Charlotte Property Management Weekly: Reaction to Proposed FHA Loan Changes for Those in Lease Option Contracts: “No Sweat”

There has been a lot of discussion surrounding proposed (and current) changes to tighten FHA loan guidelines. Heated discussions. Unhappy folks. Panic.




Real estate agents are unhappy. Buyers are unhappy. NAR is not happy. And if mommy isn’t happy, nobody is happy.



Why is this? Well, if more buyers are pushed out of the market for not having the proper qualifications now, the real estate market will continue to worsen. If that happens, who knows what the effect will be for the economy in general, and especially for those that are employed in the real estate industry.



It reminds me of one of my high school friend’s patented lines when he would see one of us wearing an ugly shirt or some God-awful hat, “I didn’t think there was a possible way for you to get even less girls, but you may have found it.”



To extend this wisdom to the real estate industry, if real estate agents didn’t think there was a possible way to do even less brokerage business, FHA may have found a way.



Don’t blame Congress; they don’t have much of a choice. They can’t responsibly sit idle while their GSE’s keep losing so much taxpayer money every quarter from loan losses. The choice is out of their hands.



The same is true with buyers and sellers in today’s market. If they go into contract on a home and the bank underwriters decide not to make the loan at the last minute, the buyer and seller have little choice: the buyer walks and the seller keeps the home on the market.



However, for those lease option buyers (rent-to-own) and sellers (rent-to-sell) under contract, there is a choice. No one has to walk; the lease contract can simply be extended until the lease option tenant qualifies for a loan. They can try to get a loan every month if they want. There is no panic, no one has to move, and the deal can still happen.



To further clarify, the lease option (rent-to-own) tenant is under a lease agreement and is paying the seller’s mortgage with their monthly rental payments. This lease can go on indefinitely (with mutual agreement, of course). As long as the tenant still wants to buy and the owner still wants to sell, no one is worried. It may take a little longer than both parties want, but the sale can still happen. This goes for any FHA closing issues such as low appraisals, increased down payment need, or higher credit score requirements.



Lease options provide greater flexibility to close deals in a changing lending environment. The lease can be extended and the terms renegotiated on the fly. Agreements can be salvaged and completed. Choice is a nice thing.



While others fret, lease option principals (including real estate agents) say “No Sweat.”



Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. His newest book, A Real Estate Agent’s Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)