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Showing posts with label home. Show all posts

Tuesday 15 July 2014

Should You Pursue Lease Options To Purchase a Home

Summary:
The real estate market is a place where people can get very creative. This brings us to the rent with option to buy programs you see on the market.

Article Body:
The real estate market is a place where people can get very creative. This brings us to the rent with option to buy programs you see on the market.

Should You Pursue Lease Options To Purchase a Home

Leasing is a fairly popular form of living arrangement since it basically involves renting over a pre-set period of time, usually 3, 6, or 12 months at a time. Leases provide lower rates than a month by month rent. However, when looking to lease, one will often come across the “Lease Option.” A lease option is essentially the same thing as a lease except that it provides the option to purchase the property at a future date.

The option is just that, an option. It may be an interesting offer for some renters, but others will want to pass it up. The option does not have to be taken, since there is a fee required to purchase the option. Although the amount can vary, the fee is usually up-front and paid when entering the lease. In general, lease options are offered in times of slow real estate markets, since generally owners of property look to simply sell during the hot times.

There are some definite advantages and disadvantages when it comes to a lease option. On the downside, the lease option is rarely exercised and therefore it ends up being money wasted. Many people pay the money thinking they will buy later and then either lose interest or find they can’t qualify for a mortgage. When this happens, the money paid to purchase the option is lost and you will be wondering what you could have possible been thinking when you entered into the agreement.

An area where a lease option is commonly used is real estate investment. In such a situation, a real estate investor believes he or she can flip the home in a short period for a profit. They find the lease option to be very attractive because it allows them to secure the home without dedicating significant cash resources to the deal. Once they purchase the option, they then start hunting for a buyer that will pay more than the seller is looking for in the original sale. If the investor can pull it off, they exercise the right to buy and immediately sell to the third party. In many cases, the two transactions will happen at the same time! This leaves the investor with a smile on their face and the original seller in a grumpy mood.

As with anything, there are upsides and downsides to a lease option. For investors, it makes sense in many situations since it frees up cash flow. For people looking for a place to live and raise a family, it rarely makes sense.


An Overview of the Escrow Account

Summary:
Whether buying or selling real estate, you will inevitably deal with an escrow account. If you are not familiar with an escrow account, here is an overview.

Article Body:
Whether buying or selling real estate, you will inevitably deal with an escrow account. If you are not familiar with an escrow account, here is an overview.

An Overview of the Escrow Account

A real estate transaction is a high dollar transaction. In fact, you will probably never make a bigger one in your life regardless of whether you are buying or selling. Given the high stakes and the fact that feelings can sometimes get ruffled on each side of the fence, the escrow account was created.

An escrow account is really a part of a larger beast known as escrow. To keep the real estate transaction running smoothly and organized, escrow is undertaken. A third party, known as the escrow agent, is retained to collect documents, money and such. Since people can be tense during transactions involving large sums of money, it is important to have a party involved that is not emotionally attached.

The escrow account is an industry term that can mean a few different things. In its strictest sense, the account is a trust account opened to hold monies deposited by the parties for appraisals, inspections and remedial work. It is also used to hold the money provided by the buyer for the purchase. This is true regardless of whether the money is submitted directly from the buyer or a mortgage lender.

In a larger sense, an escrow account refers to the total services provided by the escrow account. In addition to finances, the escrow agent will collect contracts, documentation set out in the purchase agreement and so on. In some sense, this makes the escrow agent the referee for the real estate transaction. That being said, an escrow agent does not call penalties, to wit, they will never determine that one party or the other is in the wrong. They will simply facilitate the requirements of the contract. If one party fails to comply with those requirements, the escrow will not close and lawyers typically get involved.

Escrow is standard operating procedure for nearly all real estate transactions. In the end, it is an effective way to get the transaction closed.