Before you consider a Columbia SC lease option, you should be aware of how it works, who benefits and the many things that can go wrong.
In a Columbia SC lease option, you rent a property at a cost slightly above market rate. Prior to moving in, you agree on a potential purchase date and purchase price for the home. You may buy the property at any point during the rental period up until the lease option expires. The lease option period can be any length of time that you and the seller agree to, ranging from several months to several years.
If you do end up buying the property, the seller will usually credit part of your rent back to you, usually more than the portion of your rent that was above market rate. You can put this money toward a down payment and closing costs, or keep it. The purpose of the above-market rent is to give the seller an incentive to complete the transaction. If you do not buy the property, all of the rent you paid remains with the seller, giving the seller an incentive for taking the property off the market during the time you were renting it.
Columbia SC Lease Option Benefits to Buyers
The biggest reason a rent-to-own agreement appeals to buyers is financial. If buyers don't yet have the down payment or the monthly income to qualify for a mortgage but believe they will within the next couple of years, a lease option allows them to accelerate the path to homeownership. By signing a contract now, the buyer locks in a purchase price, which means no worrying about rising home prices. Don't be surprised if, in this rapidly appreciating real estate market, the seller of a lease-option property wants to add a clause to the contract allowing for the price of the home to increase with the market.
Columbia SC Lease Option Benefits to Sellers
The biggest reason a seller would want to enter into a lease-option agreement is also financial. They may be having a hard time selling, and rent would at least help cover the cost of the mortgage, property taxes and insurance. A seller is also assured that a lease option tenant would take care of the property, since they hope to one day own it.
Columbia SC Lease Option Pitfalls
A Columbia SC lease option doesn't always work out. Before entering a rent-to-own agreement, a potential buyer should:
Check the seller's credit report. Look for potential warning signs that the seller is in financial trouble, such as delinquent accounts or a large amount of outstanding debt. If the seller balks at allowing you to check his/her credit, proceed with caution. Even after a satisfactory credit check, a potential buyer who currently lives in the home should still pay attention to any warning signs that would indicate the seller is in financial distress. Some examples include phone calls from debt collectors and suspicious-looking notices that are sent to the house.
Even an iron-clad Columbia SC lease option agreement won't hold water if the lender forecloses on the property you intend to buy because of financial distress. If the seller loses the property, you, as the potential buyer, loses the possibility of buying the property and forfeits the extra rent paid. In addition, you will have to find a new place to live.
Make sure you have a lease option agreement, not lease purchase. The former grants the option to buy at any time during the rental period,while the latter requires purchase by the end of the lease period and has legal ramifications for backing out.
Ensure that your Columbia SC lease option clearly states who is responsible for various types of maintenance or repairs. This agreement should also specify the types of changes or improvements (if any) the potential buyer is allowed to make to the property during the lease term.
Understand that a seller can refuse to sell at the end of the lease option period. This means that all the above-market rent money you've paid will be lost. A seller may also try to back out of the contract if the real estate market has appreciated rapidly and the property significantly increases in value. Of course, neither of these actions is legal, but if the buyer doesn't have the financial resources to hire a lawyer, there won't be much recourse against a shady seller.
Understand that should the market declines, the buyer will still have to pay the higher price stipulated in the contract to own the home. However, if the price is too high, the lessee can just walk away and shop for a different property. However, the buyer will lose that portion of the rent that would have gone toward a down payment, so it's important to do the math necessary to determine whether walking away is the best option.
Make sure you can buy the property. It is possible that you won't qualify for the mortgage loan required to make the purchase at the end of your lease option period. Finding this out before entering the agreement can save a lot of grief down the line.
While Columbia SC lease option arrangements can have many potential pitfalls, they can be a win-win situation between a trustworthy seller and a prudent, financially responsible buyer. If you can find an arrangement that you can agree on and a house that you'd like to own one day, this could be the perfect way for you to step out of your apartment and put down some roots.
Talk to us about other potential problems you could run into with a Columbia SC lease option. We'll be happy to discuss this method of home ownership with you.
Buying a Columbia SC home has become increasingly more difficult in this tight market we've suddenly found ourselves in. Given the current low-inventory environment, it may take longer now than it would in a balanced market that has enough homes for sale to satisfy the current buyer demand.
To prepare yourself for buying a Columbia SC home in this market, be it your first home, or a move-up home, plan to look at every new listing that even comes close to satisfying your wish list. Accept the realism that you most likely won't find everything on your wish list. Successful buyers are willing to make sacrifices. Just make sure to make intelligent compromises.
According to Gallup, nearly seven in 10 Americans between the ages of 18 and 29 don't currently own a home, but plan to make the big purchase within the next 10 years. With that many first time homebuyers coming into a market that is already short on supply, one can only guess what this might do to the future of available housing inventory.
Buying a Columbia SC Home – Become a Pricing Expert
When buying a Columbia SC home in a low-inventory market, it's vitally important to become an expert on local pricing. Follow up on every listing you liked and find out how much it sold for and how many offers were made. We can provide you with this information. This way you will know when a listing is underpriced, priced close to market value, or overpriced for the neighborhood. The lower-priced properties tend to attract more buyers. If you've educated yourself about local market pricing, you can distinguish between a listing that is underpriced and one that is fairly priced.
