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Hi all! My husband and I are thinking of moving to east Tennessee in the spring after our lease is up at our current place here in Maine. We have been checking out the average apartment prices and house rental prices in a few areas as well as the employment situation. We need a decent job for him but I should be able to just transfer for my job or go back to my previous job in TN. We lived in Sevierville for 8 months from 2010 to 2011 and miss the area very much. I am wondering if anyone has done or is doing the rent to own or owner financing thing for their house? Anyone have any thoughts on the value of this way of purchasing or know of people that have done this? It seems like a good deal for some of the listings we have seen outside of Knoxville. I would much rather pay a monthly "rent" for something we will eventually own than just paying regular rent. Thanks in advance for any advice or examples!
Last edited by KellySou; 08-14-2013 at 02:00 PM..
Reason: add info
Rent to own is never to the benefit of the renter/buyer. Most require a large downpayment and then above-average rental rates, this overage of which is set aside to help with your downpayment at purchase time. Few give you more than 2 years to actually close on the house, so if you have credit issues and can't get those cleared up in time to qualify for a mortgage, you lose the downpayment and have paid way too much for rent. Anything can happen in that time frame, too, that could set you back or force you to move to a different location, which again, causes you to lose your downpayment and extra rent. It is a great deal for the seller, but a horrid deal for the buyer. Too many things that can go wrong with it. Plus, a lot of the houses that are rent-to-own have major issues that you, the renter, may not inquire about until time to close and then you find out the house needs $20,000 in foundation repairs before anybody will finance it. Things like that. Sadly, most rent-to-own properties are pigs with lipstick and the sellers know this and don't disclose it.
Rent to own is never to the benefit of the renter/buyer. Most require a large downpayment and then above-average rental rates, this overage of which is set aside to help with your downpayment at purchase time. Few give you more than 2 years to actually close on the house, so if you have credit issues and can't get those cleared up in time to qualify for a mortgage, you lose the downpayment and have paid way too much for rent. Anything can happen in that time frame, too, that could set you back or force you to move to a different location, which again, causes you to lose your downpayment and extra rent. It is a great deal for the seller, but a horrid deal for the buyer. Too many things that can go wrong with it. Plus, a lot of the houses that are rent-to-own have major issues that you, the renter, may not inquire about until time to close and then you find out the house needs $20,000 in foundation repairs before anybody will finance it. Things like that. Sadly, most rent-to-own properties are pigs with lipstick and the sellers know this and don't disclose it.
Regrettably I can't agree with your point of view. We are on the other side of this equation. Allow me to explain. We actually explored the owner financing option as our second house was not selling. It drew a buyer but the realtor had been given some bad information by the lending institution. That didn't work and I didn't like it to begin with. Although the buyer would have paid 10% down at 5% interest, the upfront commission costs would have eaten up most of the proceeds. If the buyer turned out to leave we could have been left with a trashed house and almost no money to speak of for the period of time the purchasers would have lived there. Obviously the realtor loved this deal because she would have gotten her money up front. Fortunately it died on the vine.
The second option is much more to our liking. Although the rent is actually low for this area the property management team at the same realtor got two month's rent; one for the first month and the second for a deposit for damages, they raked off 50% of the first month's rent but it allowed us to have some cash flow off this vacant property. They also pay the utility bills.
This was not some turkey with all kinds of problems. We lived there for nearly two years and fixed what needed fixing and it is in a good area. We moved to a second home that we now live in because it requires less yard work and because we don't need to do anything to it except live here. But we could have lived in the other house indefinitely but it would have required this and that to get it to where we wanted it to be. With our current home we do nothing except live here.
As to the rental agreement, the rent, low to begin with, (about $300 under market) has $150 per month going toward the purchase price and they will have to get their own financing within 12 months or renegotiate the lease or simply leave. We could still be left holding the bag if the house is trashed but at least the hole in our budget is fixed at least for now. We are not wealthy.
So the renter/purchaser gets a full year to live in at a reduced rental price and if they want to leave after 12 months or even before (if they skip out), they have a good deal. Where is the downside? We have exposure, they have little to none because if they merely rented it would be a stack of worthless rental receipts whereas they will have applied $1,800 to the already low purchase price if they decide to purchase it. Hopefully, it will be sooner than later. We just want the monkey off our back.
I suppose that if we were just renting out some pig sty that might be true; your point of view, that is. In this case, we have a temporary respite and some monies coming in to generate cash flow. If they decide not to go through with purchasing the home we will keep our fingers and toes crossed that the house remains in good repair so we can remarket it.
Thanks for the responses. I have been looking online and have come across a couple companies that specialize in owner financed houses. The houses need work but a few appear to at least be livable as they are and are priced at an affordable monthly rate. We were hoping that it would be possible for us to do something like that but we will see when it get closer to the spring and our lease is almost done. After the current lease runs out here we can rent month to month so there's no real rush. We have to make sure everything is in place this time because we have a 19 month old little girl too. Last time it was just the 2 of us and we came down with no real plan.
