1. Bottom of the Barrel Homes
When you are looking for a lease-option you will find that most, if not all, of the Walnut Creek homes that are available are OVERPRICED or UGLY and have been on the market for a loooooong time. In the East Bay if you have a home that is at least some what attractive and isn’t over priced it will sell quickly, 30 days max.
2. Limited Inventory
Generally I find that owners either want to rent or sell, but not some kind of combination of both. It goes back to the theory in point #1. These are the left-overs from the resale market. In this hot market with limited inventory, that doesn’t leave you with much.
3. Financing IS Available
The reason most people look for lease-options is that they believe financing is impossible or hard to get. Within the past year many things have changed. We have seen new programs that allow as little as 0.5% down-payment for those who don’t have a ton of cash and portfolio loans that allow a short-sale seller to buy again in as little as 1 year! Everyday there are new and more flexible programs coming out, so don’t just assume you can’t buy.. Ask!
4. No Bargaining Power
A seller and their agent will look at all offers according to how strong they are. The amount offered is obviously a big item but the second is where is the money coming from. Generally, cash offers are considered the strongest, followed by conventional financing, FHA/VA, then at the bottom you have lease-option. This is because you wouldn’t have financing in place to purchase the home, since the purchase will be taking place a year or several years from now. That fact makes it easy for a seller to say NO.
5. Can’t Fix or Update
If you lease-option a home you won’t be able so start making repairs and updates as soon as you move in. You might not end up purchasing the home so any work you would do could carry a high risk of either throwing your money away or legal action from the seller.
6. Doesn’t Build Credit
A lease is not going to go on your credit report (unless you don’t pay it) like a purchase would. Home-ownership shows stability and is one of the best ways to boost your credit.
7. Can’t Take Advantage of Today’s Prices and Interest Rates
The interest rates now are at a 50-60 year low. We may never see these again in our lifetimes. The interest rate is a large component of the monthly payment. If you buy now you can lock down that payment amount for 30 years. Prices are as low or lower than 10 or so years ago. You don’t find that often either. Combine the two and you’ve got a perfect storm. That’s probably why the Walnut Creek housing inventory is down well over 50%.
Comments? Questions? You can post them below or email me at cbosse@rockcliff.com
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