I sold my house…

[kaycee]

and I thought that my terms may be of interest to some here. Even though my house is far away in South Carolina.

The buyers decided they were interested in buying my house when I lowered my price to just above crazy. (I know that is relative) But of course they had to sell their house. (Stop the eye rolling please) So we agreed to an “interim occupancy agreement”. Basically a rent to own. They have up to 24 months to settle, but the agreement is not contingent on the sale of their house.

In the meantime, they have agreed to move in and pay me a slightly below market rent, while taking over all responsiblity for the house save taxes, HOA fees, and fire insurance. If the sink breaks its on them, etc.

I have agreed to allow them to make any improvements and repairs they want to the house, including replacing windows, updating bathrooms, etc.

I know there is risk in that to me, but the upside is if they make repairs and improvements, they are more likely to go to settlement.

Just an anectodal story to show how, in this market, houses may need to be sold in more creative ways.

Also I had whined about my inability to sell my house on this board many moons ago and just wanted to update with some happy news.

(I’d be happy to share more complete details if anyone has interest. Just don’t know how pertinent others would find it since it is non SD, non CA property)

[Ozzie]

I’m not trying to be a jerk, but you’re joking right? You are renting below market, letting them live there and make improvements (or trash the place in the name of improvements) and considering that “a sale”?

I sold my house in a rent to own recently but only in a short lease period (under 6 months) because I knew the family wouldn’t want to move in and move out in that short of time while paying 2 months move in plus 2 months sec. deposit. That is motivation to buy.

Good luck if you are tellng the truth.

[Ozzie]

I’m not trying to be a jerk, but you’re joking right? You are renting below market, letting them live there and make improvements (or trash the place in the name of improvements) and considering that “a sale”?

I sold my house in a rent to own recently but only in a short lease period (under 6 months) because I knew the family wouldn’t want to move in and move out in that short of time while paying 2 months move in plus 2 months sec. deposit. That is motivation to buy.

Good luck if you are tellng the truth.

[kaycee]

Oh, I am telling the truth. And I know its not a great deal. But when 45 of the 170 houses in your development are for sale and you have had your house on the market for 16 months you do what ya gotta do.

Perhaps “sale” is a strong word. But I do have a signed agreement of sale I can try to enforce down the line. I know, I know.

I should say that these are not complete strangers. They live in my neighborhood. I have one of the 15 houses on the water, they currently live in one of the 160 houses not on the water. They saw this as their opportunity to move up to a waterfront house that in a more stable market they would not pay the premium to own. Their house is pristine. The one in the neighborhood that always has the immaculate yard. So I’m doubting that is going to change. Also, the wife is a local business owner with signifigant, long tem ties to the community. So I have some safety there.

I’m taking some huge risks here, I admit.

But I figure if they walk in the end, at least I’ve covered my nut and been able to take some losses off on my taxes. Then I can put my property back on the market in two years in a hopefully more stable market. Or I get it back and I can rent it again.

If they come through then I get a monkey off my back, and out of my wallet.

[kaycee]

Oh, I am telling the truth. And I know its not a great deal. But when 45 of the 170 houses in your development are for sale and you have had your house on the market for 16 months you do what ya gotta do.

Perhaps “sale” is a strong word. But I do have a signed agreement of sale I can try to enforce down the line. I know, I know.

I should say that these are not complete strangers. They live in my neighborhood. I have one of the 15 houses on the water, they currently live in one of the 160 houses not on the water. They saw this as their opportunity to move up to a waterfront house that in a more stable market they would not pay the premium to own. Their house is pristine. The one in the neighborhood that always has the immaculate yard. So I’m doubting that is going to change. Also, the wife is a local business owner with signifigant, long tem ties to the community. So I have some safety there.

I’m taking some huge risks here, I admit.

But I figure if they walk in the end, at least I’ve covered my nut and been able to take some losses off on my taxes. Then I can put my property back on the market in two years in a hopefully more stable market. Or I get it back and I can rent it again.

If they come through then I get a monkey off my back, and out of my wallet.

[PerryChase]

kaycee, was there a broker? If so, how was she compensated?

You mentioned that you had your house on the market for 16 months. Was it empty the whole time?

Thanks for sharing your story. It’s a prelude to what’s to happen in San Diego.

——

Personally, I think that if one plans to move within 5 years, one should not buy. In a stagnant market, that will result in a loss after closing costs. Plus it’s not enough time to insure the fixed housing costs vs. increasing rents benefits. That’s especially true with exotic loans.

It was possible in a booming market but I think that those events won’t occur again for another generation.

[PerryChase]

kaycee, was there a broker? If so, how was she compensated?

You mentioned that you had your house on the market for 16 months. Was it empty the whole time?

Thanks for sharing your story. It’s a prelude to what’s to happen in San Diego.

——

Personally, I think that if one plans to move within 5 years, one should not buy. In a stagnant market, that will result in a loss after closing costs. Plus it’s not enough time to insure the fixed housing costs vs. increasing rents benefits. That’s especially true with exotic loans.

It was possible in a booming market but I think that those events won’t occur again for another generation.

