DEAR BOB: We are interested in leasing a home with an option to buy. Our preference is to buy within a specific school district. Our children are already enrolled and have adapted very well. How can we find a lease-option within this school district? – Rochelle S.

DEAR ROCHELLE: You probably won’t find any lease-options advertised for houses within the school district you want. That’s why you must create your own.

I suggest you look in the newspaper “houses for rent” and “houses for sale” columns, inspect those houses in the area you want, and when you find one you want to lease-option, ask the owner if he or she will lease with an option to buy.

Purchase Bob Bruss reports online.

Most rental house landlords have never considered a lease-option. That means you must explain the benefits, emphasizing the many advantages for the rental house owner.

Be sure to offer the landlord a slightly higher rent than was requested. Also, offer a substantial non-refundable option consideration, such as $5,000, instead of a security deposit.

Lastly, negotiate as large a rent credit as possible toward the purchase price when you exercise your purchase option. I suggest asking for a 50 percent rent credit. But be willing to compromise on a 33 percent or even a 25 percent rent credit.

Try to get as long a lease-option term as possible. The best lease-option I ever negotiated (you didn’t expect me to tell you about my worst lease-option, did you?) was for 15 years. But the owner negotiated me down to only a 17 percent rent credit.

However, the option purchase price was locked-in for 15 years. I was betting that home just might appreciate in market value during those 15 years. You can read the rest of the story in my special report, “How to Profitably Use a Lease-Option to Buy or Sell Your Home or Investment Property,” so you know all the pros and cons. It is available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at www.bobbruss.com.

HOW TO KNOW A MORTGAGE LENDER JUNK FEE WHEN YOU SEE IT

DEAR BOB: Which bank mortgage fees are negotiable junk fees? Does a home buyer need title insurance, or does just the mortgage lender need title insurance? – Larry M.

DEAR LARRY: You sure are a man of few words. I will also try to be brief. A legitimate mortgage loan closing fee is one paid for a third-party service, such as an appraisal, FedEx courier fee, title insurance, credit report, etc. But watch out to be sure the lender doesn’t inflate the actual cost of these legitimate fees for third-party services.

However, a junk fee goes directly into the lender’s pocket, such as an underwriting fee, processing fee, loan review fee, administration fee, warehousing fee, etc., without rendering any specific service benefiting the borrower.

If the lender quoted a loan fee, such as a customary one or two points, that’s a legitimate fee, which should include all the lender’s services without any extra junk fees.

When you acquire title to any property, especially if it is a gift or inheritance, you always need an owner’s title insurance policy to be certain you acquired marketable title with no surprises, such as income tax liens or judgment liens of the former owner.

Your mortgage lender will always insist on receiving a lender’s title insurance policy. Take a hint. You also need an owner’s title insurance policy.

I.R.S. OFFERS NO GUIDANCE FOR HOME PARTIAL RENTAL USE

DEAR BOB: We bought our primary residence in April 2004. It is in a golf resort community. Because of the high demand for rentals in the summer, we are thinking of renting our house out on weekends and staying at a relative’s home during the rental days. How do we calculate “aggregate use time” before we can sell our house and qualify under that two out of the last five years ownership and occupancy test for the $250,000 tax exemption? – Rus R.

DEAR RUS: Sorry, Internal Revenue Code 121 provides no guidance for your very unusual situation. There is no reference in the statute to days of owner-occupancy and days of rental for the two out of last five year occupancy test.

If I understand you correctly, you just bought the home last April. Why not enjoy it and forget about the rentals? I find it difficult to understand why you are already planning its resale (unless you bought at a bargain price and will have the opportunity to make a huge, obscene profit). Perhaps your tax adviser can be of more assistance.

The new Robert Bruss special report, “Robert’s Real Estate Rules: How to Avoid the 10 Worst Home Buyer Mistakes,” is now available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at www.bobbruss.com. Questions for this column are welcome at either address.

(For more information on Bob Bruss publications, visit his
Real Estate Center
).

***

What’s your opinion? Send your Letter to the Editor to opinion@inman.com.

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