Archives for December 2008

Lease Purchase or Lease Option – Are You Wondering About These?

Recently a Mortgage Porter reader, Lisa, sent a question via my Suggestion Box (located on the right side of this web site):

"Rhonda, Can you address lease options and lease purchases? Have you seen these going on around King County? Thanks!"

Leases are not a part of what I do as a Mortgage Originator…so I enlisted a local real estate professional, Diane Kawell of Windermere West Campus.  The article below is actually reposted (with permission) from her blog, Di Kawell Real Estate Blog.

The easiest way to keep these straight is to remember that a 'lease purchase' is a purchase agreement – remember the word 'purchase.' In this strategy, the buyer agrees to buy and the seller agrees to sell, and the buyer will lease the property from the seller pending closing. There is often a delayed closing, but the buyer is obligated to close the transaction on a specified closing date. There would be a written purchase and sale agreement plus a lease agreement, and default on the lease would be default on the purchase and sale as well.

A 'lease option' is a situation where a tenant is obligated only to lease the property, but also has the right, or option, to purchase the property at a future date. There would be a written lease, as well as a written option agreement that should outline the terms of what the buyer's purchase would include, and a deadline for the buyer to decide to purchase or not. There would also be a negotiated cost between the parties for the option itself, which could be handled in several different ways (part of each rent payment, an upfront lump sum, etc). And the option cost may not be refundable if the tenant chooses not to exercise the option.

Also, there is another strategy which is simply an 'option to buy.' And this option is unrelated to any lease between the parties. Again, there would be a written option agreement outlining all basic details. And most often there would be some sort of cost for the option itself.

***All of this said, none of what I've written above, or will say below, is to be relied upon or construed as legal advice. I am a licensed real estate associate broker, not an attorney. I am licensed to fill in standardized forms, but not to give legal advice.*** Also, at this time in Washington state, there are big legal issues if a property owner is in a distressed situation and a buyer wants to offer to buy and lease back to them with a purchase option – you don't, and I don't, want to go there.

Three issues to consider:

  1. In a declining market, a sale price set today, may not be market value by the time a sale would close, and that could mean financing problems due to any required appraisal. 
  2. Although a buyer might qualify based on today's rates and programs, they may not qualify when it comes time to close – we know the current volatility in the financial markets! 
  3. The parties will have to decide whether or not is acceptable or desireable to keep the property on the market during the pending, lease or option period – there is no law addressing this issue. In my opinion as an agent, successful transactions are always about win-win between the parties, so with the right set of circumstances, using these options might just be the best answer.  Another example: Seller is working out of area for the next couple years, might or might not want to sell, and buyer needs time to get their lives or finances straightened up.

Still Have Questions? Please contact me.

To try to find out if Lease Options or Lease Purchases are becoming more common in King County, I've posted the question at Trulia.  You can check out the answers by clicking here.

Magnificent Larry Cragun

Larry Cragun has announced that this month marks the end of his Magnificent 7 Nominees.  For three years, Larry has read thousands (tens of thousands?) of articles and has hand picked those he felt were most consumer focused each month; spotlighting them on his blog, Real Estate Undressed.  In January of the following year, he posts “the Super bowl” of consumer posts and whittles down his top selections from the top 7 of each month for the Magnificent 7 for that year.  It’s quite a task and I thank him for it.  Not only have I been lucky enough to have a few of my articles nominated by Larry, I’ve been introduced to many other real estate bloggers who care just as much about shedding light to consumers as I do.

The final set of nominees for the Magnificent 7 are:

  1. Dan Melson with “Getting Rich Quick in Real Estate
  2. ARDELL with “A buyer’s right to do “an additional inspection
  3. Noah Rosenblatt with “Deflation Buyer Strategy: Buy to Renovate
  4. Mark Clawson with “Should I Refinance
  5. James Lapori with “Re-adjusting Priorities: What’s a House For
  6. Luke Mullins with “Sheila Bair: We Need Foreclosure Mitigation Now” 
  7. Rhonda Porter (my article) with “Can I Buy a $620,000 Home with a 620 Credit Score


Christmas Cheer with Jingle Bell Rock

Jingle Bell Rock as sung by The Talon Group’s Choir (aka King County Sales Department).

EDITORS NOTE:  Sadly, when First American Title rolled up The Talon Group, they took down all of their videos… information and funny alike. 

Merry Christmas and Happy Holidays

Nov27Thanksgiving2008 087 From my home to yours, I hope you are surrounded by those you love most during this holiday season.

Mortgage Master will be closing early today at 1:00 p.m. in honor of Christmas and will be reopening for business as usual at 9:00 a.m. Friday, December 26, 2008.

Merry Christmas to you and yours!

Photo: Orson taking a Christmas break.

Social Media and Seattle’s Snowpocalypse

Are you feeling like you've been trapped in snow globe and you can't get out?  Do PC180006 you have images from The Shining playing in your head?  I'm a Puget Sound native and for life of me, I cannot recall so much prolonged snow!  It's beautiful and I've enjoyed taking pictures (check out my snow album) but I'm ready for some rain!

