What is a fair increase in value per year on a two year lease option

I am dealing with a Seller, on a lease option to purchase, two year term. The Seller wants to increase the sale price by 10% per year, is that a fair increase?

Central Oregon

Not at all! Can this guy predict the future? You make your offer based on what works best for you, today. In two years the price may be higher or lower. Anyone’s guess is good as everyone’s guess.
If the homeowner is fighting you on this, he isn’t motivated enough to do business with. Move on. . .

Where are you located that this guy thinks there is better than a snowball’s chance in hell that his home will appreciate 20% over the next 2 years? The market is slowing and retreating back nearly everywhere, even in hot markets 10% just isn’t going to happen. If someone told me 10% I’d probably start laughing.

Good Afternoon,
10% !! No way. CT is right. The seller is negotiating Your profit away…annually.
As you know the market in Central Oregon tanked starting last July. Your lease option may be a great deal for your seller as his property is most likely over priced to start in order for him to agree to the deal. He is not very motivated at least. Add to your contract the right to extend the lease with option for an additional year…twice. You now have a four year contract.

Where in Oregon ?

Sales are up in Central Oregon but still sluggish. Is the seller under 300k or close to it ?
Last year same time there were about 18 homes for sale under 300k, now about 350 with more coming on line from builders.
Hope this helps…D

Hi All,

Thank you for your response to my post. I love hearing others ideas.

Property is in Bend Oregon.

This increase that the seller wants has now put this deal at a stand still.

I’ll keep working in but will give the seller time to “sit” on the sale and monthy payment a little longer.

The only way that a 10% escalation would be fair is if you were in a very hot market or you were using a price today that is below market. Sounds like that’s not the case. I guess another possibility would be if you were getting a huge credit towards the purchase price from your monthly payments.

What I really think is going on, without knowing all of the facts, of course, is that the seller does not really want you to exericse your option at the end of the lease period.

Regrettably there are people in this business who want their lease-option tenant-buyers to fail so that they can keep the (usually large) non-refundable deposit.

I do 5% per year because that is the historical average for my market. Some years I win some years the buyers win.

Do you do that even when you are pretty sure the market has been and is going to continue on a downward trend? Wouldn’t that be knowingly shooting yourself in the foot or are you only doing deals where the current asking price is already below market and you would still be in good shape even building the price up some?

Rich, I’ve never had a problem getting a T/B financed in any part of the market cycle. It’s just commonsense that you have to charge more when you’re taking the risk of damage and vacancy and giving the T/B the chance to own. I will never understand why any investor would finance a T/B at current market rent and value. Why not just sell it or rent it? Where’s the advantage?

Currently in Bend, many sellers are happy to take 0% apprecaition if you will just take over payments. I live in Bend and I have had many people offer to give up the dead or the house in exchange for payment relief. Believe it or not I have even passed on several of these properties because the existing financing is junk. Sometimes I even ask people to refinance first and then I will take the deed.
Be patient.