Using A Lease Option To Sell Your House in Alabama

The exit strategy you use to sell your house can make all the difference in earning the highest possible returns on your real estate investment. An extremely lucrative alternative to selling your house outright, lease options offer a way for you to earn a higher return on the sale. At the end of the agreement, typically one to three years, they can exercise the option to buy the home or walk away, and you keep the initial option fee that you collect upfront as a down.

Much like having tenants, you’ll be renting out your property. However, these tenants have much more at stake than the average tenants, as they are, in essence, test-driving ownership of the property. These tenants are willing to pay extra for the chance at living the lifestyle of homeowners while correcting any missteps with their credit or building savings for their down payment on the property. With the right tenants and a thoughtfully constructed lease option agreement, many investors learn to appreciate this arrangement’s benefits and begin investing with a lease option strategy in mind. So read on as we explore using a lease option to sell your rental property in Alabama.

Asking Price

Because you’re in the driver’s seat, you have the flexibility to set the sales price for the property when using a lease option to sell your house in Alabama. This strategy allows you to set the price above the current market value, often anticipating potential appreciation over the course of the contract term. While you assume the risk that property values may not increase as expected or could fluctuate unpredictably, the tenant also takes on the risk of potential market downturns. They’re essentially agreeing to a fixed price at the time of signing, which might end up being higher than the market value if property prices drop.

This dynamic creates an interesting negotiation point for both parties. As the seller, you benefit from the potential for a higher price, while the tenant gains the opportunity to lock in a purchase price, which may seem appealing if property values are expected to rise over the lease period. However, if property values decline or do not increase as anticipated, the tenant may choose not to exercise the option to purchase, leaving you with a fixed price that may not reflect the property’s current market worth. It’s essential to weigh the market trends in Alabama and be mindful of potential risks on both sides when setting the terms for a lease option sale.

Option Fee

Using a lease option to sell your house in Alabama means that you’ll collect an initial option fee ranging from one to five percent of the sales price, though option fees of up to twenty percent are not unheard of, and the fee is typically non-refundable. With the national median listing price for active listings being around $450,000 as of May 2022, 5 percent would be $22,500, which would apply towards the purchase if the tenant exercises the option.

Tenants Maintain Your Property

While you’ll still hold the title and be responsible for the taxes and insurance, everything else will fall on the shoulders of the tenant when you’re using a lease option to sell your house in Alabama. This setup provides significant advantages for you as the property owner. For instance, tenants typically assume financial responsibilities such as maintaining the home, handling any minor repairs, and keeping the property in good condition. This can ease the burden of ongoing property upkeep and reduce the need for you to manage routine maintenance issues during the lease term.

Additionally, the tenant’s commitment to taking care of the property may create a sense of ownership, which encourages them to treat the property as their own and prevent unnecessary damage. In the event of larger repairs or issues that fall outside the tenant’s responsibility, you will likely need to step in, but for day-to-day maintenance and upkeep, you can rely on the tenant to manage those tasks. This arrangement can be especially beneficial if you’re looking to sell the property in the future, as it minimizes your involvement in the property’s upkeep while still allowing you to hold onto the title and remain in control of the sale process. Just ensure that the lease option agreement clearly defines the tenant’s responsibilities to avoid misunderstandings down the line.

Above Market Rent

You’ll make above-average rental income using a lease option to sell your house in Alabama; the portion of rent paid at above-average rental rates is called the rent premium. The buyers would then deduct the amount paid into the rental premium over the contract term from the sales price upon exercising the option. Of course, if there is no purchase, you’ll also keep these funds.

Talk to one of our highly seasoned professional home buyers at Hapa Homebuyers today about your property, with no obligation. At Hapa Homebuyers, we want you to know you made the best deal and feel good about working with us long after the closing. That is why at Hapa Homebuyers, we’ll compare the numbers of a traditional listing vs. the lease option method and even make you an offer to buy your property directly, as-is, for cash. At Hapa Homebuyers, we’re fully transparent, providing the detail of how each number in our calculations so you can make an educated decision about what works best to sell your Alabama house. 

Ready to learn more about the win-win advantages for sellers of using a lease option to sell your house in Alabama? Call Hapa Homebuyers at 251-312-5100.