I'm constantly on the lookout for houses to invest in to turn into option homes where I carry the contract for a few years until the buyers can obtain financing and cash me out with a balloon payment. Recently, the REO market (real estate owned by banks) hasn't had many of the types of properties that make good option homes.

So, I went looking at short sales. Homes that the owner is underwater with the mortgage and is asking the bank to take less than what is owed as full repayment of the mortgage.

Reasons Short Sales Have Potential as Option Homes

Short sales often cost banks less than foreclosures. Clearly, the less you can buy houses for the more you can earn converting them into option homes. It took banks some time to realize it's beneficial for them to allow short sales more often than foreclosing on the properties. One reason you can acquire short sales to convert to option homes is that the bank never takes possession of a short sale. They don't have to pay property taxes or maintain it. Now couple that with the fact that the seller won't receive a penny from the sale and you have a formula to buy short sales at a very low cost to turn into
option homes.

Option homes are one of, if not the best, ways to maximize your real estate investing dollars

Some short sale negotiators I know tell me that recently they've had 80% to 90% of their short sale offers accepted. All of this should be telling you that it's time to look at short sales as a source for option homes investing.

Tips for Converting Short Sales Into Option Homes

First of all, don't get bogged down doing the short sale negotiation. You're in the option homes business not the short sale business. Every new short sale requires that the sellers be educated in the process and requirements. Then the seller has to be handheld to collect the needed documentation. And then multiple negotiations happen with the bank. You need to stick with the option homes side of the business and let someone else deal with the short sale.

Not all short sale offers will be accepted, so you want to structure your purchase offers in a way that maximizes the profit and cash flow for your option homes. One way you do this is by requiring the inspection be performed only after the bank accepts your offer. No point in sinking money into the option homes deal until you know your offer will be accepted.

Same thing with any earnest money deposit you make. To maximize the cash available for other option homes deals, you want to put in the minimum cash you can at the front end of a short sale. Even with minimum in, it's reasonable to require that the check not be deposited until the bank accepts the short sale offer.

Now it's time for you to take action by making a few short sale offers to grow your option homes business. But first, you will want to take advantage of these other free resources.

See my article and quick video on Getting Your Real Estate License for Real Estate Investing. Also, take advantage of my Free Book Offer and Video Training for finding motivated sellers to make the most of your option homes investing. There is valuable content in all of these resources I'm providing to you free. By taking advantage of them, your options homes business will prosper.

I hope you enjoy reading my blogs about option homes as much as I enjoy bring information about options homes to you. Please visit often and leave comments below.

Facing reality means finding alternative ways of selling a house when traditional ways no longer work. By answering the question: What is a Lease Option?, you'll find one of the surest ways to sell in today's market.

Real estate markets across the country are suffering right now. Sellers can't sell and buyers can't get mortgages. Real estate agents are finding it difficult earning a living. Gone are the days of expecting it to sell with minimal effort. It's time to get creative by learning what is a lease option!

What is a Lease Option?
Lease options are a way to buy and sell homes without an immediate conventional mortgage. It puts buyers who can't qualify for a mortgage right now into a home right away while they improve their credit and build up a down payment. It gives sellers the ability to beat their competition, which there is a whole lot of these days. Sellers will reach a much larger pool of potential buyers. They can expect to sell their home quicker and for a better price. For many sellers it's the ONLY way they will sell their home in this market.

The challenge for Realtors, buyers, and sellers alike is having an education about what is a lease option.

A lease option works like this: The buyer and seller agree to an option that giving buyers the right to purchase within a set period of time. During this option period, the buyer leases the home. By the end of the option, the buyer either purchases the home or forfeits their option fee. While the option is valid, the seller cannot sell to anyone else. In a nutshell, that answers what is a lease option.

Advantages for Sellers When They Understand What is a Lease Option?

This is what sellers need to understand when the question of what is a lease option is addressed.

1. Allows them to beat their competition.
2. Sellers collect rent while the house would otherwise sit vacant.
3. They will most likely receive a higher purchase price.
4. The can sell their home in a down market when few traditional sellers are able to.
5. Allows the seller to actually sell their home instead of just renting it.

Advantages for Agents When They Understand What is a Lease Option?
This is what agents need to understand when the question of what is a lease option is addressed.

Selling on a lease option isn't as ideal as a conventional sale where you get your entire commission up front but it's a whole lot better than:

1. Turning away potential buyers who can't currently qualify for a mortgage and you can't explain what is a lease option.
2. Having your seller rent their home because it won't sell and you only get a tiny rental commission. Knowing what is a lease option changes the game.
3. Losing a listing because the seller blames you for their home not selling.

Once you know what is a lease option, you still receive your full commission - part of it upfront out of the tenant-buyer's option fee and the remainder when they purchase the home.

Obviously selling on a lease option is not the first choice for sellers or agents. Whenever possible we want to sell to conventional buyers. However, when that isn't working this is a great alternative.

For more information about what is a lease option, check out my book, Rent-to-Sell, a step by step hands-on guide to selling your home as a rent to own.  To Find out more about finding motivated sellers you can get my free ebook on my facebook page:  Wendy's Page.