by neil kearney | Sep 14, 2009 | For Buyers, For Sellers, Real Estate 101 |
As I drive around in my market I tend to see homemade signs posted at major intersections with houses advertised as “Rent to Own”. In this 
post I’d like to layout a typical rent to own deal as well as show how the unscrupulous can take advantage of an unsuspecting buyer.
First terminology; rent to own is the same as a lease purchase. It is a combination of a lease and an option to buy a house for a certain price. This type of deal attracts people who are not quite ready to buy but are willing to bet that they will be able to purchase in a relatively short period of time. Most of the time the attracted buyers are either just getting started or are starting over after a bankruptcy or other credit issue.
Here are the main features of the deal:
- Buyer and Seller agree to an option price and the time for which the option is good (usually 3 years or less but is negotiable).
- Buyer pays an non-refundable option fee upfront to Seller (usually 1% – 5% of purchase price) . If they exercise the option the option fee goes toward the purchase price of the house.
- Buyer agrees to pay monthly rent to the Seller. Usually, the buyer pays a premium on the market rate rent and that premium also pays down the option price of the house.
Advantages for Seller:
- Expands the pool of possible buyers to their house. This is especially helpful in a slow market.
- Option money is upfront and payable to the Seller.
- They can usually collect above market rate rent.
Advantages for the Buyer:
- They are able to lock in a sales price on a house.
- They are able to pay down equity each month they pay rent.
- They are given time to accumulate a down payment, sell a house or repair credit.
Buyer Beware:
There are situations where the Seller is just looking for a victim. There have been many instances where sellers are just looking for the upfront money and premium rent and then find a technicality to evict the buyer/renter before the option can be exercised.
Seller Beware:
The deal can get sour quickly if the buyer cannot perform. The good news is that the Seller ends up with some money but they also have to ask the Buyer to move out and deny the pleas for an extension. The other variable is the condition of the house. If the Buyer can’t make the deal work they won’t necessarily keep the house in great condition. Something to think about.
by neil kearney | Sep 13, 2009 | Uncategorized |
Do you remeber the game show that tempted you with what was behind door #3, Let’s Make a Deal? All
summer I have been fielding calls and emails from people who want to move to the Boulder normally a really good thing. But too many of the calls have seemed like the donkey behind door #3, not quite what I was looking for. Between, slow house sales across the nation, tighter credit and people forced to change careers due to unemployment, there are plenty of reasons why people can’t buy a home right now. So instead of calling me to help them find a home, which I specialize in, they call me to help them find a free place to live.
I have received over 10 calls from people looking to be a caretaker for my vacant listings. They all seem very nice and all have a very believable story about how they want to be in Boulder, have a blue ribbon family, the best (non-shedding) pets and how they can fill my vacant listings with their beautiful furniture for very low or no rent. A win-win right? I haven’t had any vacant listings that would benefit from a caretaker so I haven’t been able to help anyone out. I have however kept their names.
Another scenario that has come up a lot is the lease purchase. Buyers want to get settled, but have not sold their current house yet and only want to make one move. They then look for an acceptable vacant house and ask if the seller in interested in a lease purchase. I will re-print a prior post outlining the nuts and bolts of the deal tomorrow.
Last week I got a call from a potential buyer who is looking to trade up to three properties in Florida for a home in Boulder. Now this is a deal that has some moving parts to it. The Boulder owner must be open to a specific property or properties in Florida, have an acceptable property in Boulder and then we must match up the value. Not impossible, but not an easy deal to put together. If anyone is interested give me a call.
by neil kearney | May 20, 2009 | Uncategorized |
I have been showing a lot of property lately. This is great, I love to do it and it is at the heart of my job. There are however some side effects which throw up a bit of a speed bump as far as personal 
productivity goes.
Before I go forward, I’d like to take a few steps back into history. In the old days, new listings were couriered on a weekly basis by taxi to each of the offices. At that point, all the agents knew of the new inventory and there was a rush (of sorts) to get their hot buyers into the hot new listings. In those days the information cycle was much slower and Realtor’s had a choke hold on the information that would make Hulk Hogan proud.
Today we have transparency. When new listings come out the whole world knows about them within 15 minutes. Emails are automatically sent to interested buyers who instantly begin comparing list price to a proprietary “market” price spit out by an inaccurate algorithm. An algorithim which has one thing in common with the buyer, it hasn’t seen the house either. The blind leading the blind.
