Can't Sell Your Home? Try Something Else

If you're stuck with a piece of property you can't sell, there's still hope.

Instead of risking foreclosure and ruining your credit if you can't pay your mortgage, there are other options to consider. Here are a few of them.

Renting out your home

Renting out the home "is a trend we've seen growing in the past year because the market has slowed considerably," says Maurice Ortiz, marketing director for The Apartment People, a full-service real estate brokerage in Chicago.

Owners, developers and investors whose properties haven't sold are finding that having tenants can mitigate some of the costs.

"Why keep the property vacant when an owner can get some money out of it by renting?" Ortiz adds.

"We're dealing with investors who have bought properties to flip and now can't sell them," he continues, as well as owners "who bought a place and now can't afford it anymore."

According to Ortiz, some developers and investors will list a property for sale and for rent at the same time, and whichever effort bears fruit first is the way they'll go.

Tips

The lease should have a cancellation clause built in to protect both the investor/developer and the tenant. It's wise to stay away from a lease without a cancellation clause because the owner could void the lease with little or no notice.

Owners need to be realistic about the rent level, says Ortiz, and try to match the market rate.

Rent to own

Renting to own "is a good way for first-time buyers who may not have stellar credit or the necessary financing at the time of the lease to get into their first home," says Mabel Guzman, realtor at Century 21 SGR in Chicago.

"The price on the home has been directly negotiated at the beginning of the lease," says Guzman. "If the market gets better, the price is built in. If the market goes the other way, it's still a good deal."

Both the seller and the tenant must agree on what percentage of the monthly rent will be appropriated for the purchase. For example, a one-year lease at $1,000 per month, with 25% going to the purchase, would mean $250 each month is set aside. At the end of the lease, the tenant will have already invested $3,000 in the property.

If the tenant is unable to purchase the property at the end of the specified time period, the invested money is not refundable. Also, no one else can purchase the property unless the buyer defaults.

Tenants with mediocre credit can spend the year cleaning it up and securing financing. During this time, the tenant should find out if the property has any problems such as liens or structural issues. The tenant is often responsible for paying the taxes, assessments, property maintenance and other upkeep expenses.

The seller has to treat this option like any other rental agreement. Credit and background checks are still necessary to see if the buyer is qualified to participate in this type of contract.

Tips

Lease-to-own should be treated like any other property purchase. Get a thorough home inspection. It's also important to get an appraisal and study the title policy and seller disclosures.

"It can be risky because the seller isn't sure the tenant is going to exercise the option," says Guzman. "But once there's an agreement, it can be a great situation because the tenant has a place to live and the owner has a potential buyer."

House-Swapping

House-swapping is a small but growing trend in the U.S.

Web sites like GoSwap and OnlineHouseTrading.com offer listings for prospective swappers for a small fee. Roughly 16,000 people around the country have purchased their homes in this manner.

"Swapping is a creative way for people who have to move because of a job change, retirement or if they don't like their current climate," says Sergei Naumov, a Florida-based Realtor and creator of GoSwap.

Daniel Westbrook, a Realtor with Remax Realtors in Tampa, Fla., and owner of OnlineHouseTrading.com, warns homeowners who decide to use this service to be realistic about their goals and research the areas they're interested in.

"If you own a nice, big house in Ohio that's worth $300,000 and you want to move to Chicago and spend that same amount of money and get the same amount of house, that's not going to happen because housing is more expensive in Chicago," he says. "You will have to pay more."

Tips

Westbrook recommends that both parties work with Realtors even for house-swaps because both are acquiring new mortgages.

"It's a typical real estate transaction. You do need a broker because both contracts are contingent upon each other," he says.

You can search online for mortgage rates and rates on other loans and investment vehicles at BankingMyWay.com.

The main disadvantage of house-swapping is attempting move from a bad market to a hot market. People who have specific requirements they want out of the houses might have a harder time finding something to their liking.

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