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Answers (6)
Best Answer
- Angela Mancinone, "angelamancinone"
- Contributions:74
Its a wonderful strategy for the buyer who maybe not in the position to buy the house right now (cleaning up your credit or marital changes etc). Generally its not a difficult transanction. There will be a purchase and sale and I would absolutely recommend an attorney because once you sign you are legally bound to perform. There are different scenarios that can take place, one might be that the buyer pays the seller X amount over the monthly rent and that amount can be used towards the down payment etc. There are different ways you can set it up thats between you and the seller but... banks do cap the $ amount that is used towards the purchase price so check with your financing broker on their terms for a "rent to own" purchase. Its a great avenue for many buyers, good luck!
- Neil Blumberg, "Neil.Blumberg"
- Contributions:42
A rent to own contract, when it is properly constructed, is comprised conceptually of 3 agreements (1) a rental agreement for $x per month (2) an option agreement, for which you are charged a non refundable fee of $x, giving you the right to purchase at a given price within a certain time (3) A sales and purchase agreement setting out the terms and conditions of the sale. Often these 3 agreements are combined into one document called a Lease Option Agreement.
These agreements are great in certain limited circumstances, but have many pitfalls. Be extremely careful when entering into such an agreement. Consult an attorney or competent Realtor. We estimate that around 80% of these lease options do not result in a sale, meaning that the tenant/buyer lost his option money.
These agreements are great in certain limited circumstances, but have many pitfalls. Be extremely careful when entering into such an agreement. Consult an attorney or competent Realtor. We estimate that around 80% of these lease options do not result in a sale, meaning that the tenant/buyer lost his option money.
- Marybeth Mills Muldowney, "muldowney"
- Contributions:514
Rent to Own...this is a lease agreement which needs to be prepared with an eye to detail. Typically a rent to own may have a deposit held in escrow and it usually has a certain amount of the monthly rental fee going towards your downpayment. Details regarding insurance premiums and taxes as well as repairs to the property while you occupy should all be discussed and make sure you put your arrangments in writing.
There are a number of other details to be worked out as well, projects at the end of one year, two years, three years? What is the owner runs into financial difficulty, that money in being considered is not your money until the transaction takes place, you should have legal counsel detail the arrangments to the lease to own agreement, it will be well worth it.
If I may be of assistance please do not hesitate to call on me, my cellular is [contact info removed by moderator due to self-promotion]
Home ownership is the way to create your networth!
There are a number of other details to be worked out as well, projects at the end of one year, two years, three years? What is the owner runs into financial difficulty, that money in being considered is not your money until the transaction takes place, you should have legal counsel detail the arrangments to the lease to own agreement, it will be well worth it.
If I may be of assistance please do not hesitate to call on me, my cellular is [contact info removed by moderator due to self-promotion]
Home ownership is the way to create your networth!
- Angie Boggeman, "angie boggeman"
- Contributions:469
Be sure to protect yourself as the buyer. in recent times people were agreeing to a purchase price in a lease to own, purchasing in 1 or 2 years. Then the housing values went down and the house would not appraise out at the purchase price. Consult an attorney or real estate agent when preparing your contract.
- Tim Moore, "Kitty_Hawk_NC"
- Contributions:151
Owners are often willing to do a rent to own, why? Because it benefits them and not the renter. For some reason renters are sucked into the belief they can fix all their credit problems, save enough money and get a loan to buy the house in a year when history proves this rarely ever happens. The success of a rent to own is below 25% and I bet these days it's less than that. Ask yourself why are you renting and not buying now with prices so low and rates at historic lows. Now be realistic and ask, can I fix those problems in 1 year or should I just rent and fix them and then buy when I know I can.
If you go through with your rent to buy you will agree to buy the house in a year for an agreed amount, you will put down a deposit and you will pay an option fee above the monthly rent each month. The owner keeps this option money and deposit and in a year he keeps it if you can't buy the house. In these years of declining property values is the agreed price you will pay for the house going to be lower than the value today? I doubt it so you may not even get a bank to loan you the money for a house that won't appraise for the agreed amount in a year.
Think long and hard.
If you go through with your rent to buy you will agree to buy the house in a year for an agreed amount, you will put down a deposit and you will pay an option fee above the monthly rent each month. The owner keeps this option money and deposit and in a year he keeps it if you can't buy the house. In these years of declining property values is the agreed price you will pay for the house going to be lower than the value today? I doubt it so you may not even get a bank to loan you the money for a house that won't appraise for the agreed amount in a year.
Think long and hard.
- Marie Young, "marie_5"
- Contributions:39
This can be a great thing or an albatross depending upon how it is worded. In this volatile market, if you lock into a price now and the market sinks, or rates go up, you could be on the hook. You don't get tax benefits while renting, and you could tie up money in the process. My suggestion is to be sure to contact an attorney, know your state and local laws regarding such a transaction, and be sure for your effort you aren't paying at or above market at the end.
Rent to own?
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