journal reported last Friday that Crye-Leike, Realtors still holds the top position in sales for Middle Tennessee, despite the decline in the housing market. I am very honored to be a part of Crye-Leike. Our success is due to the emphasis we put on customer service.

Since you have to be a paid subscription member to read the entire article, I've copied and pasted it here:

Real estate climb to top rocky
For top residential real estate performers, road to top has been fraught with challenges

Friday, April 3, 2009
Nashville Business Journal - by Jenny Burns Staff Writer

An excruciating year for most Nashville real estate firms was marked by mergers, the shedding of agents, office consolidations and the demise of the area’s 10th largest firm, ERA Pacesetter Partners.

Big firms have closed offices, shuffled agents around and say they emerged from a dreadful 2008 leaner, better and hopeful the market will show some resilience in 2009.

ERA Pacesetter aside, Greater Nashville’s top 10 firms, as ranked by the Business Journal based on sales volume, are struggling with sales declines about as large as the overall market, which fell 29 percent last year as compared to 2007.

Village Real Estate Services, ranked No. 6, had the smallest decline in sales volume at 14 percent. Village went from 1,894 transactions in 2007 to 1,620 in 2008. For the same period, sales dropped from about $466 million to $401 million.

Owner Mark Deutschmann attributes his company’s relative success to its urban niche, one he says became more desirable when gas costs spiked in 2008 and people returned to the city to live.

Village also was the best at keeping its agents. It was the only firm in the top 10 to gain agents by posting a 6 percent increase. The firm did lose some agents in 2008, but Deutschmann recruited 22 agents with two or more years of experience in the fourth quarter, giving him a net agent increase.

Re/Max Elite had the largest sales volume decline at 41 percent, from 5,114 transaction sides in 2007 to 2,983 in 2008. In the same time, the company’s sales slipped 44.5 percent from more than $1 billion to $608 million.

Owner Robb Campbell attributes the drop to his strategy of moving out underperforming and part-time agents and starting the new year with a group comprised of experienced, full-time agents. Re/Max Elite also lost the most agents last year, posting a 32 percent drop.

“This will put us a in a strong position to be able to capture a huge amount of the market share. We are already seeing our agents picking up market share and listings,” Campbell says.

Today’s sellers want experienced agents who know the intricacies of short sales and the tricks to get homes sold, he says, and that’s what he says he repositioned Re/Max Elite to do.

The Realty Association had the second worst sales performance of the top firms, posting a 38 percent drop in sales volume to 1,207 deals in 2008. In the same period, the firm’s sales dropped to $194.9 million from $339 million.

“As bad as the numbers are, we’re reasonably happy with them,” Realty President Jim Coffer says of the locally owned firm, which lost 7 percent of its agents.

With only one office for its 337 agents, the real estate firm had operated fairly lean before the market downturn and brokers rushed to combine offices.

Harold Crye, president of Crye-Leike Realtors, which remains in the top spot again this year in sales volume, says not as many small firms merged with larger agencies in the Nashville market as he had expected, which occurred on a larger scale in other markets.

“There’s going to be some consolidation in the industry,” says Crye, whose company’s sales dropped 28 percent. “I haven’t seen as much as I thought we might.”

Bob Parks Realty, which had a 30 percent sales volume drop to 3,355 in 2008, ranking No. 3, did not acquire any smaller firms last year, but owner Bob Parks says he is talking with several companies to acquire in 2009.

Another strategy for Re/Max Elite is the creation of a separate company where non-active agents can hang their licenses but they can’t sell or list real estate. This allows them to get a referral fee for sending business to an active agent, but it doesn’t weigh the company down with agents who are not producing, Campbell says.

“I’ve noticed other companies starting holding companies too,” he says.

Keller Williams, ranked No. 2, had several small firms merge with the agency in 2008, says owner Bill Haggard.

“You have to be large today to be strong in the industry,” he says. “It’s difficult to be medium-sized and have the economics work. It’s a high-volume, low-margin business.”

jburns@bizmournals.com | 615-846-4276

If you'd like to get your home sold at the price, terms and conditions acceptable to you, please give me a call. For buyers, I'm more than happy to give you a hand purchasing real estate, whether you are an experienced buyer or a novice buyer. I'm here to help.