Q: We are selling our house in Dunwoody, Georgia and moving to Charlotte, N.C. We are in our late 70’s and the house is paid for. A friend who has a friend who is interested in a lease to buy after his divorce is settled. Is this a good idea for us and does our realtor handle a situation like this? Who writes the contract?
A: Hire a real estate attorney to draft up a lease for your friend’s friend. You’ll want to make sure it conforms to state law. You may even be able to purchase a legal lease in a local stationary store or online at a site like Nolo.com or LegalZoom.com.
But, I think it’s worth having a real estate attorney draft one up and then make sure your friend’s friend signs it. You’ll have to be very clear about how much rent you want as the security deposit and under what conditions that security deposit might be tapped to pay for any damage.
The real issue for you is deciding whether you would prefer to sell the home and be done with it or whether you are comfortable becoming a landlord with the hope that you might sell the home to your tenant sometime in the future.
If you don’t want to still have ties to the home once you move to North Carolina, you might want to try to sell the home and be done with it.
But you have to through the pros and cons in light of the current economic situation. If there is no real estate broker involved in the sale of your home – your friend approached you about his friend – you may have an advantage of not having to pay the real estate commission at this time to get the home sold. That could be a savings of up to 6 percent on the price of the home – no small potatoes.
If real estate values are depressed around where you live, and you don’t want the hassle of managing investment property, not paying the real estate broker’s commission may seal the deal for you.
If you have a real estate agent that you like and trust, you may want to talk to him or her and discuss your situation. The agent may be willing to help you in your lease/option transaction for a flat fee and give you insights into the real estate market in your area that you may find quite helpful.
In any event, talk to your friend’s friend about his lease/option offer. Typically, the purchase price is agreed upon at the beginning of the lease and written into the terms.
Remember, that once you sign the lease, you become a landlord. You won’t have the same rights as you did when you lived in the home, but you may have all the responsibilities for the maintenance and upkeep for the home.
Make sure you spell out what your obligations will be in renting the home and what obligations the tenant will have. It won’t do you much good being an absentee landlord to find out that the house is not taken care of and will cost you thousands of dollars to fix up in order to sell the home if this person decides not to move forward and buy the home.
If your friend’s friend ends up being a great tenant and buys the home at a mutually-agreeable price, this could be an easy way to unload your property.
Just make sure you get a real estate attorney involved so that you have the proper documentation in place should things not go well between you and your tenant