Posted by Carrie-OH on February 26, 2004 at 08:21:44:
Sorry I didn’t respond right away. I have never dealt with this bank before but they are local. I do have very good credit and equity in my own home. The “20% down” is counted from my equity and I’ve borrowed an extra $500 in exchange for the bank paying all closing costs. (I will have access to the apprasial too)
To whatever degree the apprasial is above the sale price, I plan to have the bank minus that from the amount they are using my home as collateral.
Lease Option vs Land Contract??? - Posted by Carrie-OH
Posted by Carrie-OH on February 24, 2004 at 07:12:12:
Ques #1. I know the difference between lease options and land contracts but practically speaking, what is the difference to me in terms of protection and bottom line if I sell on a land contract for two years and collect 5K down or lease option for two years and collect 5K down. In either case if the buyer doesn’t come through you will get the property back. (I know it’s not to difficult in Ohio to do)In either case the buyer doesn’t have to qualify with a bank for two years.
I need to decide how to market a property I’ve found. Do land contracts or lease options seem to appeal to buyers more? Is there really a big difference in offering it as a lease/option or as a land contract?
Ques #2. This particular property is a bank repossesion. I’m buying with no money down. It’s a duplex with a 1500sf side and a small studio(or mother-in-law apartment).Should I market it to investors (it will have a good cash flow) or to home owners in general to have a wider market?
Thank-you for any advice
A Land Contract gives the buyer equitable title, you have sold the house on an “installment plan” but you have SOLD the property, the deed just doesn’t transfer until the buyers have paid for it all, or in most situations have 20% equity. However Land Contracts vary from state to state in the courts. In PA for example Land Contract require a formal FORECLOSURE to get the buyer out, even if they don’t have 20% equity… I have heard this is not the case in some states, but in PA it definately is.
A Lease with an Option to purchase, is just that, its a LEASE. The tenant has an OPTION to buy the property, but its seperate from the lease agreement. As such the tenant can be evicted by the same process as evicting any other tenant. And the Option is tied to the lease, so if they default on the lease the OPTION is dead as well.
The general rule of thumb in PA is don’t sell on land contracts unless you can handle the cost of a foreclosure to get the people out if they default. You are no better off than simply creating an owner held mortgage. I know people who sell on land contracts here, and they like em, but landlord/tenant/foreclosure law is heavily tilted toward tenants/owners in this state… it is improving over the “old days” but its still highly in the tenant/owners favor.
As to how to market your property, that depends on what you expect from it… an investor can show up tommorrow and pay you for your property if it makes sense… but don’t expect full retail or anything close. You will have to give up terms and/or price to an investor… lets face it we are out to make money we can’t make money if we pay you the same as someone planning on living in the property.
Retail buyers are more plentiful, will pay more, but if you want all cash and top dollar, unless you are in HOT HOT HOT market, expect to have to go through a lot of crap if you are planning on trying to sell it yourself. You greatest percentage to get it sold is to offer some sort of owner financing (lease option, owner held mortgage etc etc)… Its a lot easier to RENT TO OWN a property that SELL FOR ALL CASH in all bu the hottest markets.