Lease options – how to do them properly
The concept of the Lease Option is excellent in theory. A property owner leases a home to someone who cannot currently qualify for a mortgage loan. If executed as agreed, both parties mutually benefit. Specifically the tenant does not have to throw rent away while they recover from the economic event that left them unable to purchase and they get to lock in today’s price for a time period that may be several years.
Unfortunately in practice, lease options are often plagued with challenges.
Today I will share with you the top 3 reasons for tenants that lease options fail and why working with professionals like a qualified credit repair organization and property management company can help all parties circumvent some of the pitfalls and help tenants actually buy the property that they lease optioned.
3. A bird in the hand is not necessarily better than 2 in the bush:
Many property owners become overeager to place someone in their property. With tax payments and overhead, it is understandable. It can be enticing to move forward with a tenant that really can not buy. Without a third party opinion, there is the belief that the problem can be resolved even if it is near impossible.
This is terrible situation for a tenant to be in. Realty Trust Services working with Credit Repair Resources can help the tenant know if a successful lease option is actually possible on a property with a specific tenant and save tenants from the disaster that can happen from getting committed to an agreement that simply doesn’t work.
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2. The hurry up and wait scenario:
It is so easy to get your keys to a property and start moving in and thinking of the property as yours when you have forgotten one simple fact: It won’t be yours if you can’t get the loan and complete the purchase. Human nature will cause us to procrastinate as we move on with life as usual. For this reason Realty Trust Services lease option tenants enroll in credit repair before even occupying the property. Its important to get started on this right away! It is important that you have a credit repair company that interfaces with all parties to assist and help tenants move the ball along so that they can actually become a home owner.
1. Unrealistic expectations:
Recovering from an economic event can be extremely challenging. Credit repair is one component of the process of regaining financial control. Life continues to happen and the best laid plans… well you know. Some property owners put tight time restrictions in place for their tenants. “You have 12 months to get yourself straightened out or you are out” is a common statement we have heard. The philosophy behind this is to motivate the tenant to take action.
The challenge with this ideology in regards to lease options is that many times the property owner is not being realistic of the resources and capabilities their lease option tenants have. They forget how much it costs to live and all of the extra costs of moving. They forget that real life happens. Couple this with the cost of restoring their credit and you have a losing proposition.
Our suggestion: consult with your credit repair partner to get a true picture of what it will take to turn your credit around based on the income and resources you have available. Create a timeline and plan that can be reached comfortably and you will be much happier in the end.
A strong CRO (credit repair orginization) partner will provide detailed updates on a scheduled basis. These updates should reflect the true status of the credit repair process, the execution of the tenant’s action plan and the affect it is having on their credit scores.
Chad Kusner is President of Credit Repair Resources. He has more than a decade of mortgage lending experience and is partnered with a 20 year consumer litigator. Chad has spoken nationally on industry practices and serves as Executive Director for NACSO, the credit repair industry’s trade association. Credit Repair Resources was voted the Best Small Agency in America for 2012 by the largest ranking site on the internet and continues to prove itself as an industry leader. Contact chad at CRR760.com or 888-9-CRR760.