Rental Survey with option to buy

[Konkie]

Hello,

I just received a request for a 1007 for a property that is going to be rented as a lease option to buy with a term of four years. The agreements states the tenant will be rent directly to the mortgage holder. All the utlilities will be paid by the tenant. I have never received a request for one of these and was hoping to get some insight. Any advice would be appreciated.

konkie

 

[Mike Boyd]

All they want from you is a 1007?

You will need to know the specifics of the property. size, room count, features and amenities, condition, quality, etc. Then you complete the 1007 and send it in. I think I would ask permission to do an inspection and measure it. The fee should be commensurate with all the extra work you will be doing plus your standard fee for the 1007.

 

[Kevin A. Spellman]

In the early 90s it was common place for an investor offering rent to buy, but they did not collect a rent premium to allocate the future down payment. If the tenant is going to buy the property with a down payment coming from prior rent paid, a rent premium must be evident.

There are loan programs that permit this scenario, however, if the market rent is $1,000 and then in the future the applicant stated $500 per month is allocated to the down payment it would not work. If the market rent is $1,000 and the tenant pays $1,500, then the $500 per month can be considered a source of a down payment. Here in MA the option to buy must be exercised yearly; over a year old option may not be valid.