The Most Frequently Asked Questions:
Q: What is lease purchase?
A lease purchase is essentially a rental agreement combined with a purchase contract with prenegotiated terms. The buyer leases the property for a specified period of time and then purchases the property before the end of the lease agreement. Sales price, length of rental, rent credits, escrow instructions, etc, are all contained in the agreement. Our objective is to find a buyer who will eventually qualify for a loan. We’re not looking for a tenant but a buyer.
Q: What if the tenant/buyer tears up my house?
There's no way we can guarantee you a tenant/buyer won't damage your house since you or I won't be living with them. However, under the agreement we have with you, if that happened, we would repair it at our expense. When dealing with tenant/buyers damages are rarely a problem.
Q: When will you sell my house?
We can't give you an exact date. It will be up to the tenant/buyer to make the decision within the time frame they have. I can tell you we get paid when they buy, so obviously we’ll be pushing them to do so quickly! In the meantime, your payments will be made, which relieves you of the financial burden while we're selling.
Q: How do I know you'll make my mortgage payments?
We can pay you directly and let you forward it to the mortgage company yourself, or you can choose for us to pay your lender directly. If we don't pay the lender they would immediately notify you. You're always on top of the situation, either way.
Q: Why don’t I just list with a Realtor?
That's certainly an option, but obviously a Realtor won't make your house payments for you while they're attempting to sell your house in these troubled economic times. We’re willing to make your payments, install a tenant/buyer in the house and maintain the home, all the while. We'll give it our personal attention and you can literally forget about it until the closing agent gives you a check.
Q: What's the difference between renting my house and renting to own my house?
There's a big difference! With a lease purchase we require the tenant/buyer to put up a binder deposit that is to be applied towards the purchase of the property! If the tenant/buyer does not buy the property that deposit is nonrefundable. This deposit also serves as an insurance policy against nonperformance as well as damage to the property. This deposit pretty much assures that they are serious buyers and not renters.
Q: How can you or your program help me?
As real estate investors we know what homeowners are going through in these hard times trying sell their homes. You may be in the thinking about it stage. Maybe you've already tried listing your home with an agent or maybe you haven't decided to go that route yet. Our job is to provide a workable solution and follow through until your house is sold and you are cashed out. This will happen either when we purchase or when one of our qualified tenant/buyers does.
Q: My Home Is Over-Leveraged! What Are My Options?
We will lease option your home for the loan balance at the time it is purchased and pay you rent equal to your payment and accept responsibility for all repairs after the first 30 days. We will then find and screen a tenant buyer who will make a financial commitment to lease the home with the option to buy and assign our agreement to them after you approve them.
Q: What does this cost me?
Nothing! You’ll have no expenses until the buyer is ready to get financing and then you may pay some reasonable closing costs. Sometimes the buyer pays all the costs.
Q: How long must I lease?
The minimum term if you’re over leveraged is 10 years to give the market time to increase the value and for the debt to decrease to the point the home is no longer over leveraged. This allows the buyer to get a loan to cover the debt without you contributing cash to pay it down. If you owe at or about today’s market value we may shorten the term.
Q: When do I start collecting rent?
One month after we find a tenant buyer you approve and they accept possession of the house. We expect it to take no longer than 30 days after you are ready for us to show the house but it may take longer or happen sooner depending on several circumstances that vary with each house.
Q: What if the tenant tears up my house?
Our tenants are of a buyer mindset and will have a financial stake in the agreement. Plus they will be responsible for repairs. In our experience it’s rare for them to tear up a house and lose their option and deposit but it could happen and that is a risk you must take if you elect this program. However if it were to happen you may call us and it’s likely we can lease it again in it’s as is condition.
Q: What paperwork is involved?
You will execute a lease purchase agreement when you’re ready and when we find and you approve a tenant buyer. Then an attorney will prepare an assignment and ask you to sign a few disclosure documents at that time.
Q: What if the tenant buyer never closes?
Actually that may be the best thing that could happen for you. Every month a tenant pays you rent to cover your payment, it reduces your debt and eventually pays it off. If they don’t buy you’re building equity.
Q: Do I get any money if they do buy?
No! Not if you’re over leveraged now. The only reason a buyer would agree to lease option an over leveraged house is because they get the benefit of the debt reduction and in time will build enough equity to get financing. If this opportunity is not available the home would be unmarketable. However, if you have equity now, it’s likely you will get cash at the time of sale.
Q: Will I be paying for repairs?
Only during the first 30 days and if you can’t fix anything that needs to be fixed before we offer the house we can disclose to the buyer and may get them to accept as is. Your lease will contain a provision for you to fix anything not disclosed but only for 30 days.
Q: So what’s my responsibility?
Get the house ready to show, approve our tenant buyer, collect rent and make the payment (we can have an escrow company do this), show the house by appointment if you reside in it while we market.
Q: What if you don’t find a buyer?
If we don’t find a buyer you approve within 90 days you may cancel our agreement or allow us to continue looking.
Q: What if my house isn’t overleveraged?
We can still lease option it from you at a fair price and will either assign our contract or may choose to remain in the middle until it’s cashed out. We may also buy the house now and take over the debt or simply pay cash. Once we know the facts we can instantly tell you what we can do and let you make your best choice.
BGM INVESTMENT PROPERTIES LLC
973-946-8987