Back to my main story. When I set showings for buyers I need to find, sort, route, schedule and then call each listing office for approval. This last step has changed a bit lately. First the good, many offices, mine included, have outsourced the setting of showings to Centralized Showing Service (CSS). All CSS does is set showings, and they do so for 12 hours a day. As more companies use CSS, we who set showings have to make fewer calls to fewer companies. Yea!
Now the bad, there is a trend out there called limited service listings. Basically this means that an agent is hired by a seller to do no more than put their listing in the MLS. I have many problems with this, but will stick to the topic at hand. When I call to set a showing on one of these limited service listings I have to call the seller directly to get approval. Let’s just say that this process doesn’t usually go as smooth as a call to CSS.
The other speed bump to my productivity when showing property, are the flood of feedback emails and calls I receive. They start coming in the minute I set the showing and continue to be sent daily until I have time to respond. I don’t mind doing it but it isn’t my top priority when I have buyers in from out of town. When I am showing 20 or more listings over a weekend, I can find over 40 requests waiting for me on Monday. On a limited service listing I get a call from the owner of the home looking for feedback on their house. I have learned to keep these interactions brief because without the buffer of a competent agent, any constructive comment I make is taken as a personal insult. Yikes, I’m only trying to tell the truth.
I have also found that many of the homes in the limited service genre are over priced. Obviously they are looking to save a buck but many are not getting the advice from an agent which is so desparetely needed. In the end, going with a professional Realtor who knows their area and market will net a seller more money.
by neil kearney | Apr 27, 2009 | Uncategorized |
When you have been around as many real estate transactions as I have, you begin to anticipate the possible challenge points in a transaction. This is one of the reasons you hire an experienced professional, isn’t it? Anyway, when I have a buyer interested in a house which was built in the early 1970’s my thoughts immediately turn to aluminum wiring. 
During the 1970’s aluminum wiring was extensively used instead of copper in many houses. Since that time aluminum wiring has been blamed for many house fires. But don’t panic if your house has aluminum wiring. Aluminum wiring, when properly installed, can be just as safe as copper. Aluminum wiring is, however, very unforgiving of improper installation. It is at the connections where the latent danger can linger.
When purchasing a home that was built in the early 1970’s make sure your inspector checks for the presence of aluminum wiring. If it is present, the inspector should check each receptacle to see if there is any loosening or signs of overheating. What happens to the wire over time is a gradual loosening of the connection which causes oxidation and overheating. If the connection becomes very loose the electrical current can arch and spark. Most homes never reach this stage.
Once the presence of aluminum wiring is established it is important to know that in most cases it is not an immediate hazard. It has been functioning for over 30 years and caution going forward is advised but it is not a reason to run the other way. The wiring can be fixed without tearing apart the walls.
Solutions:
- The traditional fix for aluminum wiring was to pigtail (attach) a small portion of copper wire to the end of the aluminum wiring and then attach the copper to the receptacle. This has worked well but some feel that the connection between the aluminum and the copper can come loose over time.
- Another more recent (and more expensive) solution is a crimping method. It is the same idea but it uses a special tool that fuses the copper to the aluminum wiring permanently.
My inspection philosophy is that it is a time where the buyer gathers as much information about the house as possible so that they know what to expect in the future. It is not a time to use every minor ding to re-open price negotiations, it is a time to identify the major safety and maintenance issues and come to a win-win solution with the seller. It is everyone’s goal for the sale to go through and the inspection can be handled in such a way that the buyer get’s a good house and the seller pays what is fair.
Here are a few links with detailed information on aluminum wiring.
http://www.alwirerepair.com/
http://www.inspect-ny.com/aluminum/aluminum.htm
by neil kearney | Apr 26, 2009 | Colorado Lifestyle |
This morning was a beautiful morning and to celebrate, I took a camera walk at Sawhill Ponds. The ponds are an open space area owned by Boulder County which used to be a gravel quarry. It’s a popular spot to walk, birdwatch or fish and I’m lucky to live just a few minutes away. Here are a few shots from my walk, too bad I didn’t have a microphone as the birds voices were quite animated.
To view a shot of a goose egg after a run-in with a fox go to my Image-of-the-Week.
Sawhill Ponds and the adjacent Walden Ponds are located off of 75th Street, between Jay Rd. and Valmont Rd, about 5 miles east of Boulder.
