The Myth of Rent To Own

At least three times a week we get a call, email or social media post asking about "rent to own" properties.  This is understable since most people want the American Dream of home ownership, but not everybody is ready to be a home owner. 

Here are a few things to know about rent to own:

1. Rent To Own Properties are very rare.  Right now out of 3101 active listings in the Montgomery MLS, only 53 (or 1.7%) are advertised with Lease Purchase or Owner Financing as acceptable terms. Of the 4214 residential properties sold in the past year, 52 (1.4%) were owner financed in some form. 

2. Sellers who sell, sell. Owners that lease, lease. It may sound simple, but most people that place their house on the market want to move on. For the most part sellers who offer owner financing, lease purchase or any other type of creative financing are investors who are looking for maximum return on their investment. This goal does not favor a buyer's goal of low down payment and low interest rates. 

3. Many properties sold with seller financing  or lease/purchase do not qualify for any other type of financing. One of the reasons that investors sell using owner financing or lease purchase is that they know the price or condition of the property does not allow for accepted appraisal standards. Offering to carry the note  allows the seller to get the highest price with minimal work, thus increasing the return.

4. The buyer has no negotiating power. If the seller is the bank, they will set the price, terms and conditions of sale. Due to the limited supply and relatively high demand, the seller can choose the buyer and set the terms of sale that are most favorable to them. 

5. The terms of sale will not be favorable to the buyer.  The buyer should expect to pay exceptionally high interest rates, high down payments, non refundable deposits, short loan terms and in many cases a balloon payment. The buyer may even find themselves owing more on the property than it is worth. 

6. The buyer doesn't own anything. Most "rent to own"  or owner financed properties are financed with an instrument known as a Bond For Title or Contract For Deed.  The buyer does not receive ownership of the property until it is paid in full, in contrast,  a mortgage creates a lien on the property, but the buyer has ownership and a deed to the property. Generally, if a payment is late or not paid, the seller (note holder) can at their option convert all previous payments to rent and evict the tenant. One late payment could erase all of the equity the buyer may have in the property. 

In today's market, interest rates are still at historical lows, there are many financing options offering little or no down payments and buyer's are protected from overpaying for a property by appraisals. Given the risks involved in any sort of Lease/Purchase or other owner financing makes this option far less palatable than standard mortgages. There are very specific instances that make owner financing attractive to a buyer, these are extremely rare. 

If you eventually want to buy, but are not ready yet, save some money for a down payment, repair any credit issues and talk with a lender and Realtor about financing options. 

Ready to Buy or Sell? Contact Bo Evans Realty to find out how. 334-361-4661.or visit our web site www.BoEvansRealty.com

Should you pay somebody to lease your property?

We are often asked whether it is wise to hire a property management company to lease their property. The answer is not always simple, but the answer is that it is generally worth the small fee to let a professional manage your rental property.

A recent story on WSFA points to one good reason to hire a property manager. It is the best way to avoid scams For owners and tenants.

However there are plenty of other reasons to hire a professional property manager:

1. Time - unless you have the time and money to devote to full time management of your rental property, it is wise to hire somebody. On a typical day. We get about 100 rental related calls a day. Some of them are property inquiries, some are tenant questions and some are maintenance or repair related. A management company is organized to handle the sheer volume of calls, direct the caller to the correct answer and take the necessary action. Our company has a staff to deal with almost every known issue that might come up and has the experience to deal with it correctly. 

2.  Legal matters - From the Alabama Landlord-Tenant Act to Fair Housing laws to issues associated with the Americans with Disabilities Act to the Fair Credit Reporting Act to city, county and state regulations to eviction and collection laws, property managers are trained to know and understand the myriad of laws, rules and regulations that affect landlords and tenants. They are constantly changing and a violation of any of them can lead to fines or worse. 

3.  Tenants - generally most prospective tenants will contact the place that is likely to have a property that meets their needs. In addition, we have a rigorous qualification process for all tenants and have rules and policies in place that provide that all tenants and prospective tenants are treated fairly and equally. Private owners often loosen their standards to get the property rented, this can lead to many issues down the road.

4. Collections - Once the property is rented, many landlords find that collections is by far the most difficult part of rental ownership.  Leases can written tightly, however emotions can get involved and tenants can fall behind.  Professional property managers generally do not get emotionally involved with their tenant, the understand that their job is to enforce the lease.

5. Repairs and Maintenance - Simple volume allows us to negotiate discounts on most repair and maintenance items, in addition most of our contractors allow some form of priority to our tenants.  This may not seem like an advantage until the tenant's air conditioner stops working on July 4 or their oven breaks the Wednesday before Thanksgiving.

