Creative Housing Solutions
Buy Homes, Sell Homes, Furnished Short-Term and Extended
Sell A Home - FAQ
Frequently Asked Questions…
What is a Lease Purchase?
A lease purchase is essentially a purchase contract combined with a rental agreement. The “tenant buyer” leases the property for a specified period of time and then has the option of purchasing the property before the end of the lease agreement. Sales price, length of rental, closing costs, and maintenance are all negotiated much the same as a conventional real estate transaction. A lease purchase, if properly utilized, is both a seller and a buyer’s dream come true because it can eliminate many of the negatives normally attributed to the selling and buying of a home.How does it work?
We present a monthly lease amount as well as a pre-determined sales price that is agreed to by all parties. A lease purchase is basically a monthly lease set up over a pre-determined period of time. At the end of that time, we purchase the home from you for whatever the pre-determined price is.
The basics are simple:
● You rent your property to us.
● You give us the right to buy your property for a set price.
● We place a qualified and vetted tenant buyer in your property.
● The tenant buyer receives the right to buy your property at or above your agreed price.
Do I have to deal with the tenant buyer?
We have two different levels from which you can choose. The first level is our “Sandwich Lease Purchase” where you don’t deal at all with the tenant buyer. In this scenario we stay in the middle (thus “sandwich”) between you and the tenant buyer and we handle everything for the length of the transaction. This level is for sellers that don’t want any activity or involvement with regard to the property. If the tenant buyer doesn’t pay like they are supposed to, then we pay. If there is a repair or damage and the tenant buyer doesn’t take care of it, then we will. You will net less dollars under this scenario as some of the benefits will accrue to us, since we are taking on risk, but you don’t have to be concerned about the property at all.
The second level is our “Assign Out Lease Purchase”. In this scenario we will enter into a written agreement with you spelling out all the terms. We will then locate a qualified and vetted tenant buyer just like we would in the Sandwich Lease Purchase, except we would then assign them over to you and we would be out of the transaction. We would collect a fee that is in effect paid by the tenant buyer, so there is no cost to you. However, after closing you will be the one to deal directly with the tenant buyer and any situations that might arise. This scenario offers you a higher return so long as you don’t mind “managing” the tenant buyer and the property.
How much is this going to cost me?
The answer is simple. It doesn’t cost you anything. We make our money from our tenant buyers, not from you. If you decide to do a lease purchase with us, you do not have to pay us a commission.
What are the advantages of selling my home by lease purchase over listing it with a Realtor?
First of all there are no commissions to be paid, which can be 6 or 7%. Also, closing costs and other costs of sale are greatly reduced. Together with the real estate commission you can expect to save about 10% of the listing price. During this process all your expenses related to the house are taken care of.
A lease purchase can take less time than a traditional sale. Tenant buyers are typically ready to move, and don’t have the same time to qualify and move-in than a standard buyer. Thus you don’t have the carrying costs you would incur between listing and closing since the time frame is usually shorter.
Another advantage is that our objective is to put only high-quality tenant buyers in the house since we make our profit by selling for higher than we buy. Since we guarantee all minor maintenance on the house, it is in our best interest to ensure that our tenant buyer will take care of the home and eventually secure financing to cash you, the seller, and us out. This means that we put our tenant buyers through an intensive pre-screening process before they are even permitted to look at the house.
We don't work for commissions. And, because our profits are made by selling for slightly higher than what we buy for, we have a vested interest in the house and in making sure it gets sold.
How do you get paid?
To keep it simple, we mark up the price of the home over our agreed price with you. That is why our offer to you is typically derived from examining your “net” dollars you would receive if you sold through a Realtor and not the “listing” price. We can still “net” you more than you would receive in a Realtor sale, and it allows us to mark it up some to the tenant buyer. A tenant buyer will typically pay a slight premium over what the listing price would be because their home buying options are limited and they will not be closing until some time in the future. This allows us to create a "spread" and get paid.
How much down payment do I receive?
You typically will receive at least the amount of the monthly rent as a down payment. We collect as large a down payment as possible from the tenant buyer and that's what allows us to guarantee that we will make payments and repairs if for some reason the tenant buyer does not (Sandwich Lease Option). You could possibly receive a larger down payment in an Assign Out Lease Purchase, but that depends how much of a down payment we can collect from a tenant buyer.
How long does it take before your tenant/buyer cashes me out?
That can depend on a number of different factors. We work with many mortgage brokers that are usually able to get most people financed after they have paid for 12 months on the lease purchase. Since everyone's credit history and circumstances vary, that time period can be shorter or longer for the tenant buyer that we eventually put into the home. Because of this, we cannot guarantee the exact time our tenant buyer will secure financing. However, until our tenant buyer qualifies for financing, we continue to pay all the expenses related to the home (in a Sandwich Lease Purchase). It is also in our best interest to get our tenant buyer a new loan as soon as possible, since that cashes us out as well. We aggressively work to get our tenant buyer financed as soon as possible.
