Lease to Own Property in St. Cloud Florida

 LEASE TO OWN RENTALS INQUIRIES RISE  in my Market of St cloud Florida.

Lease To Own Homes, not a new idea by any means, but an old idea that is experiencing a renewed interest among renters. With Sellers…not so much. The concept of “leasing to own” or “Lease With The Option to Buy” is designed for renters to be able to apply a portion of the monthly rent to a down payment to purchase the property at a later date. (Typically within a year of the lease agreement)
Increased demand for housing, has lead some renters to make more inquires about Lease Options, or Rent to Own properties. But in a distressed area, that can be a very risky proposition. If the landlord/property owner is in default you could end up losing everything you have down.
For Sellers, there is NO benefit in a rising market. If you agree to sell the property in a year, you are speculating that the price would have to drop in order for your deal to be a good one for you. Unless there are other factors influencing your decision, and you feel having a buyer ” in residence” is the best way to go.
If you have been waiting for the market to “rally back” to previously over inflated property values, then it is not a good idea to engage in a contract now. A lease to own not only involves a lease, but a purchase option which if signed by all parties IS a contract.
While it is unlikely the prices for homes in St Cloud or homes in Kissimmee will get back to those previous high watermarks anytime in the near future. Many Florida home owners need to see the housing market improve from where it currently is and are waiting patiently for the market to turn around before considering selling. An average home price is $121,000. Most people who purchased in 2005-2007, cannot afford to sell for that price. So as a result, they would not benefit from a lease to own scenario at this time.
The housing market is far too unpredictable, and still under pressure from foreclosures, and short sales to make Lease/Options viable. In a years time, the renter can” opt” out and choose not to purchase. Also known as first right of refusal. But depending on where the market is at that time, it is risky. In a rising market it is clearly to the advantage of the renter/buyer. In a declining market it is the seller which would benefit to the greater degree. Which is why under present market conditions, and an uninspired economy, the Lease To Own Purchase Option has all but vanished in Real Estate.
Poor Credit also plays a factor. People looking to rent (with Lease to Own Options) generally have a credit issue of some sort that would prevent them buying outright. Otherwise, they would be seeking to capitalize on the historically low home loans lenders are currently offering (still under 4%) and be pre-approved to purchase property outright.
Those will less than stellar credit, are hoping to secure a “deal” while prices are low now and capitalize on it later when the market has more sufficiently rebounded and their credit may have matured to a point where getting a loan is more viable.
The Census Data indicates that 65% of American own their own homes. Down from previous years, is the result of the mortgage meltdown crisis, high unemployment, under-employment and a lackluster job market, and homes still underwater, combined with the foreclosure fallout and recent escalation of foreclosure filings, which is affecting one in every 167 homes locally.
Sellers who find themselves owing more than their homes are currently worth have other options with their lenders under the Home Affordable Mortgage Program (HAMP) and lender incentives giving them cash at closing to remain in their during the short sale process.
In addition, the 25 Billion Settlement with the five top lenders as a result of “Robo” signings have resulted in an increase of home loan mofidications designed to save home owners from going into foreclosure by reducing the amount of their current monthly mortgage payments.
Freddie Mac reduced fixed-rate 30 year mortgage interest rates by 1.5% saving homeowners who owed $200,000 a whooping $2900 in interest payments a year.
Banks are working harder to reduce principal amounts owed in hopes of decreasing the record high foreclosure filings which have plagued Florida for more than the last four years.
As the number of renters increases, rents are expected to continue to rise proportionately to demand for rental properties.
Investors know holding properties long term is one way to increase profitability-and therefore would not consider converting a “cash cow” into chopped meat by taking a lease option on their investment.
So with inquires on the rise, understanding why the supply of these types of homes is in short supply gives renters who wish to re-enter the home market (at some point in the future) a better understanding of why sellers are reluctant to want to participate at this time.
There risks to the renters as well. A “landlord” giving you a lease option and is not making mortgage payments is still at risk for losing their property to foreclosure. Placing the renter is a precarious position. The lease would be honored, but the Purchase Agreement may not. Leaving the would be buyer out the money which was to be applied toward the downpayment or purchase price.
While it is tempting from a renter perspective to want to maximize their return on their rent money by having it be utilized as dual purpose rent/ downpayment credit; it is a slippery slope. Finding a cooperative buyer, having a fully executed contract, making sure money is deposited into escrow, and a monthly accounting of what funds are being applied and how, make the bookkeeping aspect significant. Consult a real estate attorney before signing any legally binding agreement.
Millions of former home owners are affected by either having participated in a short sale or been foreclosured upon, and possibiliy even filed for bankruptcy and as a result have damaged their credit.
Renters who have poor credit and feel they cannot qualify under current lending standards, should still consult with a lender and learn how to improve their credit scores, ask what the proper time frames are to re-establishing credit worthiness, and how they can re-build their credit to an acceptable level for credit consideration in the future and construct a plan to achieve that.