All in all it is quite possible to rent a property on your own if you are a private company, many people do and do this very successfully.  If you have the time, business savvy and expertise to do so, you can save a nominal sum of money every month.  However, many of our owners have learned that it is well worth the small fee that we are paid to let us do this.

If you are interested in our property management services or are considering investing in real estate, give us a call 334-361-4661

The most significant real estate investment in Prattville

A huge thank you is due to the Historic Prattville Redevelopment Authority and its chairman, Tom Newton for their purchase of the Pratt Gin Manufacturing facility at a foreclosure sale on December 29.

The $1.7 million investment will surely draw the ire of some short sighted people on our community, but this is much more than a real estate investment. This is saving the most significant piece of real estate in our community. It is a source of both civic pride and civic identity.  For a native of Prattville, the gin shop is like your great grandmother's chicken & dumplings, it is always there and it brings back memories of special times.  The Gin Shop is our reason for being. It is what makes Prattville unique; it is the reason we are the Birthplace of Industry in Alabama.

Most cities and towns in Alabama are built around a courthouse square. Instead Prattville's downtown is centered around the gin shop, much like the industrial cities of New England. This makes Prattville unique, not just in Alabama but in the South as a whole.

It is no accident that the gin shop, and thus Prattville is located where it is. Daniel Pratt recognized that the fall line of Autauga Creek could provide the power to run his factory (as well as the factories that followed). The Gin Factory operated for over 150 years through several owners. For most of my lifetime, the shift change and lunch whistles could be heard all over town, always a reminder of Prattville's beginnings as a company town.

The global economy makes the production of cotton gins unprofitable in the United States and eventually Continental Eagle moved production to Asia and Africa.

HPRA's purchase of the property opens a new world of possibilities. Tom Newton has stressed that the right developer will be able to repurpose the property. He should know, he is an experienced real estate developer in his own right and has a lifetime of experience in Prattville. This was indeed a team effort and there were a number of people and groups involved in this massive project.

One developer, Pratts Mills Partners of Atlanta, had proposed loft apartments. This is a fantastic idea and, hopefully one that will be perused.  This should be seen as the beginning rather than the end. Since retail follows rooftops, expect to see an entertainment district that will compete with anything Montgomery, Birmingham or Atanta has to offer. Expect a public/private partnership as not only restaurants and shopping come to roost, but park facilities and  wouldn't this be a great place for a new library in Prattville. The end result will be a revitalization of downtown bordered by the gin shop on one end and Pratt Park on the other, with homes (new and old) in between.

The purchase of the gin shop means great things for Prattville and the preservation of one of the most historically significant properties in Alabama. It may seem expensive, and will likely get more expensive, but the end result is priceless. 

The Top Seven Things Every Seller Needs To Do

 

"Honey let's move", three simple words that can strike fear into the heart of almost anybody. Your mind will immediately flash images of strangers trampling through your house, packing boxes, loading the truck, breaking some odd lamp that will suddenly become a family heirloom; no wonder moving consistently makes the top ten list of the most stressful things a person can do.

After initially trying to justify that your current abode is perfect, you will resign yourself to the fact that there is a move in your future. What next?

Here is a top seven list of the things every seller needs to do before placing their house on the market.

7. Declutter - that junk drawer, closet, room may be ok for you but it will an immediate turn off to any prospective buyer. Go through the house and get rid of those things you don't really need, as a rule of thumb, if you haven't used it in two or three years, you aren't likely to use it again. Have a garage sale and schedule a pick up from Goodwill or the Salvation Army. Even if you decide not to move, you will feel better about yourself.

6. Repair and refresh - Every morning you look at that broken gutter and say "I gotta fix that", same goes for the leaky sink in the hall bath. While these little things are ok while you are living there, they are red flags to any buyer and you are probably going to have to fix them after the buyer' home inspection any way. Once you take an afternoon repairing these little things, get out the paint cans and paint anywhere it is needed, have the carpet professionally cleaned (or replaced if needed). It's a competitive market and your house needs to shine above all others.

Tip: Go all out and get a professional home inspection and address those items.

5. Research - I'm not talking about research into a pricing strategy that will come. I'm talking about real estate in general and research about the people that sell real estate in your area. Real estate is a constantly changing industry and is affected by many other factors such as mortgage rated, employment figures and even inventory. The simple act of listing your home for sale has changed dramatically in the past five years. Ask your friends about their experienced with Realtors, get the good and the bad. Make a list of the top three.

