Sell or lease option? Seller finance? Something else?

[Tara Piantanida-Kelly]

What advice would you give? My sister and her husband are in the enviable position of being able to retire early, move onto their sailboat, and float around the Caribbean until they choose to do something else. Originally, they thought they would have to sell their house (in the San Francisco Bay Area) to do it, but now they are considering other options.

Zillow estimates the house’s current value at $1.2 million. They still owe a mortgage. The values in the area are rising, and Zillow estimates that this area will appreciate by 4.6% over the next year.

Would you sell? Or would you offer a lease option to try to capture some of that future appreciation? Sell but carry a second? What else would you consider?

Thanks for your ideas!

Cheers~

Tara

[Bill Gulley]

@Tara Piantanida-Kelly

Please ignore non-governmental sites except perhaps those of a law firm who do NOT sell RE programs* on the SAFE Act or Dodd-Frank. Also ignore guruized sites spammed here constantly by some members, none are 100% correct for every area.

As Robert mentioned, Zillow is not a reliable source for property valuations. Don't base your sister's plans on haphazard estimates.

If the property is 1.2M, any buyer in any seller financed arrangement will need to qualify under the new laws. I would think that in reality, anyone who would qualify going through a mortgage originator for a seller financed deal at that amount should be able to walk into bank and just buy it.

The are only two advantages really for your sister on seller financing is the deferred tax benefit and a higher rate of return on the equity being paid as an annuity. While there are other benefits to SF deals, like marketability aspects, at this price level such are not significant.

Robert is also correct in saying seller financing isn't always the best option in every case, in fact not even in most cases. I too have a financial planning background and while I'm a big advocate of seller financing, it's not always the best way to go.

I didn't mention this before as I didn't concentrate on the value of the home, but if that is a close valuation I doubt SF is a viable option really, a buyer may need to go that route but usually those buying at that price level are not simple minded with bad credit, I'd think most would be more astute and certainly not first time homebuyers or new to business dealings.

It also sounds like there is reluctance in selling, trying to capture future appreciation. If there is any intent to come back to that home, doing the old sell-finance-get it back ploy, the chance of being sued for any tortuous conduct will be much higher at that price level as your buyer won't be stupid and they probably can afford an attorney.

Speaking of having means, your sister has the means to obtain professional financial planning advice and legal advice, I suggest they do so and not rely on the types of opinions you get off the internet. Thanks for the post, it's been a good discussion, but they need to do some more planning before they take off with professionals that can consider their entire situation, not just a property, especially at 52!

Additionally, having been there, rolling in cash and an income, retiring at 52 needs to be examined carefully, when you retire too young you get bored. When you get bored you end up posting on the internet. When you post on the internet you'll be giving advice and when you give advice you're going to have your advice rejected. Don't end up having to live with rejection in your older years, get back to work don't retire too young! :)