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There is almost no such thing as "valid rent to own homes."
In the strong market we have, the only reason a seller will do "rent to own" is to overprice the house and take advantage or a disadvantaged buyer.
Rent to own is a terrible idea. I don't know of any specific sites, but I know that those contracts are ALWAYS written heavily to the advantage of the owner.
Why would a person rent to own?
Either rent or own.
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Rent to own is a terrible idea. I don't know of any specific sites, but I know that those contracts are ALWAYS written heavily to the advantage of the owner.
Why would a person rent to own?
Either rent or own.
I don't think most folks really know what it means. They just think it's a way to buy a house that they otherwise wouldn't be able to get due to credit/income/other issues.
Not only are these things typically advantageous for owner/sellers, legit deals are hard to come by. Most sellers don't want to fool with all that, and most landlords looking to sell will call a realtor.
I'm going to sell a rental property to my current tenants, but they're going to get a mortgage, and none of their rent is going towards the price. Just avoiding realtors fees is all we're doing. I would personally never do a rent-to-own deal, unless there was something in the 5 figure range in it for me. Otherwise, it's not worth the headache.
Rent to own is a terrible idea. I don't know of any specific sites, but I know that those contracts are ALWAYS written heavily to the advantage of the owner.
Why would a person rent to own? Either rent or own.
Did you mean to say take advantage of the buyer? A real estate transaction is typically advantageous to either the buyer or seller(owner), or it could be amicable to both, but unless that's a typo it sounds almost like you're saying its disadvantageous to all involved?
It's pretty obvious why the renter (potential buyer) would want it. It gives them the chance to try before committing. But that assumes terms that are comparable with a typical rental. A few years back when the market was heavily in favor of buyers (but buyer's confidence was low), this was a highly recommended home buying strategy because of how much leverage the buyer had. All of this still assumes a reasonable level of financial math skills on the part of the buyer... lol
The question might be why would a seller want to do this? Well there's usually only one answer, because they have not had success getting the price they want when selling. An owner either wants to get rid of a property or rent it out as investment income, and the only time they would be open to a combination of both/either is when they cant sell but don't want to sit on it and pay insurance and taxes, and the market isn't offering them what they want for it.
So Mike Jaqish is right with regard to the current market... a sellers market is NOT the right time for a buyer to seek this out, because it will almost certainly indicate a property that hasn't been able to sell (big red flag in a sellers market) and the seller will just tweak the terms to their advantage. But the buyer's desire to try before buy (assuming reasonable terms) is still understandable. Buyer beware in current market.
Rent to buy is heavily seller advantaged. It's on the order of payday lending IMO in its predatory practices. Typically the agreements spell out:
The homeowner is responsible for all maintenance on the home (similar to owning the house, not renting)
Receives no equity in the property until the "mortgage" is completely paid off (similar to renting, if you leave after X years you're out everything)
If you miss a payment you forfeit all equity (similar to above, and renting)
"Mortgage" is typically higher than rent would be (similar to owning, at first)
Mortgage payments normally are not reported to a credit agency therefore no credit history is being built or improved upon (similar to renting)
This is a true case of sellers taking advantage of renters who cannot get a conventional mortgage. More government control and oversight should be added to protect the lower income people being taken advantage of.
Did you mean to say take advantage of the buyer? A real estate transaction is typically advantageous to either the buyer or seller(owner), or it could be amicable to both, but unless that's a typo it sounds almost like you're saying its disadvantageous to all involved?
It's pretty obvious why the renter (potential buyer) would want it. It gives them the chance to try before committing. But that assumes terms that are comparable with a typical rental. A few years back when the market was heavily in favor of buyers (but buyer's confidence was low), this was a highly recommended home buying strategy because of how much leverage the buyer had. All of this still assumes a reasonable level of financial math skills on the part of the buyer... lol
The question might be why would a seller want to do this? Well there's usually only one answer, because they have not had success getting the price they want when selling. An owner either wants to get rid of a property or rent it out as investment income, and the only time they would be open to a combination of both/either is when they cant sell but don't want to sit on it and pay insurance and taxes, and the market isn't offering them what they want for it.
So Mike Jaqish is right with regard to the current market... a sellers market is NOT the right time for a buyer to seek this out, because it will almost certainly indicate a property that hasn't been able to sell (big red flag in a sellers market) and the seller will just tweak the terms to their advantage. But the buyer's desire to try before buy (assuming reasonable terms) is still understandable. Buyer beware in current market.
The owner has the advantage. The renter (that's what they are) is being taken advantage of.
So, yes. You and I are in agreement.
__________________
When in doubt, check it out: FAQ
Rent to buy is heavily seller advantaged. It's on the order of payday lending IMO in its predatory practices. Typically the agreements spell out:
The homeowner is responsible for all maintenance on the home (similar to owning the house, not renting)
Receives no equity in the property until the "mortgage" is completely paid off (similar to renting, if you leave after X years you're out everything)
If you miss a payment you forfeit all equity (similar to above, and renting)
"Mortgage" is typically higher than rent would be (similar to owning, at first)
Mortgage payments normally are not reported to a credit agency therefore no credit history is being built or improved upon (similar to renting)
This is a true case of sellers taking advantage of renters who cannot get a conventional mortgage. More government control and oversight should be added to protect the lower income people being taken advantage of.
Agreed. I'd like to see tighter restrictions on the practice. It's quite crooked.
__________________
When in doubt, check it out: FAQ
Rent to buy is heavily seller advantaged. It's on the order of payday lending IMO in its predatory practices. Typically the agreements spell out:
The homeowner is responsible for all maintenance on the home (similar to owning the house, not renting)
Receives no equity in the property until the "mortgage" is completely paid off (similar to renting, if you leave after X years you're out everything)
If you miss a payment you forfeit all equity (similar to above, and renting)
"Mortgage" is typically higher than rent would be (similar to owning, at first)
Mortgage payments normally are not reported to a credit agency therefore no credit history is being built or improved upon (similar to renting)
This is a true case of sellers taking advantage of renters who cannot get a conventional mortgage. More government control and oversight should be added to protect the lower income people being taken advantage of.
Well, I would think a "rent to own" could be structured to be more evenly balanced, IF IF an RTO seller was open to do so and IF IF a tenant/buyer was sharp enough to touch appropriate bases.
1. The tenant/buyer should have legal representation and should request a professional title search with any deficiencies cured, and should have the written contract vetted by their own independent attorney.
Due Diligence is not rendered unnecessary merely because it is a rent to own transaction.
2. The home should be inspected prior to contract and tenancy with needed repairs noted and possibly negotiated.
3. The home should be appraised, surveyed, etc. Market value should be noted and price negotiated.
And, if the tenant/buyer finds an RTO "dealer," the tenant/buyer should request proof of RTO transactions that have successfully led to tenant ownership.
I had this conversation years ago online, and a lease/purchase dealer in Oregon chimed in and said that she closed over 80% of her deals, and that she refunded any earned equity if the deal came apart and the parties separated amicably.
That is the only person I ever spoke with who offered up an ethical approach to RTO, Lease/Purchase, etc.
Otherwise, it is often on the level of nasty Buy Here-Pay Here car sales.
Commonly on real estate "investment" forums, I have seen operators gleefully bragging about taking advantage of the tenant/buyer's ownership dream and collecting above market rents with the promise that the (nonrefundable) "extra" would go towards down payment, pocketing large profits from rents and deposits because they know going in that the buyer would never close, and even "selling" the property to another pigeon when a tenant/buyer vacates.
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