There’s good news for renters who need to exit a lease to buy a newly built home: Some builders and Realtors will help you time up your home purchase or buy out your lease so you won’t have to pay rent and a mortgage at the same time.
Though not all builders and Realtors offer this type of assistance, those who do say it’s no sweat to make it happen for willing and able buyers.
“The transition from a lease situation, whether it’s an apartment or house, into a new construction home is actually much easier than transitioning into a resale home,” says Ian Petty, a Realtor at Relocal Home Real Estate Services in Kennesaw, Ga., near Atlanta.
The transition into new construction is easier because building a brand-new home can take six to eight months and builders oftentimes can sync or “time up” the completion of that home to match the end of your lease.
Time Up Your New Build
Whether this strategy will work for you depends on your individual situation and the builder’s construction schedule. In some cases, the builder will delay starting your home in order to finish it later. In other cases, your home might be partially built and then later finished on time.
“That is totally up to the builder and what their workload looks like,” Petty says.
If you want to time up, don’t fall in love with a brand-new home that’s already completed. Finished homes, known as standing inventory, are ready for immediate sale, and Petty says builders probably won’t hold one of those homes for you when another buyer might be able to close right away.
The same logic applies to the last few homes in a soon-to-be-completed section, or phase, of a new-home community.
“If the builder is at the end of phase one and has only one (house) left (to build) and two at standing inventory in that phase, they aren’t going to wait on you,” Petty says.
Instead, you’ll need to choose a lot and buy a home that’s not yet started.
Be reasonable in what you ask for
Whether the builder will delay completion of your home also depends on what else you want as a buyer, says Ken Pozek, a Realtor at Keller Williams Realty in Orlando, Fla.
“If you’re trying to get free upgrades, a crazy discount on the lot and (other favorable terms) and you also want a (delayed closing date), you’re probably not going to get it,” Pozek says. “If you’re being reasonable and a delayed start works into the builders’ financial picture, they’re usually good with that.”
The Lease Buy-Out Option
If timing up isn’t enough for you to buy the home you want, another strategy might be for your Realtor or builder to buy out all or part of your lease.
Pozek offers this example: You have six months left on your lease. Your rent is $1,500 per month. The sales commission, which the builder pays your Realtor, is $15,000. Your Realtor offers your landlord $5,000, paid in full, to let you out of your lease early. If your landlord says yes, your Realtor gives you a $5,000 credit at closing and you give the $5,000 to your landlord to end your lease early. The Realtor earns $10,000.
Realtors might not be enthusiastic about giving up a big chunk of their income, but Pozek says some will do it if it means closing a sale.
Others won’t get involved. Petty says he’s never bought out a lease for a buyer and only once negotiated directly with a buyer’s landlord.
“Typically the tenant will have a decent amount of rapport built up with the landlord. If at some point there is an impasse between the two parties, that is when the Realtor would step in,” he says.
There is also “some opportunity to negotiate with the builder to maybe cover a couple months of rent,” says Ryan Lambesis, broker at Related Realty and founding partner at L2 Properties, a real estate development company in Chicago.
Temporary Housing Help
If your lease is scheduled to end before your new home will be completed, ask your landlord to convert your occupancy to month to month. If that’s not an option, your Realtor or builder might be willing to help you pay for short-term housing.
“The builder might subsidize or give you a credit (at closing) toward your temporary housing lease,” Lambesis says.
It’s smart to discuss your lease-ending date with your landlord, Realtor and builder as early as possible when you’re shopping for a new home.
“It’s always best to be upfront about your timeline with your broker and, if you’re working directly with the builder, then the builder,” Lambesis says.
That way, you’ll have as much time as possible to figure out your options.
Marcie Geffner is an award-winning freelance reporter, writer and editor in Ventura, California. In the last decade, she has penned more than 1,000 published stories about residential and commercial real estate, banking, credit cards, computer security, health insurance and small business, among other subjects. Editors describe her as “detail-driven,” “conscientious,” “smart” and “incredibly versatile.” Her award-winning reporting has been lauded as “rock solid,” “spot-on relevant,” “informative,” “engaging,” “interesting” and “nuanced.” Her stories have been cited in seven published nonfiction books and two U.S. Congressional hearings.
Prior to her freelance career, Geffner was senior editor of California Real Estate magazine. Later, she became managing editor of Inman.com, an independent real estate news website. She also has prior employment experience in technical writing, corporate communications and employee communications. She received a bachelor’s degree in English with high honors from UCLA and master’s degree in business administration (MBA) from Pepperdine University in Malibu, California. She enjoys reading, home improvement projects and watching seagulls at the beach.