JACKSONVILLE – Jan. 8, 2013 – Dawn and Victor Pellot were stuck in their 1,300-square-foot home off Wilson Boulevard on Jacksonville’s Westside, owing more on the mortgage than the home was worth, and they wanted more room.
Two months ago, they got it. The Pellots and their two children, ages 3 and 18 months, moved into a newly-built, 3,500-square-foot home in Orange Park through a program that allowed them to lease their old place and move into the new one.
“It was extremely important,” Dawn Pellot said. “That made all the difference” in deciding to look for a new home to build as early as April, she said.
A Detroit-based company, Marketplace Homes, has partnered with homebuilders in several markets in the United States to offer the program, one of few such in the nation and the only one available on the First Coast.
It works on the premise of leasing the existing home under a six-year deal while the existing homeowner gets a new mortgage to build a new house. Although the previous homeowner is still financially responsible for the mortgage on the existing home, Marketplace essentially manages the property for six years and assumes 100 percent of the risk if it can’t be rented. Generally, Marketplace representatives will try to incorporate a lease-to-own agreement for the new tenant.
On the First Coast, Marketplace has hooked up with homebuilders D.R. Horton and Drees Homes. The two local companies did not respond to requests for interviews.
Marketplace’s vice president of marketing, Chintan Pathak, said the approach is new and started on the First Coast in March. It targets homeowners who want to take part in the buyer’s market but can’t sell.
Essentially, Pathak said, the six-year lease will stabilize the existing home’s value by turning it into a rental property, which decreases foreclosures or short sales by property owners who struggle with negative equity in a house or condominium. Company officials say there are “fewer than five” foreclosures of properties they’ve turned into leases.
“It allows (property owners) to take advantage of the market today and allows you to sell when the market recovers,” Pathak said.
At the end of the six years, Marketplace will continue to manage the property or the homeowner can decide to list it for sale. The homeowner would still be responsible for the mortgage, as they are even under the six-year lease deal. The guarantee on the rent lapses, but the homeowner has the option to continue the lease and property-management agreements.
Marketplace gets no commission on the existing home. It assists in trying to find a lease-to-own tenant, but the homeowner can market the sale of the house on their own, given considerations for the lease stipulations.
The company evaluates each home and mortgage to determine the custom lease rate. If a renter pays more than the monthly mortgage costs, Marketplace gets the difference. If the lease doesn’t cover costs, the property owner has to pay the difference.
Marketplace also gets a “standard” commission from the builder of the new home.
Although Victor Pellot and his wife found a renter on their own, the guaranteed lease removed a worry.
“If you don’t have a renter, then you don’t have two mortgages to pay,” Victor Pellot said. “The only pitfall is you have to pay the first two months of rent for marketing and all that.”
The program is so new that many homebuilders and real estate workers on the First Coast are unaware of it.
Daniel Davis, executive director of the 1,000-member Northeast Florida Builders Association, was one.
“It is a new concept. But you’re seeing more confidence and you’re going to see creative ways to get people into new homes,” said Davis.
Part of the housing collapse that started in 2008 was attributed to a glut of new construction. But Davis said that’s now behind the First Coast market and programs like Marketplace’s can only help to literally rebuild the industry.
“I think it’s very attractive and I think it’s good for the community and good for creating jobs in North Florida,” said Davis, who is also a Republican member of the Florida House of Representatives. “We need to figure out ways to help out people who are underwater in their existing homes and this is one of the ways that can do it.”
The Northeast Florida Association of Realtors was more cautious. Communication Director Melanie Green hadn’t heard of the program, either, and advised anyone considering it to seek real estate legal advice.
“The only thing I would offer to any potential homeowner is get legal counsel,” she said. “Certainly, there’s some sort of contractual agreement they’ll be entering into.”
The Times-Union contacted a real estate attorney who declined to comment on the program, and several messages left with other lawyers requesting an interview were not returned.
Marketplace says it understands the caution and welcomes the scrutiny.
“We’re the only ones doing this on this large of a scale,” said spokeswoman Elyse Sarnecky. “For the caution, I welcome any Realtor to call us. If they advise legal counsel, our leases are one-page documents and they’re written in plain language.”
The program has not been without its problems.
Sarnecky acknowledged its early stages brought issues with bogus lessees. But that’s been aggressively addressed.
“Our property management department underwent a huge overhaul over a year ago,” Sarnecky said. “Since then, we’ve gotten a lot of this under control and we’ve been able to place high-quality tenants.”
© 2013 The Florida Times-Union (Jacksonville, Fla.), Drew Dixon. Distributed by MCT Information Services
No comments:
Post a Comment