Right of First Refusal vs. Rent to Own

The two most requested searches I receive are a 3 bedroom, 2 bath for under $1,000 and a “rent to own” home. As I was doing my daily real estate reading, I came across this thread on bigger pockets.com; it’s a fascinating (in it’s implications) read on the idea of rent to own vs. right of first refusal. *THIS IS NOT LEGAL ADVICE* It appears that the whole rent to own option from a seller may invoke Dodd Frank, in that a seller offering this option may be performing a financing role, and thus subject to all those lender requirements outlined by law.

The short of it is this: rent to own is VERY complex and not always the best option. This thread has an interesting way to nullify some of the complexity, in the right of first refusal. In practice, it’d allow a renter the safety and comfort of knowing they have first claim to a purchase (that’s my non lawyer read on it anyway).

The short short of it: don’t enter into a rent to own contract without seeking professional guidance! Here’s the thread:

http://www.biggerpockets.com/blogs/3/blog_posts/38181-rofr-is-better-than-an-option

If you’re looking to buy or sell in Colorado Springs, I’d be honored to earn your business! Call Rob at 719-440-6626.

From the inbox: why don’t people do rent to own?

The answer to this one is complex. The short answer is that in this market, they generally don’t have to. The demand for housing is high and interests rates are so low that the majority of buyers don’t need this type of financing, either.

The longer answer is that a rent to own is not a simple transaction. A lot of folks think this is an easier option than a traditional purchase but that’s not the case. Generally speaking, it’s more advantageous for a homebuyer to purchase a home “traditionally” than rent to own (a.k.a. lease options) a home.

Rent to own (lease option) often requires a substantial down payment. Also, this money is lost to the seller should you the buyer choose not to execute a sale.

That said, they have their place in a market. If a person would like to buy a home but needs time to work on their credit, it’s an option. However, always consult with a lender, Realtor and attorney prior to signing or drafting a lease purchase option contract.

Looking to buy or sell a home in Colorado Springs? Call Rob at 719-440-6626!

Deficiency judgments: what are they and how does this impact you?

Short answer: the court says you owe a creditor money.

Longer answer: A deficiency judgment is a court imposed judgment against a person for the difference between the mortgage value and the sale price of a home.

Why does this matter and why is it coming up now?

A lot of folks walked away from homes in the housing bust. This decision is coming around to bite them in a lot of respects as debt collectors and lenders start to make the motions to collect that debt.

Why does this matter to you now? If you’re underwater on a home, please don’t walk away. Give me a chance to help you short sale the home, which does not (done correctly) leave a deficiency.

Looking to buy or sell a home in Colorado Springs? Please call Rob at 719-440-6626!

http://www.brokencredit.com/fannie-mae-florida-deficiency-judgments/

7820 Clymer Way – $244,500 – Fountain, CO

Looking for a beautiful home in Fountain, CO? Check out:

http://www.zillow.com/homedetails/7820-Clymer-Way-Fountain-CO-80817/119307599_zpid/

You won’t regret it! Ask about the military buyer credit, too! Call Rob at 719-440-6626 or email rob@rtrcolorado.com.

Three reasons a homeowner chooses the home they do…

location, condition and price.

It’s really quite awesome to be an agent and see that moment when someone walks into a home and knows “it’s THE one.”

These are three factors to consider when selling a home, too. Do you have a good location, is the condition good and is it priced well?

Looking to buy or sell a home in Colorado Springs, call Rob at 719-440-6626 or email rob@rtrcolorado.com!

Zillow acquiring Trulia…

…interesting. What does this mean for the consumer? I’m torn. Competition is good for an industry; Zillow taking out a competitor could be negative in this aspect. However, super crunching (the analysis of insane amounts of data, which Zillow will now dominate) has some really cool applications. Implemented correctly, this could empower a consumer.

From the inbox: why is rent so high!

Good question! Short answer: property and mortgage values and cash flow.

Longer answer: it’s a function of the dymanics of the city. As someone looking to buy rental property myself, here’s the analysis I use in looking at this. If you want to buy a $150,000 home, as an investment, you need 20% down. Let’s assume $1000 a year in insurance and another in taxes.

For investment purposes then, this home is going to cost a $30,000 down payment and at a 4.5% APR, cost a landlord $777 a month to pay principal, interest, taxes and insurance.

A landlord is going to need cash flow, too, to be prepared for emergencies and have a return on their investment. In this case, that $150,000 3 Bed, 2 bath home may rent for $1000 or $1050. This isn’t profit for the landlord, necessarily, as there are taxes and maintenance of the home involved, too.

It scales from there…a $175K home requires a 35K down payment (as an investment property) and costs $878 a month to carry in this scenario.

LARGE CAVEAT: This is for a 20% conventional loan, investment property. An owner occupied home will require much less down but have a higher overall mortgage as a result.

Looking to buy or sell a home in Colorado Springs? Please call Rob at 719-440-6626 or email me at rob@rtrcolorado.com.

*Reprinted with the permission of the party whom asked.

For Sale – $245,000 – 7820 Clymer Way

Looking for a beautiful home in the Fountain area? Look no further than 7820 Clymer Way! Interested? Call Rob at 719-440-6626 and ask about my military buyer credit!

Looking to buy or sale a home in Colorado Springs? I’d be honored to earn your business!

From the inbox: Is rent to own a good deal?

The answer to this one isn’t cut and dry. Generally speaking, it’s more advantageous for a homebuyer to purchase a home “traditionally.” Rent to own (a.k.a. lease options) often require a large downpayment that may be lost to the seller should you the buyer choose not to execute a sale.

That said, they have their place in a market. If a person would like to buy a home but needs time to work on their credit, it’s an option. However, always consult with a lender, Realtor and attorney prior to signing or drafting a lease purchase option contract.

Looking to buy or sell a home in Colorado Springs? Call Rob at 719-440-6626!

Rental prices due to rise 10-26%?

I had a lunch meeting with a “numbers guy” today…was told that he expects rental prices to raise on average 10-26% in the next year. I have not yet verified this information independently, so take it as an unconfirmed data point. Anecdotally, this doesn’t actually surprise me, though, having watched the rental market here climb for the last 14 months.

Looking to buy? Low interest rates…HIGH demand (especially for a 3 bedroom, 2 bath home that rents for ~1100ish)…this is the market to do so!

Rob – 719-440-6626