Why don't I just sell my house myself or rent it in the meantime?
These are always options available to you. The difference would be that you are responsible for your monthly payments, maintenance and repairs during the selling period. You need to try to find someone who can actually qualify for financing, wait for them to get approved, and hope that they don't pull out of the deal, making you start the whole process over again. Renting during this period opens entirely new difficulties that would-be landlords often overlook, especially when you are trying to show the home and sell while renters are living there.
Why don't I just find my own tenant buyer?
If you have the expertise to screen potential tenant buyers, check references, know what sort of credit scores will allow someone to be able to be financed, deal with maintaining your home while someone else lives in it, work with mortgage brokers to get them financed, and finally, process all the paperwork and set up a closing, then finding a tenant buyer on your own would be a viable option for you. If you lack the expertise in any of these areas, we are able to help.
What if your tenant buyer doesn't buy the house?
Our tenant buyers are carefully pre-screened to ensure that they want to buy the house and are able to do so at some point in the future. We collect as large a down payment from them as possible to make sure they have “skin in the game”. However, circumstances can change in someone's life, such as an unexpected job transfer that can make it necessary to move. In situations like that, we continue to pay all the expenses (for Sandwich Lease Purchase) for the house while we find another qualified tenant buyer to put into the home. Remember, we make our money when your house sells.
How can you say I won’t have any vacancies?
You won’t because your tenant will be us (for Sandwich Lease Purchase). We’ll agree on a lease term—3 years, 5 years, whatever you want. And that’s the end of your vacancy problem. If our tenant buyer moves out, then that’s our problem, not yours (for a Sandwich Lease Purchase). We’ll keep paying like clockwork.
How do you eliminate my maintenance and repair problems?
You’ll have 4 levels of protection. First, we will purchase a home warranty at no cost to you and will keep it in force for the life of the lease. Second, the tenant buyer will be required, by the terms of their lease, to perform all regular maintenance and repairs. Third, if any problem comes up that the tenant buyer is unable or unwilling to perform, WE will do it (for a Sandwich Lease Purchase). And, fourth, you’ll maintain your homeowner’s policy to protect against incidents covered by insurance. You will still be responsible for any repairs that are required during the first 30 days after occupancy by the tenant buyer, unless negotiated to be their responsibility. This protects them from pre-existing conditions and gives them confidence in the home.
What do I have to do?
For the most part, as the homeowner you don’t have to do anything . We take care of all the paperwork as well as the placement of tenants and monthly payments. And because you don’t have to worry about the day to day repairs, the only thing you need to decide is where you want your monthly checks sent (for Sandwich Lease Purchase). It is really quite simple.
How do I get my payment each month?
We can set it up however you like. Some of our homeowners like for us to electronically send the payment each month straight to their bank account. Others prefer us to set up an escrow account where we mail the rent to the escrow account and the account pays the mortgage. (You can call the escrow account anytime and request a statement of activity so you can see when the rent was paid and when the mortgage was paid.) We normally set it up to automatically pay your lender each month and send you the difference. That way you won’t have to worry about a thing.
What if a tenant tears up my house?
There's no way that we can guarantee you that a tenant buyer won't damage your house since you or I won't be living with them. But under the agreement that we will have with you, as the seller, if that happens, we will repair it at our expense (if a Sandwich Lease Purchase). Our objective is not to find a "tenant" - our objective is to find a Buyer who will eventually own your house. We investigate them thoroughly before entering into an agreement with them, and you will have the option to approve them. Damages are rarely a problem. In fact, in most instances we have found that our buyers many times have improved a house with new carpet or some other upgrades, such as fencing. Again, if it does happen, we'll fix it, and we will put that in writing (if a Sandwich Lease Purchase). If we do an Assign Out Lease Purchase you will have to handle it.
Who handles the paperwork? Do I have to pay for that?
We handle all of the necessary documents to make the transaction happen. And the best part is that you don’t need your PhD to be able to read them. Of course, you are always welcome to have these items reviewed by your real estate agent or attorney at any time during the course of the transaction. We want you to be 100% comfortable with everything before moving forward.
Any Other Questions?
If you have any other questions or concerns, please feel free to contact us.
Plum Properties LLC and affiliated or associated entities are not a real estate brokerage, although a principal in the entity is a real estate broker. Plum Properties LLC is a real estate investment company. All properties are owned by Plum , or or an affiliated entity, or Plum/Affiliated Entity may have a purchase contract and/or option with the owner of the property that will allow Plum/Affiliated Entity to assign to a third party, or is leased by Plum/Affiliated Entity with a right to sublease.