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Answers (7)
- Ashley Lambert, "AshleyTheRealtor"
- Contributions:42
I have two downtown listings in my city in which the seller is offering lease-to-own for a Buyer. In this situation he still wants to see that the Buyer is approved to purchase the home and that the only thing holding them back is the down payment, in which he will allow 6 months for the Buyer to save up. The condos will remain on the market, accepting back-up offers and giving the agent the right to show the condo with a one-day notice.
An attorney had to draft this contract.
Note: I recently took an update course and the speaker said that 5% of lease-to-owns actually close. The low percentage is due to either the Buyer making a small, expendable deposit up front and/or finding something better during the time of their lease agreement. In this case I agree with Tiffany Bond, Seller Financing is a nice alternative.
An attorney had to draft this contract.
Note: I recently took an update course and the speaker said that 5% of lease-to-owns actually close. The low percentage is due to either the Buyer making a small, expendable deposit up front and/or finding something better during the time of their lease agreement. In this case I agree with Tiffany Bond, Seller Financing is a nice alternative.
- Tiffany Bond, "TiffanyBond"
- Contributions:3010
The only time I have seen these work is between family members. They are attractive to buyers because (in theory) it won't be a hit to their credit and if they don't have good enough credit to get a loan they believe this may be their only way to achieve home ownership. They are a scam artist's dream - right up there with some of the charm that credit card companies have, but with less laws to protect you.
A MUCH safer alternative purchase method is to purchase with seller financing. Have the property legally transferred to you and have the seller carry the mortgage. This keeps the seller from encumbering the property and still gives recourse in the event of non-payment. These are much harder to get though since a huge percentage of rent to own are scams.
A MUCH safer alternative purchase method is to purchase with seller financing. Have the property legally transferred to you and have the seller carry the mortgage. This keeps the seller from encumbering the property and still gives recourse in the event of non-payment. These are much harder to get though since a huge percentage of rent to own are scams.
- Professional Investor, "Sacramento Investor"
- Contributions:42
In this market there is no reason for a Lease to Own contract. You can probably buy a home yourself without going that route. AND in this market you can bet that the home is already upside down with debt. You don't want to pay higher than market rents and find out that the house is going into foreclosure. Plus, I've never seen a successful L2O transaction close.
- Aldreth
- Contributions:4226
Randy rocks. :)
www.Aldreth.net
www.Aldreth.net
- Randy_H
- Contributions:4385
Generally, the purpose of such arrangements is to separate you from your money. On occasion someone gets lucky and stumbles upon a rent-to-own situation that is legitimate. Of course, on occasion someone gets lucky and stumbles upon a series of random numbers that entitles them to a free pile of taxpayer cash from their resident state government. I once landed on "Free Parking" in a game of Monopoly also...
- rjon.101
- Contributions:201
Do this google this phrase "scams on rent to own real estate" and you can spend hours reading a lot of reasons/stories to avoid rent to own.
most all of the time they are entered into buy an owner who can not sell in in normal sale for the price he wants. typically it is a price far above market value. If he wants to sell it just put it on the market at market value and sell it. If an owner won't just put the house on the market and sell it that should be a signal there is a problem that is not good for you the potential rent to own victum. There is no benifit for a house that can be sold in a normal sale at market value to be sold via a rent to own scheme. Thousands have been had by these in Vegas, NV , Az and Socal during the boom . and the only buyers falling for a rent to own are the ones who cant buy via the normal buy process due to lack of credit and or cash and so hope for and look for the deal that is going to fulful their dream, making them susceptable to the seller pulling a rent to own scam.
Frederick points out some really good problems that can occur and cost you everything you have put into the scheme and that could also cost credit problems.
Really, do the google search and enjoy the reading
most all of the time they are entered into buy an owner who can not sell in in normal sale for the price he wants. typically it is a price far above market value. If he wants to sell it just put it on the market at market value and sell it. If an owner won't just put the house on the market and sell it that should be a signal there is a problem that is not good for you the potential rent to own victum. There is no benifit for a house that can be sold in a normal sale at market value to be sold via a rent to own scheme. Thousands have been had by these in Vegas, NV , Az and Socal during the boom . and the only buyers falling for a rent to own are the ones who cant buy via the normal buy process due to lack of credit and or cash and so hope for and look for the deal that is going to fulful their dream, making them susceptable to the seller pulling a rent to own scam.
Frederick points out some really good problems that can occur and cost you everything you have put into the scheme and that could also cost credit problems.
Really, do the google search and enjoy the reading
A Real Estate Attorney should draft the paperwork, and set up an Escrow Account if necessary.
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Is it an OPTION to Buy, or is it a CONTRACT to Buy?
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What amount of the Rent, if any, is applying toward a Down Payment?
Many Renter/Buyers assume that all of the rent is applying toward a down payment, when in fact, none of it may apply.
It all depends on what is written in the Option Agreement, or Contract to Purchase.
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If some of the money will apply to a Down Payment,
is it being held in escrow by a third party,
to keep the Seller from just running off with it?
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Is there an existing Mortgage or Mortgages or Judgment Lien on the Property?
Has the Buyer done a Title Search or Abstract?
What is to prevent the Seller from taking out a Loan after the Fact and damaging the Title?
What happens if the Seller loses a lawsuit and a judgment lien is placed on the house?
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How does the Buyer know that the Existing Mortgage or Mortgages are being paid?
If the house is Foreclosed on, the Renter may have no rights,
and may be put out of the house (with a few excepted states, including California)
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Is the Seller going to Finance this, or will the Buyer be getting New Third Party Financing (Bank or Credit Union Loan)?
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What about the Existing Mortgage - is there a Due on Sale Clause that might be triggered by the Rent to Buy agreement?
If the Present Mortgage Holder considers the Option to be a Transfer of Ownership, it may trigger a Due on Sale Clause in the mortgage (the entire Loan Balance is accelerated and due immediately).
Likewise, if the Property Appraiser deems it to be a change of Ownership, there may be Property Transfer Taxes or Intangible Taxes due.
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Who will insure the house? Is there Tenant Insurance to cover the Renter / Buyer's private property?
What if the house is severely damaged by a storm or fire - is there a provision for that?
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See a Real Estate Attorney before entering into such an agreement.
There are serious consequences involved.
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Best wishes,
Fred
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What is the purpose of renting to buy arrangments?
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