Builders back lease-purchase

It’s a sign of the economic times, experts say: The concept of getting into a home by working out a lease-purchase deal is making a comeback.

With a lease-purchase agreement, a buyer moves into a house and makes payments on it while working out credit bugs or down payment issues that keep them from buying it outright. Builders have owners in the home who are working toward a settlement date that can be six months to a year away. In some agreements, part of the monthly payments are applied to the purchase price.

But in a strong real estate market, a lease-purchase plan usually draws sneers from buyers and builders alike, said Lawrence Kasmen, president of Buckhead-based Highlight Homes.

“Builders don’t typically offer this option because there’s a perception that the house is not sell-able,” said Kasmen. “But now, with buyers having difficulty getting credit, we look at it as giving people the opportunity to realize the dream. It’s certainly not a negative on our homes.”

For the first time, Highlight is offering lease-purchase options at their communities in East Point, College Park and the Cottages at Stillwood in Newnan, where houses are priced from $189,000 to $249,000.

“We typically require 5 [percent] or 10 percent as a down payment and verification from the individual’s lender about how long it will take to restore their credit,” said Kasmen. “Then we give them a road map on how to do it. The deposit is applied to the purchase and sometimes the rent can be applied to the cost, too.”

Sandra Dunn, president of Five Star Mortgage, said more builders are coming to her Duluth office to discuss lease-purchase options for potential buyers with credit problems.

“About 90 percent [of the buyers] have some credit repair that needs to be done,” said Dunn. “They may be able to purchase in six months, but right now, they may have credit issues, no down payment or too much debt to qualify for a loan. A lease-purchase can put them in a house while they work to make changes.”

The arrangement benefits both builder and buyer, said Dunn.

“For builders, their house is not sitting there vacant,” she said. “Someone is taking care of it and the grass and that gives a neighborhood the feeling that things are kept up. It also gives the buyer the pride of homeownership: They have something that’s theirs while they’re building toward their future. And they can buy the house at the end of the agreement for what the house costs now.”

Buyers want to buy, said Kasmen, but today’s loan restrictions can make it extremely difficult.

“We cooperate with the buyers to re-establish their credit,” he said. “We look at it as a good service that’s helping the economy, because if builders have homes but buyers can’t buy them, the market will stay at a standstill.”

Qualifying

You may qualify for a lease-purchase agreement if:

> your income is high enough to make the monthly payments.

> you have credit problems.

> you don’t have enough savings for a down payment.

> you have too much debt and need time to pay some off.

> you need time to pay off some collections.