It is not uncommon for prospective homebuyers to lose premium payments and option fees at the end of their contract. This happens when they can’t buy the home through their lease-option agreement due to new circumstances.
Even if these buyers have the option to purchase the property, they forfeit it for one reason or another. What if there’s an option to assign the lease option to someone else? Think of it like a sublease. This is a good way to get your money back.
Related: Pros & Cons of rent to own.
Why Do You Need to Assign a Lease-Option?
If you are looking to get out of this arrangement, you should consider assigning your contract to someone else, thus avoiding losing money credited toward the purchase price.
Instead of convincing the seller to let a new tenant move in, you should try to arrange with someone who wants to purchase the home. Many sellers find it beneficial to them even though they don’t keep the premium payments and option fee this way. Lease option assignment prevents the original seller from losing money while finding the buyer.
Aside from that, it allows the sellers to focus on other opportunities. While some choose to invest their money, others would rather pay off their mortgage early than work with real estate investors.
How to Assign a Lease-Option
Not everyone wants to assign his/her contract to an investor. Many people wholesale lease options instead. Perhaps you also think of assigning your agreement to another tenant-buyer but you don’t know where to start.
First things first, you need to find an assignee who’s ready to buy the house outright. While you can assign a lease option with or without the seller’s permission, going through this process without a lawyer or qualified realtor can be daunting. This is especially true for first-time buyers.
It is generally not hard to find motivated sellers. With the seller’s permission, your agreement can be redrafted by a real estate attorney. That means you’ll permanently lose the option to buy the home. Please note that there’s an assignment fee involved.
There is an alternative to lease-option assignments, but it’s much more complicated. It involves buying the home and selling it immediately. However, you should hire a realtor and/or attorney and give them a portion of that money to pay the new homebuyer. It’s kind of like a sandwich lease option.
How to Conduct Negotiations with the Assignee
Let’s assume that you’ve found an assignee who is ready to negotiate. Before assigning the lease option, you need to ask him/her to give you back the money – premium payments and option fee – that was applied to the down payment.
The assignee is supposed to refund at least most of that amount. If you get nothing out of this assignment, it doesn’t make sense to find a new homebuyer. That said, it is a good idea to enter into negotiations. Most assignees are willing to negotiate to get some money from premium payments or the option fee.