[kaycee]

Perry Chase,

It is true that you take a risk when you plan to leave in less than 5 years. But as long as you evaluate that risk and don’t go in blind you can eleviate some of that risk. As a military family, you face that question frequently. In my first house in DC metro area that I sold in ’02, I made about $200K in 4 years. This time, if all goes well, I’ll lose about $50K. Not bad overall I guess. (Not in equity, just in improvements I put in that I didn’t get back, expenses on the empty house, etc.) But yes, all things being equal, I certainly wouldn’t recommend it genrally. But I have seen it work. I knew one military family that had a rental house in every town they had been stationed in. They bought when they moved and rented when they left. They only rented to other military families and of course that was a constant source of customers. Worked for them, but I then I haven’t talked to them since BRAC.

I put the house on the market in Feb ’06. I left the house vacant, but fully furnished, clothes in the closet, etc until Oct ’06. At that time I was forced by Navy rules to “pack out” as we say and put my stuff in storage until I had somewhere for it to be delivered. (which turned out to be May ’07 when I had to settle on the house I bought in DE) .

There is a broker and she will get a commission at settlement which could be two years from now. There is a fully effective agreement of sale, it just has a closing date of 8/31/09. The buyers have the option to settle early. If they walk, I guess she gets nothing and just has to hope that I relist it with her.

[kaycee]

Perry Chase,

It is true that you take a risk when you plan to leave in less than 5 years. But as long as you evaluate that risk and don’t go in blind you can eleviate some of that risk. As a military family, you face that question frequently. In my first house in DC metro area that I sold in ’02, I made about $200K in 4 years. This time, if all goes well, I’ll lose about $50K. Not bad overall I guess. (Not in equity, just in improvements I put in that I didn’t get back, expenses on the empty house, etc.) But yes, all things being equal, I certainly wouldn’t recommend it genrally. But I have seen it work. I knew one military family that had a rental house in every town they had been stationed in. They bought when they moved and rented when they left. They only rented to other military families and of course that was a constant source of customers. Worked for them, but I then I haven’t talked to them since BRAC.

I put the house on the market in Feb ’06. I left the house vacant, but fully furnished, clothes in the closet, etc until Oct ’06. At that time I was forced by Navy rules to “pack out” as we say and put my stuff in storage until I had somewhere for it to be delivered. (which turned out to be May ’07 when I had to settle on the house I bought in DE) .

There is a broker and she will get a commission at settlement which could be two years from now. There is a fully effective agreement of sale, it just has a closing date of 8/31/09. The buyers have the option to settle early. If they walk, I guess she gets nothing and just has to hope that I relist it with her.

[eyePod]

kaycee,
I understand you had to do what you had to do. But one possible downside is if prices fall significantly over the next two years the buyers will have strong motivation to “renegotiate” before closing. I think what would give me pause is the two year timeframe. You just don’t know what’s going to happen. Giving them two years to sell their house seems beyond reasonable.

[eyePod]

kaycee,
I understand you had to do what you had to do. But one possible downside is if prices fall significantly over the next two years the buyers will have strong motivation to “renegotiate” before closing. I think what would give me pause is the two year timeframe. You just don’t know what’s going to happen. Giving them two years to sell their house seems beyond reasonable.

[(former)FormerSanDiegan]

Typically rent-to-own deals include rents ABOVE the market rate, with some non-refundable portion being applied to the down payment. This appearance of skin-in-the-game on the renter-buyer’s side is what might keep them in the deal 24 months from now. Giving them below market rent rate and essentially a free option to buy is a bit of a raw deal for you.

On the positive side, it sounds like you have it rented at a rate that about covers your monthly carrying costs. That’s not so bad.

[(former)FormerSanDiegan]

Typically rent-to-own deals include rents ABOVE the market rate, with some non-refundable portion being applied to the down payment. This appearance of skin-in-the-game on the renter-buyer’s side is what might keep them in the deal 24 months from now. Giving them below market rent rate and essentially a free option to buy is a bit of a raw deal for you.

On the positive side, it sounds like you have it rented at a rate that about covers your monthly carrying costs. That’s not so bad.

[gn]

kaycee,

I’m not trying to rain on your parade. But, consider this.

Let’s assume that, looking forward there’s an equal chance
of prices going up or down.

The buyers are paying below market rent.

If prices go down significantly, they walk.
If prices go up significantly, they buy the house.

As you can see, it’s a win-win situation for the buyers.

This is why, typically, in a rent-to-own situation,
the buyer pays above market rent. Otherwise, it’s not fair
for the owner.

Now, with all the credit/debt problems on Wall Street,
going forward, prices are more likely to go down than up.

[gn]

kaycee,

I’m not trying to rain on your parade. But, consider this.

Let’s assume that, looking forward there’s an equal chance
of prices going up or down.

The buyers are paying below market rent.

If prices go down significantly, they walk.
If prices go up significantly, they buy the house.

As you can see, it’s a win-win situation for the buyers.

This is why, typically, in a rent-to-own situation,
the buyer pays above market rent. Otherwise, it’s not fair
for the owner.

Now, with all the credit/debt problems on Wall Street,
going forward, prices are more likely to go down than up.

[Author]

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