Model Lease Back Programs

Today most home builders have models in order to show the different types of designs the builder builds as well as the quality of construction. Bear in mind that many of these builders do not own these models outright. They built them and then leased them back from the owners. This is commonly referred to as "Model-Lease-Back".

As you visit models and model centers you may see information about “Lease Back Programs”. These are the programs whereby you (the Buyer) contract to have a model (house) built and the builder or developer leases the house back from you for a predetermined amount of rent for a specified period of time. Generally builders will lease the house back for the amount of the mortgage principal, interest, taxes and insurance payment (PITI) amount. Some builders/developers will have a built in increase for renting the home. The period of time the builders/developers lease the home is normally one year with additional time options generally at the builder's/developer's discretion.

Pros: Lease backs can be a good way to plan for your house needs now and have the home ready to move into when you're ready to move. Some retirees find this an appealing option as more and more people are preparing for early retirement. Lease backs can allow you to buy a house at today’s price and have it kept in like-new condition until you move in.

Cons: Builders may have final say on what options are put into the home, what colors are used to design the home, and where the home is located. Builders want maximum exposure and as such model centers and home are generally located in the front of a development and on a main street. If privacy and site selection is most important to you a lease-back-program may not meet your needs best.

Some Things to Ask About

How long is the lease for?
How will the home be used? (Will it be a 7 day a week model home or just used to bring interested customers through?)
How much rent is the builder offering, what it is based on (e.g. PITI) and does the rent increase if the builder takes any of the extended lease period options? (Meaning if the builder rents longer then expected)
Who will maintain the model?
What options will be in the model and who will being paying for these options? (If the Buyer is to pay for any of the options ask if there is any reduction in the option's price. Keep in mind the option being in the home will help the builder greatly to sell these products and thus the builder will make a profit.)
Where will the model be located?

Last Updated: August 06, 2005 09:58 PM