Eugene Oregon Real Estate

Purchasing Oregon Property Through Lease Options

With the downturn in the real estate market across the United States this has become quite the hot topic for Buyers, sellers, investors, people facing foreclosure…etc. Lease Options have become increasingly popular due to financing being harder to obtain and values becoming Stagnant. This blog is just a quick insight to Lease Options, if done correctly they can be a valuable tool in purchasing real estate.

Here are a just a few reasons someone might need/want to purchase through a lease option:

• You have the income to make the payment but need some time to clean up any past credit issues
• You have the income but need some time to save up money to pay for closing costs
• You have recently changed industries in which you work (you need 2 years in the same industry to qualify for a loan)
• You have recently become self employed (again, you need 2 years of self employment to qualify)

A “Lease Option” could help you make that jump into becoming a Home Owner. A simple way to look at a lease option is as an alternative financing tool. The seller virtually acts as the lender in this situation. With financing availability getting tighter (which seems like it gets tighter everyday) being creative can keep you one step ahead. Basically a Lease Option happens when a Buyer and a Seller agree to a short term lease (typically 12-24 months) with the option to purchase the property at the end of the lease hence “Lease Option.” Having an experienced Real Estate Broker helping you with this is crucial. If done correctly you can set up the contract to be very similar to a mortgage so that each payment you make deducts from the balanced owed. You will also be paying interest to YOUR lender (the current seller) so I would recommend that you check with your CPA to see about tax deductions.

This is just like negotiating any contract and terms can vary but you will want to establish certain aspects in the contract:

• Purchase Price
• Option Payment (your down payment)
• Lease period (6 months, 12 months, 24 months…etc)
• Interest Rate
• Monthly Payment
• What portion of the payment goes to interest and principal

One thing to keep in mind is that if you DO NOT exercise your option to purchase the property at the end of the term you will typically lose your down payment and any payments that have been made towards principal. Due to these transactions being a complex nature it would always be wise to consult an attorney before entering into the agreement.

There are more to lease options, they can be a very sophisticated and complex transaction so having someone with experience is crucial. If you have any questions feel free to contact Rick Grand at 541-521-1011 or email him. Rick is a Real Estate Broker as well as a Loan Officer, he has the unique ability of having been on the lending side of a transaction as well as representing buyers. This gives him an experience and knowledge that can truly help you with a Lease Option contract.