Leasing vs Selling Your Home
In this unusual housing market, many people who must move are considering the option of a Lease or Lease Purchase Agreement. I will try to summarize some of the considerations.
I highly recommend using a professional Property Management Company to handle your lease agreement, market your home, screen prospective tenants, hold the tenant's deposit in a required trust account, handle payments, and supervise repairs. These professionals are familiar with Landlord/Tenant Laws in Georgia.
Before deciding to lease your home, consult an accountant to find out how leasing your home will affect your tax liability negatively or positively.
POSSIBLE TAX RAMIFICATIONS
1. Your Property Tax may increase in the next calendar year because of loss of Homestead Exemption.
2. If later sell your property, and you are living OUT OF STATE, you should know that the State of Georgia requires the closing attorney to withhold up to 3% of your gain at closing if you cannot show that you have sustained a loss.
HOME OWNERS ASSOCIATION
Check with your HOA to find out if leasing is allowed, and if it requires HOA written approval.
Give your tenant a copy of the Covenants and Restrictions, and address in your lease agreement whom is responsible for yard maintenance, etc. Ultimately, the HOA will hold the OWNER/LANDLORD responsible for any violations.
This goes for violations of COUNTY ORDINANCES, too, so become familiar with your county and city ordinances for single family neighborhoods.
FAIR HOUSING LAWS
EVERYONE involved in a real estate transaction is subject to the FAIR HOUSING ACT, including the property owner. Read more about the Fair Housing Act as it pertains to single family housing. In addition to the Fair Housing Act, there is the Tenants' Rights Act of 2009 which protects the rights of tenants in the event that the home goes into foreclosure while subject to a written lease agreement.
In a rental, you retain ownership of the property. Typically, you will do a move-in inspection with the tenant. The lease agreement dictates the term of the lease with the start and end date. The monthly rental amount and when and to whom it shall be paid is part of the agreement. It should include language about what happens if payments are not received on time. It also details what utilities and repairs the tenant and owner are responsible for paying. The amount of the refundable security deposit is included (NOTE: The landlord must hold the security deposit in a trust account and may NOT co-mingle this deposit in a general operating account).
The Georgia Association of REALTORS(R) Lease Agreement is 10 pages long, so be cautious about using a 2-page agreement which may fail to address important legal issues.
LEASE PURCHASE OPTION
A Lease Purchase Agreement is a Purchase and Sale Agreement combined with a Lease Agreement. It includes the purchase price, the amount of earnest money (must be held in a trust account), closing date, and other details of a sale agreement. If the property is sold with a "Due Diligence" clause, the buyer will have a period of time to have the home inspected at the buyer's expense and negotiate repairs with the seller or terminate the agreement. In that case, the buyer is entitled to a refund of earnest money. The 9-page Lease Agreement addresses all the details of the lease.
For a landlord, a Lease-Purchase may attract a tenant who is committed to living in the house and one day owning it. For a tenant who is not ready or able to purchase at this time, it offers the chance to settle into their new neighborhood prior to closing.
Lease Purchases can be fraught with pitfalls for the Seller and Buyer. Here are just a few things which might go wrong before the closing date:
In these cases, the seller has lost a sale and may or may not have lost a tenant. The buyers have lost their dream. The real estate and mortgage professionals do not get paid.
ADDITIONAL INFORMATION FOR RENTERS AND LANDLORDS
RESEARCHING RENTAL LISTINGS (SINGLE FAMILY, TOWNHOME & CONDO):
FINDING A PROPERTY MANAGEMENT COMPANY
IN YOUR AREA
Below is a link to a few property management companies in metro Atlanta:
Many larger real estate companies have one or more property management specialists, so you might check with your local offices. Again, I would caution against using an agent who has not been through property management courses and is experienced in landlord-tenant laws.
DISCLAIMER: All information herein is is believed to be accurate and timely, but not warranty as such is expressed or implied. Much of the information pertains to residential real estate in the State of Georgia. Be sure to check with your state and local authorities for accurate and up to date information.
© 1999-2012 Pat Sabin