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Negative Equity or Little Equity

A Lease Option is a powerful and useful tool which can be of value to a vendor who is desperate to sell their property but unable to do so because there is little or the property is in Negative Equity. It can also be ideal for a vendor who does not need the full equity immediately. If a seller needs to stop paying the mortgage and move on without selling the property at below its full market value, then we can help by using an instrument called a Lease Option.

Options are used all the time in the financial markets such as big airlines buying all their fuel at a set price for the next 12 months. They have been used in the property markets in the UK for some time but not in the residential market, but this is now becoming more mainstream.

Let's assume that have a property that you need to sell very quickly. If you sell through an estate agent in the current market, it is extremely unpredictable and the over-supply of properties in estate agents’ books means your property could be on the market for nine to twelve months without being sold. In the meantime, you would be advised by the agent to keep reducing the price to create interest.

If your property doesn’t have enough equity, there’s only so much you can reduce with the price. Selling to a cash buyer normally requires a discount of a minimum of 25% in the current market. Therefore, not every seller is in a position to reduce the price.

With lease options, you, as the seller, grant an option to buy your property at close to the property’s full market value based on today’s market in the future. The option period could be anywhere between 1 and 15 years. In the meantime, the person who takes on the lease option takes on your mortgage payments and become responsible for your property’s maintenance and upkeep. In other words, we are "leasing" your property.

You may then move out of the property immediately without any further burden of a mortgage.

When they exercise the option to buy, you may make a profit that would otherwise be impossible if you had sold in today’s market.

Let us show you an example:
If your property is on the market for £150,000; your outstanding mortgage is £125,000 and your monthly mortgage is £700, you’ll need to reduce the price to probably £130,000 to attract any interest. That means you will not make any profit at all from this transaction and it could take 6 to 12 months to sell your property. During this time, you’ll need to continue paying your mortgage.

However, you could agree to grant an option to sell your property for £150,000 within the next 5 years. Meanwhile, your mortgage payments of £700 a month will be paid by someone else. When the option is exercised you would make £25,000 after paying off your mortgage of £125,000.

A lease option would suit the following situations:
- The seller has mortgage arrears or is facing repossession.
- The seller needs to move on immediately without further mortgage commitments.
- There is little or no equity in the property.
- The seller does not need a large lump sum of cash immediately to move on.
- The seller wants to secure a price that is close to today’s full market price regardless of the state of the housing market in the future.

This service is free and the process takes approximately 28 days and in some cases less than 2 weeks. Due to the flexible nature of a lease option, it is possible to structure it so that it can completely suit your circumstances.

Homes Sold Fast can help you

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Get started now with your FREE no obligation offer and find out how we can unlock your property, with a Homes Sold Fast solution.

Use our online enquiry form or call 0845 056 3848 to discuss how we can help you.

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