option to purchase not supported in current market

Status
Not open for further replies.

ttlady

New Member
we had an option to purchase, 3yr lease which was approaching the end of the term. We tried to discuss the current market value,the banks would not ok loan for the home above it assessed rate but the owner would not lower the purchase price. We discussed the choices further and that we did not want to move, the owner then stated he would lower the price slightly but would not apply our option monies that had accumated over the term of the purchase option. That would leave us less the monies pd ea month for nearly three years and/or out of the deposit money. We pd more ea month to rent due to the option amt.The price did not lower enough to support the market value, the banks still would not cover that amt over the value. The house listed still approximately 50k over the assessed price. We are looking to retrieve the option portion amt as the owner essentialy voided the contract. Do we have the right or should we go after the amt of money held toward the option or deposit?
 
The lease with an option to purchase can be written several ways; a purchase price is decided upon initially (the most common way to do this) or the price becomes the "market value" of the unit at the time of the actual purchase (less commonly used). As the buyer you "gamble" that the price of the house will increase during the three years you live there, giving you more house for the money.

If the purchaser is unable to come up with loan amount at the end of the term (including being unable to get financing), they lose their option money.

In this case, the owner did not void the contract. In fact, they could argue that you voided it by being unable to get funding at the end of the lease term.

Look at it this way; if you had decided on a price three years ago and the market turned around and housing prices increased considerably, you'd be getting a deal on the home. It didn't work that way which is why I've never really figured out the lure of these option to purchase rental situations. In so many of these situations the buyer never ends up actually purchasing the place.

Gail
 
Gail is correct, the actual wording of your lease option is very very important here. I am afraid that you guys signed a hybrid lease option/lease purchase sort of agreement. As strict lease option is where you pay a certain amount of money down as an "option payment" to buy the option to purchase this property for $x for say 3 years. That money is non-refundable and if the property has gone down in value you are just out that money if you do not pay the inflated price for the property.

A lease purchase is where you agree to purchase a property for a certain amount of money preceded by a number of years where you lease the property. Many times there is a down payment and monthly credit of part of the lease payments to the deposit. Since you are "purchasing" the property from day one, the "extra payments" are counted toward the purchase price and are not refundable.

If you mixed the two it is the worst of both worlds. With an option, you should not have been making payments to build up a down payment. You don't start paying on the price of the house until you exercise your option and indicate that you are going to purchase the house.

If you are mixing the two but the wording is in your favor you may be lucky. If there is a specific payment that is labeled "Option payment or premium" and then "credit of part of the rent toward down payment" then you should receive those extra payments back if you decide not to exercise your right to purchase. I doubt the Sellers have that money and they won't give it back without a fight, but it is possible that you can get it from them.

Your best bet is to renegotiate the price. If faced with keeping the house they may agree to a lower price. Does that make sense?
 
Status
Not open for further replies.
Back
Top