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Old 07-14-2014, 07:38 AM
 
Location: Plymouth Meeting, PA
67 posts, read 97,975 times
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Could someone tell me how rent to own works in MD? I am really looking to start my research so that I can move in a year. Thank you very much. How long do I have to be in the house and does the rent money go toward the purchase of the house?

Thank you

V
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Old 07-14-2014, 07:52 AM
 
Location: North Beach, MD on the Chesapeake
35,122 posts, read 44,940,551 times
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The only answer to all your questions will be: It depends on how the contract is written.
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Old 07-14-2014, 08:43 AM
 
Location: Sneads Ferry, NC
11,685 posts, read 20,979,278 times
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It totally depends on what you can negotiate with the owner of the house. We wanted a year lease with a year extension, and then month to month. Don't expect all of the rent to apply towards purchase. Typically it would be the premium you pay over the market rental of the house. For example, if the market rent is $1200, and you pay $1400, then the extra $200 is credited toward a down payment on the house.

I think your best chance of finding a house would be with an estate sale, where the house needs work and it has been on the selling market for a long time.
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Old 07-14-2014, 03:29 PM
 
687 posts, read 734,979 times
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Contrary to popular belief rent-to-own really doesn't exist. If it did you'd know more individuals who have actually bought or sold a home that way.

The only exceptions here are very low-end properties where the monthly payments made by the tenant/future-owner are about the same as rent (here ~800-1,000 for a row house), where the terms of the contract are short, and where the speculator or previous owner did very little to fix it up; even then it is a rarity due to the risk involved and only if the property hasn't sold for ages will a seller go down that road.

There is zero advantage to a seller, and A LOT of risk. Only a fool would sell their home RTO.

Sure the deal is advantageous to the buyer, but even then no one would "buy" RTO if they could secure lending through more conventional means. In that case a seller has to wonder why are unable to secure traditional financing,

If that is the case (else why would you seek a RTO "deal"?) then one has to wonder whether you'd be a good candidate to even rent the property, much less steward the property for a few years until you are somehow in a better position to buy it. Which then brings up the question: how will your buying position be significantly better in the future in relation to now?

So, why is RTO a bad idea for seller when you sit down to consider it?
Think about it: for the length of the term it is essentially a rental property and that means the seller still has to be a landlord and a lot of people simply do not want to be a landlord, especially at any geographic distance. Without a property management company means they still have to be reasonably local and can't move (which I imagine in most cases is what someone wants to do). But this is only the smallest issue.

Then there's damages and maintenance. Who is responsible for what, when, and at what cost. It all has to be spelled out item by item in the contract. The biggest issue is that the whole situation begs the question of: "Who owns what and at what time?" as well as "who is responsible for what, and when?" and "what happens when someone doesn't follow through?" There is little legal precedent here whereas there are extremely clear cut laws for both tenants and landlords in the case of a rental property, and very clear responsibilities for property ownership.

Also: If during the course of the "contract" property values go up significantly then the previous owner loses out on that increase, in which case they could've just rented it out anyway and then sold in the future. If property values go down then the renter/new-not-really-owner can simply walk away, in which case the seller is once again stuck with trying to sell a property and is in fact in an even worse position due to the lower nominal dollar value.


Good luck with your search, but you should note that it is a (very) long shot. You have to ask yourself the same kind of question any business person asks themselves about any negotiation or transaction: "While such a deal is good for me...what's in it for the party on the other side of the table?" I think if you honestly examine this you'll find that there is no advantage here for someone trying to sell in which case they'd just use conventional means.

Last edited by mapmd; 07-14-2014 at 04:08 PM.. Reason: grammar/spelling
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Old 07-14-2014, 03:57 PM
 
Location: North Beach, MD on the Chesapeake
35,122 posts, read 44,940,551 times
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I've known several people who've done RTO, all have been pleased, none have been in the ghetto. The key is to write a complete contract which covers maintenance and the other items you listed. The length of time I've seen has been no more than 2 years.

Obviously a smart person involves a lawyer.
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Old 07-16-2014, 03:28 PM
 
305 posts, read 1,255,803 times
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RTO, also known as Rent with Option, does indeed exist. It's really better not to make sweeping statements like that unless you are sure you know what you are talking about. Makes you look at little foolish thinking that just because you don't know about it, it doesn't exist.

