Home Buying Strategies: Lease Option?

Home Buying Strategies: Lease Option?

One of the hardest problems for a buyer to overcome is moving up. How do you successfully sell your current home, get the funds, and then turn around and buy something new, all when inventory is so tight?  It can be quite a daunting maneuver.

One idea to consider is a lease option. A lease option will reverse that process. Basically you find the new property, lock it in with an option, move in, then sell your current home. We are in the middle of a deal right now like that, and so far, everyone is happy.

Here is how it works in Marin County. The Buyer puts an offer in on the new home, with an option agreement. The option agreement requires funds be put down, usually 5% of the sale price, and given directly to the Seller. The funds are non-refundable, but applicable to the purchase price of the home. At the same time, the Buyer also executes a lease agreement to move into the home and pay rent to the Seller. Once in the new home, the Buyer sells their current home, then uses the proceeds to close on the new property.

For example, let’s say the Buyer finds a willing Seller at $1,000,000, with a lease price of $5000 a month. The Buyer puts down $50,000, which goes directly to Seller. They move in at $5000 a month; often a portion of the rent may also be applicable to the purchase. They then sell their home for $700,000, and use the funds to complete the purchase (which is now only $950,000, because the option payment has been deducted from the sale price.)

There are risks, of course, as the Buyer may get less for their home than anticipated. It also requires a Seller who is willing to wait a little while for their proceeds. But occasionally the stars line up and it can work for everyone involved.

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Marin Home Buying Strategy: Make like a Cougar.

Not that kind of cougar!

As the Fall market sets in and there are fewer listings and less buyer competition, the trick is to get everything in order and then be ready to pounce. Fall is a good time to be a smart buyer in Marin.

City views from Camino Alto on Corte Madera Ridge.

City views from Camino Alto on Corte Madera Ridge.

Many families who wanted to move in time for the school year have already done so. If they could not find what they wanted, they are probably waiting until next spring. So the buyer pool is smaller, and less competitive. The market is still very strong, but the totally insane multiple offer situations we saw in the spring are now more the exception rather than the rule.

As the days get shorter and homes sit on the market a little longer, price may be more negotiable. We are heading in to the holiday season, and Sellers who have not yet sold their home and want to get on with their lives may become more flexible on price. Twice this week, when talking to another agent and letting them know that the home was currently priced out of reach for our client, the agent said, “The Seller has said they will look at all offers. Please make one.”

Selection is still fairly good, and in some areas, inventory is increasing. In fact we are at our highest inventory level right now in months, with 835 homes for sale in Marin. Just this week in Larkspur and Corte Madera, there were several new listings of smaller homes on level lots in walkable locations. These properties, especially if they have a large enough lot that would permit some later expansion, are often the best deals, if you consider their long term upside.

The first trick is to know exactly what you are looking for. Then you must get your financial ducks in a row so that you are ready to pounce. next, you get out there and look at everything you can, especially as the weather gets worse and rainy (we can only hope) and all but the most ferocious and diligent of buyers have given up. And then you will be ready to pounce!

Marin Market Balance Returning? Depends.

“It was the best of times, it was the worst of times. It was the age of wisdom, it was the age of foolishness.” That’s the opening to “A Tale of Two Cities”, and maybe that’s the best way to illustrate what is happening with the Marin County real estate market.

New Larkspur listing this week: 11 Ward Street, a two bedroom, 3 bath walk-to-town townhouse in downtown!

New Larkspur listing this week: 11 Ward Street, a two bedroom, 3 bath walk-to-town townhouse in downtown!

Real estate is moving more towards a balanced market, which we have been predicting for some time. It is, however, still very localized, with major differences between towns and price points. Areas where buyers still perceive there is value, as well as better entry level pricing, are still doing quite well. At higher price points though, it is well into a balanced market, with inventory growing higher.

So let’s look at two cities in Marin County. Fairfax….aka “The People’s Republic of Fairfax.” Former home of Van Morrison and the Grateful Dead, known for tie dye and alternative lifestyles, right? How about this: family friendly, vibrant downtown with thriving shops and restaurants, and great trail access where there are only fourteen homes available for sale, and half are already in contract?

Tiburon, on the other hand, a place where everyone wants to live with perfect weather, outstanding views, and great proximity to the City has 77 homes for sale, and only 29% are in contract. As gorgeous as Tiburon is, the small town local atmosphere of the Twin Cities (Corte Madera and Larkspur) and Mill Valley, along with San Anselmo, Fairfax and parts of San Rafael are often at the top of the young family buyer’s list.

But the big difference in this tale of two cities is median price.  The median priced home for sale right now in Fairfax is $1,100,000; the median price for active homes in Tiburon is $3,444,000. Other luxury-priced markets have a similar story. In Belvedere, 29% of homes are in contract, and in Kentfield, 23%. In the slower moving luxury end of the market, these are  good numbers.

In Novato, 46% of listings are in contract, with a median active price of $899,000. Corte Madera has 35% in contract, with a median of $1,195,000. San Anselmo is very similar, with 39% of listed homes in contract.  As always, there are pockets where it is still crazy, especially close to town locations. The Rose Lane condominiums for seniors (55+) in Larkspur sold out all of their phases in the first weekends. In Mill Valley, a new condo development right downtown, 33 Lovell, sold their first two units in the first week, at $1000 a square foot.

Pending sale in Inverness, this custom built contemporary just across from the beautiful Chicken Ranch Beach.

Pending sale in Inverness (approx $1m) this custom built contemporary is located just across from the road from a beautiful community beach. You will love crossing the road to get to Chicken Ranch Beach!

Homes that are for sale near downtowns are in particularly high demand. Call me, Bob Ravasio at 415-378-1414 if you would like more detailed information about the market or any of our listings. If you are a buyer, call either of us tand we’ll share our best strategies and timing for buying in Marin.

And please follow Marin Real Estate Insider!  Learn all about the real estate markets in some of the most amazing and beautiful communities on United Spaceship Planet Earth! (And yes, that’s a bow to the Republic of Fairfax).