A lease with the option to buy is an option contract. It is one where the seller will allow the renters to lease a home and when the lease is expired, the renters have the option to purchase the home. This kind of option contract has started to become more popular over the recent years, especially with people who are struggling with mortgages. These people are using this method as a way to sell their homes. Lease options to buy are also popular with people who have poor credit and need time to repair it while preparing to purchase a home. There are also people who are not sure whether or not they are ready to purchase a home. They can have time to test it out first. Lease options to buy have many advantages for both the sellers and buyers.
One of the advantages for the buyer is that they are the only one who will have the option to buy during the agreed upon time period. Another good one is the fact that usually a portion of the rent will go towards building equity and towards the down payment. If you have already locked in a price and the market goes up in value, you will pay less for the home than it is actually worth. There is a downside to that advantage, if the house goes down in value you will actually end up paying more. If you are the seller an advantage to this kind of lease is you will have an immediate cash flow with an opportunity to sell your property at a later time. Another seller advantage is you will likely get a better quality of tenants because they will take better care of the home.
There are a few things that a buyer should always be sure to do before entering into an option to buy. They should make sure that all payments on the house are kept up; they should make sure that there are no liens against the home and everything is specified in writing. You should also do a home inspection, document all repairs and always take photographs of the condition of the home.
References
Chongchua, P. (2012). Lease-To-Buy May Be Good Option. Retrieved from National Association of Realtors: http://www.realtor.com/home-finance/real-estate/buyers/lease-to-buy-may-be-good-option.aspx?source=web
Lawyers.com. (2012). Option Contracts for Buying & Selling. Retrieved from Lawyers.com Web site: http://real-estate.lawyers.com/residential-real-estate/Option-Contracts-for-Buying-and-Selling-Real-Estate.html
Weintraub, E. (2012). Lease Options – Lease Purchase Purchase Sales. Retrieved from About.com Guide Web site: http://homebuying.about.com/od/financingadvice/qt/091007_leaseopt.htm
A reverse mortgage is a home equity loan for seniors, who are 62 or older, to use the equity in their homes without actually selling their homes. The most common type is the HECM or Home Equity Conversion Mortgage. With a reverse mortgage the interest on the mortgage is deferred. A regular mortgage will require the owner to make scheduled payments over a certain amount of time, but with a reverse mortgage no payments are due as long as the homeowner lives in the home. The loan does not become due until the homeowner passes away, sells the home, or no longer occupies the home as their primary residence. The homeowner, however, can make voluntary payments at anytime. The loan advances on a reverse mortgage are not taxable and usually will not change your benefits for Social Security or Medicare.
Reverse mortgages were created for people who intend to live in their home for many years. To be eligible for this type of mortgage you must be at least 62 or older, have a low balance on your mortgage or own your home. These mortgages can help people who are looking to supplement their income, pay medical expenses, or just make some home improvements.
Auerswald, C. (2012). What is Reverse Mortgage…in plaiin English. Retrieved from All Reverse Mortgage Company Web site: http://www.allrmc.com/blog/what-is-a-reverse-mortgage-plain- englishCommision, F. T. (2012). Reverse Mortgages: Get the Facts Before Cashiing in on Your Home’s Equity. Retrieved from Federal Trade Comminsion Web site: http://www.ftc.gov/bcp/edu/pubs/consumer/homes/rea13.shtm Development, U. D. (2012). Frequently Asked Questions about HUD’s Reverse Mortgages. Retrieved from HUD Web site: http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/hecm/rmtopten
Cooperative housing is an alternative type of home and property ownership. The cooperative housing usually consist of apartments or a group of dwellings. The entire property is owned by the residents which are known as a corporation or association. The corporation owns the title to the real estate and the residents purchase stock which entitles them to live in a unit in the building. In cooperative housing the residents do not own the actual property but they own a part of the corporation. As long as the resident owns the stock they have the absolute right to occupy their unit. Cooperative housing usually is not for the first-time home buyers or for buyers looking for investments. It is very important that the buyers check into the cooperative’s bylaws to make sure they are moving into a community where they would like to live.
Cooperative housing is self governing and usually has a board of directors that are more powerful than the normal Home Owners Associations (HOA). The cooperative shares the cost of maintaining the property and any amenities that come with it. The board of directors manages the cost and makes decisions about these expenses. These boards can also limit who is allowed to live there if there is sale of the stock. This can make it harder to sell your shares and to move from the cooperative.
There are benefits to buying into cooperative housing; one benefit is that because of its self-governance the members are usually more motivated to be active in services to the community and to the social organizations. Cooperative housing is a community social structure.
