September 13, 2007
7 Factors To Determine Whether Selling Home With Owner Financing or Lease Option
In my previous blogs, I wrote about how to do owner financing and lease option by example. Questions were raised on how should you determine to sell your home with lease option or owner financing.
There are at least 7 important factors you should consider. They are the guidelines to help you made decisions.
1. Hate the fact to be a landlord
If you hate to be a landlord and want to sell it, you should not do lease option. Although lease option is much better option than lease only, you still have somewhat responsibilities as a landlord. If you hate that, you should not do lease option.
2. How long you can wait to sell your home
If you cannot wait for than 12 months to sell your home, you should not do lease option.
3. Down payment
If you want to do owner financing, you should consider the possibility to get 10% down payment or you should do lease option. You can market your home both ways, that is, lease option and owner financing, and let the market tell you how much down payment you can get. You can ask potential buyers how much down payment they can make if they are interested in owner financing.
4. Collateral
If buyer is an investor, they are usually not willing to put 10% down. But, most investors may have other investment properties that can be used as collaterals. Most of them are willing to do so. If there is no bigger down payment and no collateral, you should do lease option.
5. The time it takes to foreclose the home
If buyer defaults on payment, the remedies are different. You have to repossess the property if you do owner financing. You have to evacuate the tenant if you do lease option.
Generally, it is much easier to evacuate the tenant than to repossess the proeprty,  and also it takes much shorter time. But, in some state, such as in Georgia, it takes much shorter time to do the foreclosure or repossession and foreclosure proceedings are much easier than other states.
6. Personal guarantee on your mortgage
If you have personal guarantee on a mortgage loan for the property you are going to sell, you should consider lease option to eliminate the risk of the lender calling the loan due on sale.
7. Tax benefits
If your home is not your primary residence and own it least than one year, you have to pay high capital gain tax if you sell it with cash. Lease option gives you two tax benefits. First, you can defer the time of the home selling to more than 12 months. That ways, the tax on capital gain will be much lower than selling it with an ownership of least than 12 months. Second, if you do lease option, you can get tax deductions for the mortgage interest and rental property depreciation. Of cause, you can get other tax deduction if you do lease option.
Fore more home selling tips on related homr selling blogs, click following links:
http://besthomesellingtips.com/category/home_selling_by_owner_financing/
http://besthomesellingtips.com/category/home_selling_for_sale_by_owner/
 http://besthomesellingtips.com/2007/09/07/how-wraparound-mortgage-works-%e2%80%93-by-example/
http://besthomesellingtips.com/2007/09/12/lease-option-by-example/
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Pownce it!
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