DON'T SKIP PROPERTIES BECAUSE OF THE LAND by Armando Rancano
Many Palm Springs home shoppers prefer buying properties on land they would own, rather than leased land. Some are afraid of losing their homes if the lease expires and the land owner does not want to extend the lease. Others feel that lease costs are excessive and that the surcharges on home sales now becoming common in newer extended leases are onerous.
Leases are secure so long as payments as made
We have looked in detail at the case against leased land and find that excluding lease land properties because of land objections hurts home buyers. Here’s why: As with any other contract, as long as lease payments are made the fear of losing homes is unfounded. This is certainly true during the term of the lease. What about when the lease expires? The fact is that most leases are renegotiated and renewed long before their expiration dates. Land owners earn income from leasing the land, not taking over the properties for other purposes.
Indian leases are really owned and regulated by the U.S. Government
Indian leases are really owned by the U.S. Government, which acts as trustee and regulates the lease process, reviewing all renewals with an eye to what is fair, typical and customary for the market. The feeling that lease holders have all the power and property owners have no leverage is not accurate.
Leases likely to outlast us or our stays in homes. As easy to resell as fee properties.
Many people look at it in a very practical way. They are not at all concerned because lease terms often exceed the life expectancy of owners, or their stay expectancy for that matter. On average, Californians move every five years. What about resale? In fact, we found lease properties sold slightly better on first listing, 68.6% vs. 65%.
Count all costs and net savings on lease land purchases are significant
Finally, excluding properties on lease land from purchase consideration is, in the vast majority of cases, not a wise financial decision. Lease properties expand consumer choice and save a lot of money. Twenty-five percent of the over 10,000 listings in the last 3 ½ years were lease properties. They cost less and many would have been a great fit for home seekers.
Lease properties were, on average, $106,000 cheaper. This difference is what makes lease land properties such a bargain. You simply get a lot more house for the money and can save significant cash in the process.
Why? Because higher prices for fee properties also means higher property taxes, higher insurance rates and higher mortgage payments. We calculated that these costs exceed the amount paid for leases, even when adding the sales surcharges now a part of many new lease extensions. Even if paying cash, five-year net savings amounted to $8,280, ten-year savings $18,539 and up from there.
The bottom line is that many factors go towards the selection of a home. Taking a desirable lease property out of consideration is often justifiable because of the property, but does not make economic or any other sense because of the type of land the property sits on.
As Realtors, we make less in commission on less expensive lease land properties. However, our job is to act in the best interest of the clients we represent. We are responsible first, for educating ourselves, then educating our clients on lease land properties if there are lease properties that fit their needs.