Unlock the Power of eSignature Legitimateness for Rent to Own Agreement

How to eSign a document: eSignature legitimateness for Rent to Own Agreement

what's up my name is daryl williams and welcome back to another episode of real estate 101 [Music] all right guys so today we're going to talk about a lease purchase agreement and this is also something that i recently experienced in the last two months of negotiating such a deal and i'll briefly summarize that story after we go through all the technical aspects of a lease purchase agreement but before we jump into that please take a moment to like this video smash that like button subscribe if you haven't already and please share it would mean a lot to me all right so what is a lease purchase agreement a lease purchase agreement in real estate is a rent to own contract between a tenant and the landlord for the former to purchase the property at a later point in time the renter pays the seller an option fee at an agreed upon purchase price giving them exclusive rights to buy the property both parties agree to what the purchasing price of the home will be at the end of the lease term the agreement will likely include a stipulation that portion of the monthly rent goes towards the down payment the renter should be confident that they can secure a mortgage at the end of the lease or else they forfeit the option to purchase the property a lease purchase agreement commits both parties to the sale barring breach of contract or the buyer's inability to secure a mortgage buyers are also typically required to pay for maintenance costs property taxes and insurance and expect to pay a slightly higher rent than market share in order to contribute to a down payment so how to structure a lease purchase agreement a lease purchase agreement often includes two distinct contracts one for the lease agreement and the other for the end of lease sale so a contract of sale the lease agreement will include all the standard elements of a traditional lease along with a few special clauses such as requiring a buyer to pay for maintenance costs property taxes and insurance fees unsurprisingly the lease should outline how long the lease period will be and the month monthly rent amount this portion of the agreement will also allocate a dollar amount of rent that will go towards a down payment the second part is the contract of sale this agreement will outline the purchasing process and the terms once the lease period has lapse no matter how long the lease term is both parties will agree upon the purchasing price based on market value at the time of the lease signing no matter which direction the market fluctuates whether it goes up or down or sideways both parties are bounded to the agreed upon purchasing price it is also highly recommended to have a lawyer review this contract before signing as you can see i'm always going to tout that you always should have a real estate attorney if you haven't watched my last video about what real estate attorneys do please click right here and find out a lot more all right so what are the benefits of a lease purchase agreement so let's talk about the buyer's benefits first so the rent will go towards the down payment or at least a portion of the rent will go towards a down payment depends on how you negotiated that in the lease agreement you get to save what moving expenses as you're buying the home you already live in you also get time to work on your credit score so that you can qualify for a loan if the home value increases um above the agreed upon purchase price the buyer has already built equity in the home which is very awesome so what are the benefits to the seller you get a large upfront payment if the tenant defaults on the contract the seller owner keeps the down payment at the end of the lease term at the locked-in price those are the benefits between the buyer and for the seller owner of the property and you should treat the lease purchase agreement as seriously as you would a home purchase because that's what it is this strategy can benefit both sellers and renters who want to be buyers and as always have an attorney look over all the agreements all right so earlier i mentioned that i recently experienced this process um still right now actually because at least hasn't been signed yet but first this was supposed to be a deal that was just going to be a purchase and then we found out that the sponsor aka developer of the unit in new york city the developer lives in the building and he kept back a few units for himself and the one that we're trying to purchase he rented out for the last eight years so my buyers were like we want to buy this unit comes to find out the building's tco uh temporary certificate of occupancy and if you forget what that is please click this video right here to learn a little bit more or to refresh your memory expired so the building needs to renew it and because of that you can get financing because the bank needs to have the tco in order to finance um the purchase of that property also because it's owned by a sponsor the developer who has it in an llc he needs to refile with the attorney general in new york city in order to get the property out of that in order to sell it so in no center in both of these scenarios right now as it is the property can't be sold to anyone so we came up with a creative way for my buyers to still possess the property to the time that they can purchase it which was a lease with an option to buy and we've took two months guys two months to negotiate and hammer out the sale aspect of this deal what that purchase price is credits and concessions at closing for my buyers to redo the bathrooms in the apartment because they're atrocious and that took about two months and then finally we came to an agreement and we drew up the lease and the lease writer and send it to the buyers which they're viewing right now with their attorney and making some adjustments and changes but i hope to have this signed next week and we're hoping to be able to have them purchase the property first quarter of january the tco should be renewed by the end of the year and then the sponsor developer will be able to file with the ag and then i will get to close on the sale of this property they will get to close on the sale of this property sometime january february march to the latest so hours is a little modification none of the rent is going towards the down payment in this process because we can't have a contract of sale because the sponsor can't sell the apartment what my buyers are getting in essence is a right of first refusal so once the apartment is available to be sold they have the first right to purchase it or not to purchase it and that was the modification of our lease purchase agreement just to quickly review a lease purchase agreement is when a buyer or a potential buyer can't get financing at the moment or for any other particular reason they can't buy the the apartment or house or right at that moment is when they negotiate with the landlord to lease the property um in order to buy at a later date um so again this is a high level tactic you might not do this in your second or even third or fourth year of real estate i had the unfortunate experience fortunate experience fortunate experience to do this i learned a lot is probably the most complex deal that i'm doing in 2021 but um that's what it is and if you don't remember just rewind back to the beginning and listen to the definition or you can even google it thank you so much for watching this video i hope you learned a lot and i will see you in the next one [Music] you