Davidson, E. (2012). The Definition of Cooperative Housing. Retrieved from Home Guides Web site: http://homeguides.sfgate.com/definition-cooperative-housing-6754.html
Tree, L. (2012). Cooperative Housing. Retrieved from Lendiing Tree Web site: http://www.lendingtree.com/smartborrower/glossary/c/cooperative-housing
A lien is a legal claim that is put on personal or real property by someone who is owed money to by another person or entity. You will usually find liens in situations such as loans against cars or second mortgages on homes. They can exist when money is loaned using a substantial item as collateral by the borrower. Some common types of liens are mechanic’s liens, judgment liens and tax liens.
A mechanic’s lien on property is usually used for contractors, subcontractors or people such as repairmen. A good example of a mechanics lien is when a contractor builds a house they can attach a lien on the property until they receive payment. A court can award a judgment lien against you in a lawsuit. The person who has won the lawsuit can place a lien on your home until they have received payment. The next common lien is a tax lien. A tax lien can be place on your property by the IRS is you do not pay your taxes that are owed.
There are ways to get a lien removed. You could negotiate with the holder (filed the lien) and have them voluntarily remove it by paying what you owe, or you could file a lawsuit to receive a judgment by the courts to remove the lien. Liens against your home can have a harmful effect. If there is a lien against your home, it can make it nearly impossible to sell your home.
Geek, W. (2012). What is a Lien? Retrieved from WiseGeek Web site: http://www.wisegeek.com/what-is-a-lien.htm Researched 2/20/12
Guru, C. (2012). What Is a Lien on a Home? Retrieved from eHow Money site: http://www.ehow.com/about_5114047_lien-home.html
Organization, I. J. (2012). What is a lien? Retrieved from IndianaJusticeOrg Web site: http://www.indianajustice.org/Data/DocumentLibrary/Documents/1054438385.93/0105liens.pdf
FHA or Federal Housing Administration operates under HUD or Department of Housing and Urban Development, which was formed in 1965, for the primary purpose of helping people obtain home loans who would otherwise not qualify for a traditional home loan. The FHA removes the risk to the lender by insuring the home loan. Most lenders welcome FHA borrowers because of the fact that the FHA assumes the risk of the loan.
FHA loans are very popular for first time buyers and buyers who have little or no credit. These are also popular with buyers who have had a few credit problems in the past and buyers who have a lower monthly income. The criteria for these types of loan are not as strict as a conventional loan. These loans usually have a lower interest rate and the monthly insurance premium is cheaper than a conventional loan. Another advantage to a FHA loan is the closing cost can put into your loan. There are some disadvantages to a FHA loan but the main one is that there is a loan limitation. The FHA home loan amount that a borrower can borrow is limited.
FHA loans are not just for first time buyers. These loans are available for home buyers whether it is their first home or tenth home. They can be used for buying a home or for refinancing a home even if the current loan is not a FHA loan.
Info, F. (2012). What is an FHA mortgage loan? Retrieved from FHA Info Web site: http://www.fhainfo.com/whatisanfhaloan.htm
Loan, F. (2012). What is FHA Loan. Retrieved from What is FHA Loan?: http://www.fhainfo.com/whatisanfhaloan.htm
Wikipedia. (2012). FHA Insured Loans. Retrieved from Wikipedia Web site: http://en.wikipedia.org/wiki/FHA_insured_loan
Earnest money, which is sometimes called a good faith deposit, is when a buyer gives a seller a deposit to show their intention to complete a purchase. This deposit money is then, usually, turned over to the real estate broker who holds it in a trust. Anymore, almost every transaction for residential real estate sales does require the buyers to make a deposit of earnest money. This deposit is usually a small amount of money, sometimes 1% to 3% of the sale price of the property. Usually this deposit goes towards part of the down payment at escrow closing. This deposit gives assurance to the seller that the buyer is acting in good faith towards purchasing the real estate.
Earnest money is very important to the sellers. Without it buyers could make contracts with sellers to purchase real estate and then just walk away from the deal. If the buyer defaults on the contract they lose their deposit. The seller can also be required to return the earnest money. For example, the seller would have to return the deposit if the house did not pass inspection. Earnest money deposits are an assurance that both sides will be honest when purchasing or selling real estate property.
Thompson, J. (2006, June 3). Earnest Money – What, why, how much. Retrieved December 19, 2011, from Phoenix Real Estate Guy: http://www.phoenixrealestateguy.com/earnest-money-what-why-how-much/
Weintraub, E. (2011). Home Buying/Selling Earnest Money Deposits-Protect Your Good Faith Deposit. Retrieved December 27, 2011, from About.com: http:homebuying.about.com/od/buyingahome/qt/EarnestMoney.htm
A quitclaim deed is one of the ways to transfer property from one person to another person. The Grantor (person who transfers) simply turns over their property to the Grantee (person who receives). They usually transfer the property by selling it or giving it as a gift to the Grantee. A deed is just a document that transfers one person’s interest in property to another person. This is considered a contract and must be signed with a description of the property in it.