A couple of reasons many of them never get completed is (1) the potential purchaser cannot qualify before the option expires and (2) the potential purchaser discovers that it's actually a crappy house in a crappy neighborhood, and they don't want to buy it after all.
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Old 07-16-2014, 06:08 PM
 
687 posts, read 734,979 times
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Quote:
Originally Posted by Mom21 View Post
RTO, also known as Rent with Option, does indeed exist. It's really better not to make sweeping statements like that unless you are sure you know what you are talking about. Makes you look at little foolish thinking that just because you don't know about it, it doesn't exist.

A couple of reasons many of them never get completed is (1) the potential purchaser cannot qualify before the option expires and (2) the potential purchaser discovers that it's actually a crappy house in a crappy neighborhood, and they don't want to buy it after all.
I think you just confirmed what I typed.
There are a lot of people wanting to buy through RTO, you can check out craigslist if you want to confirm this, but few people who want to sell going that route. Only when that is THE last option.

Many of them don't get completed because it is a precarious situation for both parties.

The buyer desperately wants to buy, perhaps because they consider renting a dead-end road, but is not really in a position to buy through traditional means and isn't really a prime candidate for buying a house anyway (hence the extra charges for RTO and often a hefty deposit up front). The seller desperately wants to sell, for whatever reason and may have exhausted other options.

Assuming the two parties find a deal that works for both of them and you get a "future buyer" into the house...well of course it falls through most of the time. Like I said: how will the buyer be in a substantially better position to secure lending in the future? Odds are, they won't be. If they honestly thought they could be they'd simply wait a year or two and then use conventional financing through a bank or mortgage lender.

So now you're back at square zero. The buyer has just paid extra costs of renting, has probably lost a deposit and has nothing to show for it. The seller just wasted a few years trying to unload a home and is now in the position of trying to sell it again, probably at an even more deteriorated condition.
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Old 08-01-2014, 09:50 PM
 
Location: Frederick, MD
39 posts, read 48,146 times
Reputation: 15
Quote:
Originally Posted by violamr View Post
Could someone tell me how rent to own works in MD? I am really looking to start my research so that I can move in a year. Thank you very much. How long do I have to be in the house and does the rent money go toward the purchase of the house?

Thank you

V
Just ratified a contract with a rent to own, as the buying agent. I would be more than happy to answer any questions you may have. eric.mc@kw.com

Contrary to common belief, it can be done on any home, if both parties are willing. For example, the home that i have ratified, is between 500-600k in Mount Airy. Anything is possible if you are diligent.
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Old 08-08-2014, 03:02 PM
 
305 posts, read 1,255,803 times
Reputation: 114
Quote:
Originally Posted by mapmd View Post
I think you just confirmed what I typed.
There are a lot of people wanting to buy through RTO, you can check out craigslist if you want to confirm this, but few people who want to sell going that route. Only when that is THE last option.

Many of them don't get completed because it is a precarious situation for both parties.

The buyer desperately wants to buy, perhaps because they consider renting a dead-end road, but is not really in a position to buy through traditional means and isn't really a prime candidate for buying a house anyway (hence the extra charges for RTO and often a hefty deposit up front). The seller desperately wants to sell, for whatever reason and may have exhausted other options.

Assuming the two parties find a deal that works for both of them and you get a "future buyer" into the house...well of course it falls through most of the time. Like I said: how will the buyer be in a substantially better position to secure lending in the future? Odds are, they won't be. If they honestly thought they could be they'd simply wait a year or two and then use conventional financing through a bank or mortgage lender.

So now you're back at square zero. The buyer has just paid extra costs of renting, has probably lost a deposit and has nothing to show for it. The seller just wasted a few years trying to unload a home and is now in the position of trying to sell it again, probably at an even more deteriorated condition.
You are correct in what you have stated. But it does exist. And sometimes, the deal even goes through to the end and the closing takes place. Just not very often. The best deals are the ones where there is a normal security deposit (one month's rent) and market rental fee. If you don't end up consummating the deal, the renter has lost nothing. Now, the owner -- that's another story. It should really be a last resort for an owner unless they can wrangle a non-returnable deposit out of the deal. Oftentimes, though, that wouldn't be enough to fix up the house after the tenant moves out.

So the bottom line -- can be good for renter, seldom good for homeowner.
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