Expert: Dick Dennis - 4/22/2010

Question
We have a house we want to sell, but we got a government loan on it about 4-5 years ago. We tried to sell it 2 years ago for $80,000.00 but it never sold. We have renters in it and they have paid $550.00 per month without fail for 18 months. They want to buy it but need 2 more years because they had to file bankrupty a few years ago. We live in Meigs Co. Ohio and is their any way we can sell it on a land contract and they keep up the taxes and insurance until they can purchase it. I would want them protected if we shoud die before they could purchase it. We have 5 children and they will inherit all we have minus the loan on the house, in our will we have everything to be sold and equally divided. My husband and I are 65 and 66 and live on social security. We bought his uncles house which was in forclosure and used all our saving. We still need a lot of repair on it.

Answer
This sounds like a perfect opportunity for a lease/option, Shirley. As long as the tenants have been paying rent without fail, you may want to "reward them" by having a good real estate attorney put together a lease and option for you and the tenants.

The way it works is that they give you a non-refundable deposit, say, $2,000 or $3,000. They continue to pay the rent they have been paying and you give them, say, $200 per month credit toward their down payment two years from now. They will then have $3,000 plus $4,800 credit toward their down payment when they go get a loan and buy the property from you.

The purchase price should be established now. To encourage them to buy the property sooner rather than later, you offer them, say, a $2,000 per year reduction in price if they buy the house before the two years are up. However, if they do not buy the house within two years, then they agree to pay $2,000 per year more on the price.

They are permitted to do any repairs or improvements while they live there, but any and all costs of repairs, plus all deposits and rents paid shall not be refundable or credited in any way if for any reason they do not buy the house, say, within four years. It then reverts back to a rental basis at a $200 per month increase in rent at that time if they choose to remain.

A good real estate attorney can embellish this agreement and hopefully improve on what I have offered here. Also, let the tenant pay the attorney fees but receive credit toward the purchase price. Notice I said lease AND option. That is because what the tenants have is a lease. Then they have an option which should be a separate document, otherwise a court judge could consider this an equitible interest situation for them and entitled to a refund should they decide to take you to court after moving out. A good real estate attorney should be able to explain that to you while protecting your interests. I do wish you well.

Dick Dennis
dixiedee13@aol.com