Where Did All The Buyers Go?

Interest rates are near historic lows, yet it seems nobody's buying.

A recent caller said to me ...  "People aren't even coming to look at my house and I don't know what to do. Will you buy it? I'll sign it over for what I owe!"

Even when you're offering to sell at a discount, finding a buyer now is tougher than it's been in years. The main reason is because of the mortgage markets.

The press coverage regarding the "mortgage market meltdown" has been relentless. And that's part of the problem. People aren't looking because they're afraid they won't qualify for a loan. Even those with "great credit" are anxious about the thought of being turned down for a mortgage.

So where did all the buyers go?

They haven't gone anywhere. Most are home, waiting for the media to signal the "All Clear"!

As a private investor and real estate consultant who's also in the mortgage business, I'm seeing this from both a buyer and a seller's perspective. People are frustrated on both ends.

The typical buyer who qualified for 90-100% financing just 6 months ago, might only qualify for 80% today. The problem is they don't have a 20% down payment.

So where does this leave them? The majority will opt to stay where they are. Some will look for other ways to buy, such as a "Lease Purchase".

And this is what more and more sellers are turning to as well.

The number of homes available for "Lease Purchase" has increased dramatically over the last few months. Even "builders" are turning to the lease purchase (which was practically unheard of until recently).

"Lease Purchase" however, has been a preferred sales strategy for savvy investors for years. Why? Because it's always been a quick way to put a potential buyer in a property before the next payment is due.

Keep in mind though, it has advantages and disadvantages.

The biggest "disadvantage" (at least from a seller's point of view) is the low down payment you receive. If you're expecting a big down payment when you offer your house on a lease purchase, you're likely to be disappointed. From my experience, to make things happen quickly, it's reasonable to expect around 2-3% as a down payment.

In some areas you may get more, in others it may be as little as "one month's rent". The key is to not advertise a specific down payment requirement. Instead, ask your callers ... "How much did you have set aside for a down payment"? After a few phone calls, you'll have an idea of what you might be able to expect.

Whether or not a lease purchase is an avenue for you to consider really depends on your personal situation and priorities. If getting someone in the house quickly is more important than getting a large down payment, then lease purchase might be a good sales strategy for you to consider.

An important point to remember is that just about every aspect of a lease purchase is negotiable. Down payment, monthly rent, rent credits, maintenance, repairs, sales price ... all negotiable. Does that give you any ideas?

Here Are a Few "DON'Ts" to Remember:

• Don't be afraid to negotiate. (If you're married or have children, you spend half your life negotiating already. Settle somewhere between "hardhead" and "wimp" and you'll probably end up with something "reasonable").

• Don't assume the next call on your ad is going to be the last call you ever get. (Be at least a little optimistic, if nothing else, at least you'll be more fun to hang around with).

• Don't look at a typical lease purchase agreement and assume "that's the way it has to be". (Typical is not necessarily "good").

• Don't assume your local part time real estate agent knows how a lease purchase is supposed to work. (I've met a lot of agents who don't know how a mortgage is suppose to work).

• Don't assume a contract has to be slanted in favor of the "tenant". (Remember what I said about "typical").

Personally, I prefer things slanted a little more to my side (hey, it's my house, right?). I want to be reasonable, but I don't want someone taking advantage of me.

I generally As far as getting monthly rent on time, some people just need a little incentive. And that's an easy thing to work into the contract. Just tie "rent credits" into getting paid on time. Money seems to be a great motivator.

And if you're able to do this on your own without the assistance of a real estate agent, you might just save yourself several thousand dollars in commissions.

My partner and I have used this strategy several times to put buyers in our own houses and in most every instance, we've been able to do it in 30 days or less.

Maybe a lease purchase is something that will work for you too. But be sure to do your homework. It's not a strategy that fits every situation, but it might fit yours.

Michael Hart is a Mortgage Consultant and "Lease Purchase" Consultant based in Peachtree City, GA. He is also a former real estate agent and author of several articles and reports on mortgages and selling "By Owner" real estate.

He can be contacted through the internet at www.localinvestornetwork.com or by phone at 678-318-3542.