A quitclaim deed is a warrantless deed. For example, a quitclaim deed comes with no warranty (guarantee) that the property being transfer is debt free or that someone else may have part ownership of the property. This is why these types of deeds are more risky than other forms of deeds such as “general warranty” deeds or “warranty” deeds. The quitclaim deeds only transfer the rights that someone has in the property; it does not affect the rights or interest of any other person that may have some claim of ownership in the property. This is a very important when considering a quitclaim deed.
This type of deed is a great way to pass one person’s interest in property to another person when there are no problems in ownership of property. A lot of times, quitclaim deeds are used in divorces. It is also used a lot of times when families inherit property with shared ownership between the family members. One member of the family can sell their share of the property to another member without affecting the rights of anyone else. This is a quick and easier way to transfer property from one party to another. Always remember, it is very important to consult with legal help before transferring any property.
Geek, W. (2011). What is a Quitclaim Deed. Retrieved January 3, 2012, from Wisegeek.com: http://www.wisegeek.com/what-is-a-quit-claim-deed.htm
Investopedia. (2011). Quick Claim Deeds. Retrieved January 3, 2012, from Investopedia.com: http://www.investopedia.com/terms/q/quitclaimdeed.asp#axzz1iQcwpiRZ
Lewis, H. (2011). Understanding quitclaim, warranty deeds on property. Retrieved January 3, 2012, from Bankrate.com: http://www.bankrate.com/brm/news/mortgages/20040826a1.asp
Project, N. J. (2011). Quitclaim Deeds and Life Estates. Retrieved January 2, 2012, from Lawhelp.org: http://www.lawhelp.org/documents/1593816260en.pdf
A residential gated community is a community that is designed to keep out public access. These communities can be residential homes, apartments, townhouses, or condominiums. The gated community is designed to keep out crime and to reduce traffic on the residential roads. The community is usually walled off with gates to enter and leave by. These gates usually have a keypad for a code to be entered or a security guard to allow entrance to and from the community. Even though they have little proof that these communities do have less crime, they do offer the residents a sense of security.
A gated community usually offers many amenities for the residents. They offer recreational areas such as pools, parks, bike paths, or other common areas. Residents like the idea of not having to leave the area for day to day activities. Residents also enjoy this type of community because they like the idea of trusting the area for their children to play because of less traffic and knowing who and who does not in the neighborhood. Most people move into this type of community for the sense of security it provides. Gated communities have become quite popular in the United States.
Seller disclosure is fairly a new requirement. When you are selling a home, you as a seller are responsible for disclosing the physical defects of the property. These physical defects can include things such as leaks in the basement or holes in the walls. Usually an inspector is not required; you are only responsible to disclose the anything that you have knowledge of. Most of the states now have laws that make it illegal to knowingly conceal defects of the property you are selling. There are also some states with laws that do require you to look for certain defects whether you know about them or not. Usually, a state will require that the seller must make all disclosures about the home in written form.
Disclosure forms are usually required by most state’s laws. The special forms must be completed and signed and dated by the seller, but be aware that the buyer must also sign and date the form. If there is no form required by your state, be sure the buyer acknowledges the disclosure on the home by signing and dating it. It is very important that the buyer accepts your disclosure in writing just in case a question arises in the future. In some cases, both seller and real estate agent could be held responsible for failing to disclose defects of the home. Whenever there is a question about whether or not to disclose, always disclose.
The dictionary defines escrow as “a deed, a bond, money, or a piece of property held in trust by a third party to be turned over to the grantee only upon fulfillment of a condition.” (Merriam-Webster, 2011) Simply put, in real estate, escrow means that one party deposits funds that are to be given to another party upon closing of the sale. Escrow also includes the documents that are necessary for the closing of the sale.
The deposited funds are held in escrow by the Title/Escrow Company. They hold the funds until the seller and buyer sign the closing papers. Once the closing is complete the company then takes the funds from the buyer and transfers them to the seller. This also includes any documents that are needed for closing. This process begins when the written offer from the buyer is accepted by the seller and the earnest money is deposited and ends when the transaction has been completed. Escrow is actually an assurance that no money will be transferred until all the requirements of the sale have been met. Whether you are the lender, the seller, or the buyer, an escrow is a must have assurance to safeguard the funds when selling any real estate property.