Rent to own is never to the benefit of the renter/buyer. Most require a large downpayment and then above-average rental rates, this overage of which is set aside to help with your downpayment at purchase time. Few give you more than 2 years to actually close on the house, so if you have credit issues and can't get those cleared up in time to qualify for a mortgage, you lose the downpayment and have paid way too much for rent. Anything can happen in that time frame, too, that could set you back or force you to move to a different location, which again, causes you to lose your downpayment and extra rent. It is a great deal for the seller, but a horrid deal for the buyer. Too many things that can go wrong with it. Plus, a lot of the houses that are rent-to-own have major issues that you, the renter, may not inquire about until time to close and then you find out the house needs $20,000 in foundation repairs before anybody will finance it. Things like that. Sadly, most rent-to-own properties are pigs with lipstick and the sellers know this and don't disclose it.
I used to be a real estate agent and I agree with every word of this.
OP, why does it have to be a rent-to-own? I tell EVERYONE to rent first so they have a chance to get settled but not rent-to-own where you will pay more for a place that you may not want to buy in the long run. And doing this long-distance is a very bad idea.
I'm from New England and have lived in the South for almost 20 years, eight in Knoxville. Never mind a house at this point. Secure jobs before moving.
We will always make sure we have jobs before moving. When it was just the 2 of us it wasn't a big deal to just go with no real plan but with a baby we will make sure that we have a job and a place to live before we move. We are just curious about the houses we could possibly afford once we are established there. We both have bad credit and regular banks will probably say no way to a loan. My husband will be trying to get his resume to companies he is interested in by the end of January and hopefully be able to set up a few interviews in March. He is using his vacation from his job here to take a bus down and try to get as many interviews as possible. After March 1st we could relocate there in 2 weeks or a job for him, I can probably transfer my job. Thanks for the concern though!
We will always make sure we have jobs before moving. When it was just the 2 of us it wasn't a big deal to just go with no real plan but with a baby we will make sure that we have a job and a place to live before we move. We are just curious about the houses we could possibly afford once we are established there. We both have bad credit and regular banks will probably say no way to a loan. My husband will be trying to get his resume to companies he is interested in by the end of January and hopefully be able to set up a few interviews in March. He is using his vacation from his job here to take a bus down and try to get as many interviews as possible. After March 1st we could relocate there in 2 weeks or a job for him, I can probably transfer my job. Thanks for the concern though!
The "bad credit" problem is indeed something that would throw a monkey wrench into the works. In that event, even a cream puff in an area of surplus houses and anxious sellers would not want to do this deal.
Having this knowledge, I would say the rental option is the only real option you have at this point.
In the situation I laid out above, in our own situation, we have two houses and two mortgages. We don't need two houses and two mortgages. So we were highly incentivized to go the lease purchase route. It is not a perfect solution and at such time they go through with their own bank loan it will be a happy day. I count six perfectly good homes in the very nice sub-division I live in that are trying to be sold. Some will sell almost immediately; others will languish on the market. Some are over priced for the neighborhood, for example and some are not competitive with other similar houses. Eventually any house can be sold if it is priced properly.
But to reiterate, your option is obviously renting at this point in your lives.
Yes, we have figured that most likely we will rent for a while and get a feel for the area we are most interested in. My credit is not as bad as hubby's and we may be able to get a first time home buyers loan later. It just seems so odd that there are quite a few websites that have rent to own or owner financed houses in the area. I had never thought too much about it before but when I searched for housing info it kept popping up here and there and my husband said to look into it. Personally I am the type of person who takes forever to make up my mind about a big purchase so it won't be the first thing I see that we eventually buy. Our rent here in Maine is not bad but the rest of the expenses here are high too. A vehicle is very expensive to maintain here with the salt on the roads in the winter and if you pay heating costs it is crazy. Groceries and gas are high as well. We managed to get a 2 bedroom apartment with heat and electric included for $800 per month. That is very good for the area near Bar Harbor (15 miles away). We just want to be somewhere that we may have a chance to own something of our own one day and here it is almost impossible.
It just seems so odd that there are quite a few websites that have rent to own or owner financed houses in the area.
During the housing boom the area was overbuilt, especially with rental cabins. The irrational exuberance that made people think they could make huge profits by buying and selling homes also found its way into the thinking that one could buy a vacation home and pay for it with rental proceeds. Same thing happened in both scenarios, too many people thought the same thing. People are left with homes and desperation for money. It's also a great way for people to make more money than on the average rental as outlined by "TN37043."
Quote:
We managed to get a 2 bedroom apartment with heat and electric included for $800 per month.
That would be a darn good price for the Sevierville/Knoxville area. Seymour has 2 bedrooms at 960 and 1,000 square feet going for $711 and $778, respectively. And pay down here is lower. I'm from New England, I know.
Most importantly, be very, very cautious of rent-to-own companies on the internet. A lot of them - probably most of them - are scams.
Buying "rent to own" is a great way to be a home owner. My ex were buying on contract (more or less rent to own). Our contract was for 12 years, ending in '98. And, of course, the ex still has it. Present wife and I were buying a nice 3 BR 2 bath on an acre for $625/month for 20 years. This is a great way to buy and not have to worry with the bank. That could help with that bad credit you mentioned. If you find somebody like a contractor who either builds or flips houses would be good. Good luck!
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