On a side note, it's been fascinating to see the level of communication that has taken place about our weather via blogs and other forms of social media, like Twitter, from the public to our local government.

I've received emails from the City of Seattle and King County over the past few days with request to post safety tips for my "community" of readers.  They are utilizing bloggers to help spread their message.   In my neighborhood, West Seattle Bloghas done a phenomenal job (as they always do) keeping everyone up to date and sharing stories about our local weather (and more).  I believe it was our big winter storm of 2006 that really catapulted WSB's readership.   If you have an neighborhood blog, this is one reason alone to subscribe.   Just this morning, I became aware of the Seattle Transit Blog.

If you're a long time reader of Mortgage Porter, you may be aware of the interest rate updates I quote.  Twitter allows you to post live updates of whatever you're doing in 140 characters or less.  Just like a blog, you can subscribe (or "follow") what the author has to say.  Local folks I'm following on Twitter who have helped with information on the storm are:

West Seattle Blog (@westseattleblog)

Washington State DOT (@wsdot)

King County News (@kingcountynews)

Seattle Department of Transportation – Snow (@sdotsnow)

Seattle Times @seattletimes 

Seattle PI @seattlepi

and don't forget Mortgage Porter (@mortgageporter)

Last, but not least, you can search terms on Twitter using "Twitter Search".  Twitter-er's will use the # sign to create a short code/phrase that can be used to follow a specific event or thing.  For this storm, the code is "#seatst".  Whenever someone posts a comment (aka tweet) on Twitter about this storm, if they include #seatst.  When you enter #seatst in the search field on the Twitter search page, you'll see a list of what EVERYONE is saying right now about the storm.

Do you have a Twitter profile? 

Tips for being prepared for this weekend’s snow storm

I just received this email from King County with a request to post this safety information on my blogs for our local community:

Are you prepared?  Steps to stay safe in this weekend's storm

With high winds forecast for this weekend and possible power outages, it's time to take steps to stay save and avoid carbon monoxide poisoning.

How to avoid carbon monoxide poisoning

Carbon monoxide can kill you or cause serious injury.  Carbon monoxide gas comes from burning fuels such as gasoline, propane, oil, kerosene, natural gas, coal or wood.  Here are some steps to prevent carbon monoxide poisoning.

  • Never use a gas or charcoal grill, hibachi, or portable propane heater to cook indoors or heat your home.
  • During a power outage or at any other time, do not operate fuel-powered machinery such as a generator indoors, including in the garage.

  • Avoid combustion "space heaters" unless there is an exhaust vent.

Carbon monoxide poisoning can strike suddenly and without warning.  In some cases, physical symptoms of carbon monoxide poisoning may include splitting headache, nausea and vomiting, and lethargy and fatigue.  If you believe you could be experiencing carbon monoxide poisoning, get fresh air immediately.  Call for medical help from a neighbors home.  The fire department will tell you when it's safe to reenter the home.

For a full list of carbon monoxide prevention tips and other safety and disaster information in English and other languages, visit

Other important safety tips

  • Make sure you are wearing enough warm clothing before going outdoors.  Wind speed can create dangerously cold conditions even when the temperature is not that low.
  • If you think power will be out for several days, check with your city for location of warming shelters.
  • Watch for signs of frostbite and hypothermia-slurred speech, confusion, uncontrollable shivering, stumbling, drowsiness and body temperature of 95 degrees Fahrenheit or less.  Get medical help immediately if you think someone has frostbite or hypothermia.
  • Check on elderly friends, family, and neighbors to make sure they are safe.
  • If power goes out where you live, keep food safe by keeping the doors closed on your refrigerators and freezers as much as possible.  A full freezer can stay at freezing temperatures about two days'' a half-full freezer about 1 day.  Potentially hazardous foods, like meet and fish, should be discarded if thawed and warmer than 41 degrees.

Update: News Release from the City of Seattle

The Snow We’ve Been Waiting For?

Yesterday morning the local news forecasters had Seattle prepared for a big snow blast that didn't happen.  Schools canceled and we waited and waited for the flakes to fall…and today we were suppose to have around 1-2 inches.  Well I'm bundled up here to tell you that in my warm home in West Seattle, we have about 6-7 inches and it's still snowing!  Luckily I'm armed with my laptop and can work from home while we weather this winter storm.   DSC_0031 

Two years ago, almost to the day, we were with out power for 6 days during the Hanukkah Eve Storm.  I guess next on our slate is winds from the north…cross your fingers and hope that we keep our power! 

Santa Ben and the FOMC Deliver Lower Rates

Just in time for the holidays, the FOMC surprised everyone by cutting the Fed Funds Santaben rate to a range of zero to 0.25%.  This 0.75-1.00 reduction is more than the widely anticipated 0.50% rate cut.  The Fed also reduced the Discount Rate by 0.75% to 0.50%.

Bernanke and the FOMC didn’t stop with the giving there…they reiterated their commitment to buying mortgage backed securities which keeps mortgage interest rates low.

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