If you want to buy a home but have a current lease agreement, don’t let that be a hindrance to home ownership. Sometimes gems are put on the market and you have to act fast — or lose out. Find out what your options for breaking a lease are.

Breaking a Lease to Buy a House: What You Need to Know

Finding a home built with your needs in mind can be a dream come true. You feel like all your legwork has finally paid off. But what happens if the home is put up for sale before your lease expires? Can you break the lease to grab the great opportunity in front of you?

A lease is a legally enforceable agreement between you and the property owner, breaking it has legal implications. If you haven’t read yours in its entirety, you need to do so before breaking the contract.

Most renters only confirm the rental figure and read the clauses that have to do with their pets before signing on the dotted line. Maybe you did, too. But there’s hope.

If you’re thinking about breaking a lease, here’s what you need to know.

The Pros of Breaking a Lease

  • You May Obtain Compensation If There Is an Issue
    If your rental property has problems and the landlord has refused to fix them, you have legal options. You can go to court to make sure that your landlord does not sue you for breaking the lease and may even get compensated.

    If one of the reasons you’re thinking about vacating the property is the severity of the problems, you can sue the property owner for constructive eviction and the court may void the lease and give you monetary damages.

    However, the landlord’s failure to act must be persistent and the problems must be thoroughly documented. In many cases, enlisting the services of a licensed building inspectorcan help fortify the case.
  • You Can Mitigate the Damages If You Find a New Renter
    Many states have laws about mitigating damages if a lease is broken. Basically, both you and the landlord must try to find another tenant to take your place if you move out early. You’re reducing the rent amount that is owed for the remaining months.

    There are two ways to go about it:
    • Re-renting: A new tenant takes your place and signs a new lease agreement. They also pay their own security deposit. The landlord may have to re-list your unit and show the property to potential renters.
    • Subletting: This involves finding someone who is willing to take over your existing lease. They may have to sign a sublease agreement but the lease will still be in your name. You also won’t get back your security deposit till the end of the original lease term.
  • If Your Lease is Short-Term, You Only Have to Give a 30-60 Days Notice

    Most townhomes, single-family homes, and individual condo units have a one-year lease or longer. These properties are usually owned by small investors and offer predictable revenue as landlords can budget according to the projected rental income.

    And while longer leases offer renters the security of a fixed rent amount for a fixed term, there are times when short-term leases are attractive — like when you’re thinking of buying a home.

    If you negotiated a short term lease upfront and decide to move out, you will steer clear of the heavy penalties that come with breaking a long-term lease. Shorter leases only require a 30-60 days notice and can be terminated without many negative consequences.

The Cons of Breaking a Lease

  • Your Landlord Could Sue You
    A property owner can sue you if you move out without paying the outstanding rent for the lease term.

    You can mount a defense as most state laws have clauses on a landlord’s responsibility and you can break the lease if there is just cause. In many states, the landlord is required to make efforts to re-rent a unit vacated before the lease expires. If there is no such effort on their part, their case might fail.
  • You Could End Up with a Poor Credit Score
    Because a lease is a legally binding contract, your landlord can report you to the credit bureaus – like TransUnion and Equifax – if you fail to honor the agreement.

    They may also decide not to pursue legal recourse but send a debt collection agency after you. Debt collectors are aggressive and may also decide to sue you. The entire process can be very damaging to your credit score.
  • You Could Lose Your Large Security Deposit
    If your agreement permits, your landlord could seize your deposit. All they may need to do — according to your state law — is send you a breakdown of how they used your deposit.

    The good news is that there are steps you can take to prevent this from happening. If your landlord is understanding and your relationship has been cordial, you can talk to him. Together, you can reach an amicable solution that makes both of you happy.

This is the number one question homeowners ask and the number one answer they get is ‘it depends’.

Why is it such a difficult question?

Home valuation is tied in to many different factors aside from how many bedrooms and bathrooms. In Savannah, in particular, the block or position on the block can change property value for $20,000 or more. Then there’s updates and layout, age of the roof, ac system and so much more. And we haven’t even looked at the market yet!!!

How is value determined?

Value is determined by what someone is willing to pay for it. This means that it doesn’t matter what you paid for it, if no one else is willing to pay that. This is one of the struggles of a fluctuating market. During the housing market bubble of 2006, home prices were grossly inflated which had skewed the value or perceived value of homes. Therefore a home valued at 2006 standards is very different than 2015 standards. Current value is determined by what your home would sell for in today’s market.

So . . . how much is my home worth?

The best way to determine the current market value of a home (how much it would sell for today) is to do what’s called a Comparative Market Analysis or CMA. The CMA pulls together information about the property with comparable properties in the area, called Comps. Once the appropriate comps are determined this data is complied into a report that breaks down what has sold in the past 6 months, what is currently under contract and what else is available for sale. Then an appropriate valuation of the property can be deducted. Thus answering the question: how much is my house worth.

‘It depends’ is an easy but unsatisfying answer, whereas to get a real answer takes some time and research. That’s why as a Realtor, we’re here to help.