You'll save yourself a lot of time and disappointment if you don't make offers on underpriced listings that attract five or more offers, particularly if you can't go much higher than the list price.
When buying a Columbia SC home — based on your pricing expertise we'll help you obtain — your financial capabilities and how close the house matches what you want will help you make an educated decision about whether to make an offer.
One major factor you must include in your pricing education is finding out how much work a particular listing will need after you buy it. Factor this information into your "affordability equation." A listing priced at $400,000 that requires $100,000 of repairs isn't affordable if you can pay only $450,000 at the most.
Buying a Columbia SC home can be a test of one's patience, but not if you have your own agent on your side. Having an exclusive buyer's broker on your side of the transaction will give you more confidence in your home buying decision. Try to find someone who is an exclusive buyer's broker to represent you when you purchase your next home.
We can’t always predict the future. Okay, we can never predict the future, but one thing we do know is, 2013 is going to be another great year to buy a Columbia SC home.
Reasons You Should Buy a Columbia SC Home in 2013
1 – Mortgage Rates Remain Near All-Time Lows
Just a few short years ago, 30-year fixed rates were above 6.00%. For December 2012, they averaged 3.35%. If you don’t speak mortgage, this means that by buying now, you’ll likely save thousands of dollars in interest, because rates can have a huge impact on your mortgage payment. Don’t wait for low rates to go the way of the dinosaur — when they’re gone, they probably won’t be coming back for a long, long time (if ever).
2 – Home Prices Won’t Be This Low Forever
Columbia SC home prices have been sitting pretty low for a while now, but this isn’t going to last: home prices are officially on the rise. 2013 could be your last chance to grab a cut-rate price before it becomes ancient history.
3 – Save On Next Year’s Taxes
By buying a Columbia SC home, you’ll be able to deduct everything from real estate taxes, to private mortgage insurance, to loan points paid on a purchase. In other words, homeownership and tax savings go together like pumpkin pie and whipped cream. You can find out more about tax benefits of owning a Columbia SC home by browsing the “Taxes” category to your right under Columbia SC Real Estate Categories.
4 – Build Equity
Think of your mortgage like a “forced savings” program. Yes, you’re writing your mortgage company a check each month, but that money, less the interest you’re paying, is still yours in the form of equity. In essence, the difference between renting and owning a home is that homeownership lets you build up your own monetary value, instead of your landlord’s.
5 – Protection Against Inflation
Landlords have a tendency to increase rent every year or two to accommodate for inflation. This won’t happen if you own your Columbia SC home. Having a fixed-rate mortgage means you’ll make the same payment for the life of your loan, so you won’t ever pay more unless you want to.
6 – Help Your Credit
Making mortgage payments on time will boost your credit score and show you’re capable of taking on big financial responsibilities. Your credit score impacts so much more than your mortgage rate: It can affect the interest rate you get on car loans, credits cards, and any other kind of loan you’ll conceivably take out in your lifetime. Good credit is a powerful tool.
7 – Something to be Proud of
You can’t help but feel a real sense of accomplishment when you’re handed the keys to your very own Columbia SC home. Your house is the physical manifestation of your years of hard work and financial responsibility. And nothing says “success” like owning your very own piece of the American dream.
Ready to make 2013 the year you buy your Columbia SC home? Give us a call, or contact us by using the comment link below.
Buying a Columbia SC home instead of renting pays off, on average, in about three years. That’s a national average, but seems to hold true in most markets across the nation. This, according to a new analysis from real estate website Zillow.com.
The analysis that Zillow calls the “break even horizon” compares what it costs to buy or rent the same home in a number of U.S. markets over time. Of course, the rent versus buy calculations will vary depending on where you live.
Break Even Point for Buying a Columbia SC Home
In some markets, the break even point is 4 to 5 years, but in other areas, buying a home wins out in less than 2 years. There are wild markets where residents must wait up to 14 years for buying to make more sense than renting.
The analysis takes into account a host of factors potential buyers should think about when considering the leap, including the down payment, mortgage and rental payments, buying and selling costs, property taxes, utilities, maintenance costs and tax deductions. The analysis adjusts for inflation and forecasts home value and rental price appreciation.
The new study on the old “rent-versus-buy” debate comes at a touchy time for the housing market. Many analysts believe a housing bottom has already been reached but don’t expect a return to the days of the real estate bubble. There is already some concern about the strength of the recovery, with home sales slowing in June as inventory remained tight and buyers paid higher prices.
However, rents are also rising, and housing affordability is at or near record levels, and mortgage rates remain very low, for those who can qualify. The combination of these factors are prompting many renters to consider buying a Columbia SC home instead of continuing to subsidize their landlord’s retirement.
When trying to decide if buying a Columbia SC home instead of renting is best for you, decide how mobile you’ll be, your financial situation, marital status, career goals, and your personality. In other words, are you more likely to never want to do maintenance or yard work? If so, renting may be your best option.
If you’re trying to decide whether buying a Columbia SC home would be your best move, talk to us. We can help you decide which option best suits your lifestyle and your pocketbook.