4. Amateur or Pro – Every seller has said to themselves, “This isn’t brain surgery, I know I can sell it on my own”, after all, who knows your house better than you do?  It is true that many people sell on their own and do it successfully without a Realtor.  However, most of them find that this is a full time job and they end up needing help along the way with all sorts of issues (pricing, buyer qualification, showing, appraisal issues and legal issues are a few of these).  In the end, sellers that use a Realtor, make more and sell quicker than those that don’t.

3. Questions to Ask Yourself – You need to put yourself in the shoes of a buyer looking at your house.  Most buyers have seen five to fifteen other houses before they visit yours, answering these simple questions will help your house stand out:

•  If I was going to stay in this house another five years, what changes would I make?            
•  What are the best features of this house and its surroundings?
• What are the worst things about this house and its surroundings?
• What one thing would prompt a buyer to buy this house over all others on the market?
• What one thing would prompt a buyer to buy another house on the market over this one?

These questions are designed to help you overcome objections over price, condition, neighborhood, schools, design, floor plan, location and a myriad of other item that will cause your house not to sell.  Answer them honestly and address the issues brought up by the answers.

2. Who would buy your house? - The likely buyer of your house is somebody very similar to you when you bought it.   Think back to those days when you were looking.  Were you a first time buyer or move up buyer? What were the specific things you needed in a house? What sort of budget did you have?  An essential part of marketing is knowing who you are marketing to, figure out the type of person that will buy your house and you will have half the job conquered.

1. Where are you going and why – You are moving for a reason, what is the primary reason?  Are you experiencing a job transfer? If so, how long before you need to be in your new location? Has there been a change in your family that requires a different place to live? Has there been a change in your lifestyle that allows a different place to live? Have you found your dream home and don’t need two houses?  The answers to these questions will give you a guide to the amount of time and the amount of money you will need to make the move.

 Of course this is not the end all, be all of lists.  We haven’t even begun to address items such as pricing strategy, contracts, staging, escrow and closing, appraisals, inspections and a myriad of other things that will affect the sale.   A member of the Bo Evans Realty Team is ready to help you with your next move.  Give us a call today at 334-361-4661 or email sales@boevansrealty.com

Thinking of Buying A Home in 2015 this Guide will help

Home ownership rates are expected to continue climbing over the next year. The coming year should bring a fresh supply of new homes, new mortgage programs are expected to be rolled out soon for first time buyers and interest rates should remain low for the foreseeable future.

Perhaps you have decided that 2015 is the year for you to take the the plunge and buy a home. If you are sure where to start, this handy guide should help. 

1. Check your credit- Remember that credit card with the $750 limit you got with the cool t shirt? Even if you paid it off and haven't used it since the night you bought a round for everybody, it still may be affecting your credit. Check out Credit Karma.com or My Fico.com to make sure you don't have have any old open accounts or accounts that need to be taken care of. Both sites provide excellent advise for improving your credit and MyFico will all you to purchase the same credit report many mortgage lenders use. Mortgage lenders will require a credit score of 625 for an FHA loan  and higher for other mortgage programs. 

2. Save your money - While there are a variety of mortgage programs that require little or no down payment, you will still need some cash for things like closing costs, insurance and that cool new recliner for your den. You should have about 5% of your purchase price in the bank. 

3. Get pre-approved - There are so many mortgage programs, even seasoned buyers need some guidance in choosing the best one for their needs. All have different credit, income and down payment requirements, some are limited to certain counties, VA loans are only available to active duty or prior military, guard and reserves. There is a difference between pre-approval and               pre-qualified. . Don't know who to call, contact a member of the Bo Evans Realty Team, we'll be happy to help. 

4. Make A List - You probably have a pretty good idea of what you want in your next home, but it's a good idea to examine your lifestyle and determine your wants and needs. You probably,y need a certain number of bedrooms and a particular school district but you may want a pool or workshop. Prioritize the items. Put as many items on your list as you want, separate them into "must have" "would like to have", and "would be nice to have". It also helps to make a "don't want" list for things you would like to steer clear of. 

5. Dream - by now you know what you want (and don't want) in your next home. Head over to BoEvansRealty.com and check out the vast inventory of homes in our area. You can also sign up for automatic updates that will email you anytime a home that fits your needs comes on the market. 

6. Get Ready - contact a member of the Bo Evans Realty Team (334-361-4661) to begin the steps to buying your next home. You will get expert advise on contracts and offers, negotiations and all the steps you need to take to be in your new home in time for a great house warming party. This step can happen at any point of this process. 

Until Next Time ....

The Bo Evans Realty Team