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Wednesday, June 4, 2008

The lease market

The lease market has certainly picked up steam in this trying market. Fully 20-30% of our business locally is now in leases. Many of these properties are somewhat distressed - near foreclosure - so the owners have decided to lease, rather than lose the place to foreclosure. The ironic thing is that many of the people seeking to do a lease have just recently lost a house to foreclosure.

The lease process has as much, if not more, paperwork involved than a purchase, when you include all of the preliminary application forms and background checks and pre- and post-occupancy checklists and explanation documents. There is a whole raft of laws protecting the rights of tenants, so would-be landlords need to be extra careful on the front-end. Once a tenant is in, it can take 4-6 months to get them evicted, if they turn out to be deadbeats. So, a great deal of due diligence is required up front. The lease document itself can be quite complex and tries to cover all of the things that can come up between a landlord and tenant. All-in-all is is much more complex than the Purchase Agreement document that may govern a sale, since events that occur after the sale are seldom of concern; while one must be concerned about things that might happen throughout the term of a lease.

Because a lease situation can be fairly complex, it is a good idea to have a good Realtor or a good lawyer involved - sometimes both. You will also need the services of a company that can do background and credit checks. Your realtor really can't do those for you. You should be aware of the applicants background, especially if a foreclosure or bankruptcy was involved; however, it is the applicants current condition that needs to be evaluated. Many people went through some rough times, because of a variety of things, from layoffs to divorces to loss of overtime, which caused them to default of their own home mortgage. If they have stabilized their lives and can now show a steady income stream and a responsible attitude towards their debts, they may be good candidates for your lease. There may even be a complete innocent and logical explanation for the person's desire to lease. They may be on a short term assignment in the area or they may be new to the area and what to get familiar with it before buying. You have to ask.You need to do a good face-to-face interview and size up the applicant.

If you are a homeowner who has tired (or maybe is close to a problem) of the selling routine. leasing can be a way to at least recoup some of your monthly costs. Don't try to get it all or yo may be overpriced, even for a lease. If you are recovering from hard times and need to lease while you repair your credit, be prepared to show that you are now in a position to meet your obligations and would make a good tenant.

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