Brandon Nelson
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7 Key Questions to Ask a Lease/Option Seller
I got a call yesterday from a friend who’s considering buying a house… or leasing it, depending on how you look at it… with a “lease/option” scenario. I’ve closed two lease/options this past year, and since the house she and her husband are considering is a FSBO (for sale by owner), I e-mailed her these questions to ask the seller right off the bat. This, of course, presumes my friend and her husband have looked at the house and are interested in pursuing it.
1) How long of an option period are you willing to give us? 1 year? 2 years? More? (Longer is better for the Buyer, while quicker is better for the Seller.)
2) Assuming you have a price in mind, how did you come up with it? (This is always a favorite question of mine to ask of as FSBO seller. An actual “CMA” or “BPO” or Appraisal would be good. One way or another, you the Buyer need to know the value of the house beyond just what the Seller “wants”.
3) How much of an option fee will you require? One of mine this year had a $10,000 fee, the other had a clean-up of a storage building and the land in lieu of money.
4) Will 100% of the option fee will be credited toward the purchase price and/or Buyer’s closing costs?
5) How much will the rent be? And if the option runs for longer than 1 year, what will the rent be the 2nd year?
6) How much of each month’s rent will the Seller credit toward the purchase price or contribute to Buyer’s closing costs. The more the better for the Buyer, but less tends to inspire the Buyer to actually close the transaction.
7) Will Buyer and Seller split the costs of an attorney to review the contract? (Even with Realtors involved I think lease/options deserve an attorney review. There are a lot of What if’s? to be addressed, and a tight contract is a good contract.
These are essential terms to understand at the outset of a lease/option transaction. They’re not as straight forward as conventional transactions, but they can open the door to home ownership for someone who may not have the ability to close right away. If you’re interested in trying to buy OR sell with a lease/option, give me a ring. I’ll walk you through it and we’ll see if it’s right for you.
