A creative and common way to sell a house, and ridding yourself of the obligation to maintain it, is to sell is as a Lease Option. This is done by leasing the house and selling the tenant an “option” to buy the house in the future at an agreed upon price.
The tenant pays an option fee, a percentage of the agreed upon sales price, and then pays a slightly higher than average monthly rent. A portion of this rent payment is credited toward the future purchase. The tenant in effect takes possession of the house and is responsible for all repairs and maintenance.
The disadvantage of course is that the tenant, just like any tenant, may stop paying rent, damage the property, and never exercise his option to buy the property. This happens quite frequently by the way, more than half the time.
It’s also imperative to know that a lease option is strictly regulated by state laws. Because of these laws, enacted after the 2008 financial crisis, Lease Options are nearly as common as they once were, and Second Chance Offers advises against selling a house in Texas using this technique. But if this strategy is ideal for a particular seller, we can structure a transaction that has the same benefits, done in accordance with Texas laws.
Are Lease Options still legal in Texas?
Technically yes, but for all intents and purposes, not really. Texas Senate Bill 629 requires notifications and lender agreements that are very restrictive and carry such severe penalties for doing them incorrectly that it’s generally not worth attempting.
So what are the alternatives?
Instead of doing a lease option, the owner may choose a different strategy such as selling with owner financing, selling subject-to, or selling with a wrap-around mortgage.