Percentage Of Options Exercised?
What percentage of options are actually exercised? People without good credit or much cash for a down payment are drawn to L/O and I would think that it may still be difficult for them to qualify in a year or two. Any insights?
Even an offhand guess would be appreciated. I suspect the percentage is very low.
I have heard of a figure of 20%, but I would do more due diligence to hear from other folks about their experience.
JohnBergman,
Glad to meet you.
If your buyer makes their payments on time and you have a record of such, then your chances of getting even a "D" credit buyers is very good. Lenders like to see that the buyer can make the payments on time.
Find a mortgage broker who works with credit challenged buyers, if the broker is on top of his game he will get your buyers financed.
L/O I have heard is around 10% will be able to re finance, remember you are doing nothing more than renting the property, no real incentive for your buyer to re finance.
I have found that selling with a Contract for Deed that 70% re finance, which is great because I have a built in profit center when this happens and it is another nice payday. You also command a much higher down payment, and your buyer tends to take better care of the property.
For the buyer's that are unable to re finance you can either works other terms with them or have the property back to re-sell, with a greater property value and higher equity added.
John $Cash$ Locke
I've seen figures. I only care about MY L/O deals.. I want to sell my properties using a L/O. I therefore enter into an agreement with an optionee who has a reasonable chance of purchasing. I do that with a financial statement, credit report and sending the prospect to a loan officer for consultation/credit repair. My actual number of transactions consummated is very high. That's how I make my profit. Few don't exerecise their option or qualify.
There's an investor mindset which thinks that the road to riches is to L/O the same property multiple times with people who have the cash but not a
prayer of purchasing the property. In that case the % of exercised options would be very low.
The % is your choice
Hey,
Very, very, very low. It fact for me it is 0%.
I have rentals, but offer the option to the tenant to do a L/P after the first year. Only a handful have ever entered in to a L/P and now have ever completed it.
I am seriously considering offering L/P on all the houses, as they become available. I think it is a better way to "rent" them and get some cash upfront.
There is a reason a "buyer" uses a L/P instead of a normal mortgage and that reason is usually bad credit. So I do NOT believe you will be able to "pre-qualify" them. It will take a year or so, for them to be in a position to get a mortgage.
if you are really hoping for an option to be exorcized. why not sell the property contract for deed with a wrap and a ballon in 2 years? if they cant come up with the ballon then...guess who is in the drivers seat to prepare a win win situation #2
[addsig]
Hey wheelerdealer,
I don't do Contract for Deed, so maybe I just don't understand, but how would this help the invester????
If the "buyer" stops making payments, wouldn't you have to foreclose on the house instead of standard eviction process?
Why would a Contract for Deed succeed where a L/P failed?
What makes this Win/Win?
A l/p does not tie the buyer to anything but an "option" versus an "obligation" as in crontract for deed.
[addsig]
Hey WheelerDealer,
I fully understand your point concerning one being an option and the other being a requirement, but I don't believe the problem with L/P not being fulfilled relates to the "buyer's" seriousness. Instead it is due to the individual not being able to qualify for a loan.
Generally speaking (and not including RE investors), an individual uses a L/P or a Contract for Deed, because they are unable to obtain a loan. In today's market of 0-5% down loans, it is NOT because of the lack of a down payment. In fact, both L/P and CFD require some upfront money. Therefore it is the individual's credit worthiness that prevents the loan.
During the term of the L/P or CFD, the individual is suppose to correct any problems with their credit and the simple fact is they don't.