Lease Option to Purchase

[Mayze]

I have been a landlord for the last two years on our former primary residence, and will be selling to avoid capital gains. Our current tenant wants to buy early next year and wants to lock in what I consider to be a fair price. If we agree, there will be no broker commission. Seems like a great way to go, but do any Piggs know of potential problems going this way? The option would apply to the down payment, and is not a huge amount of money. Thanks for any insights!

[spdrun]

Problems? The brokers can’t lease a new BMW and will have to settle for a VW Golf this year?

[HLS]

You do not need agents/broker to be involved in a transaction if both parties are willing to accept the liabilities if anything goes wrong.

“A great way to go” ? For whom ???
As the seller/landlord, you have nothing to gain and much to lose with a ‘lease option’ and/or not being represented in a sale.

If the market goes up, you lose out by locking in today’s price.
If the market goes down, the buyer will not buy the house and you will still own it.
Are you receiving any additional NON-refundable $$ over and above current market rent for giving the option ?
You stated that the ‘option would apply to the down payment’ and what happens if they don’t buy ?
**They want an OPTION to buy the house, it’s not an obligation.

If you push the window for cap gains exclusion, IF you cannot get tenant out OR closing is delayed for any reason, it could cost you many thousands of dollars. Not all loans close.

I’m not saying that it’s a terrible idea and maybe nothing will go wrong, but the courts are backed with millions of dollars of cases involving money and ‘misunderstandings’

[ljinvestor]

Why not sell it to them or someone else now? Seems like too many variables between today and 9mo from now.

[EconProf]

Lease-option arrangements are like business partnerships with relatives–they almost never work out.
HLS gave good advice–reread his piece.

[SD Realtor]

Lease options to purchase are in the most case beneficial for the seller/landlord but that is because they are rarely if ever exercised and as a landlord you get to keep your rental and keep the option money.

You would be foolish not to put the home on the open market and attempt to get the maximum price available. You care most about your net, not about the sales price.

[Anonymous]

Sell it to them or someone else now .

[Anonymous]

Seems like too many variables between today and 9mo from now.

_________________
GuL

[Author]

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