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The lingo varies from state to state. In my area, there are two different phrases, and they get used as if they were interchangeable, even though they are not.
A "Lease/Option" is basically just a normal lease, with the understanding that a tenant may be willing to buy at a later date and a seller may be willing to sell at that later date. Usually, terms are not agreed to up front, other than those of the lease.
A "Lease/Purchase" is a legal real estate contract to purchase the property at a future date, with the further agreement that the buyer will rent the property in the interim. The buyer and seller agree to all terms up front, and are legally bound to perform, just like any other real estate contract.
Common terms to discuss are:
How much deposit/earnest money? Usually, a seller wants more "glue in the deal" on a longer closing. They want more assurance the buyer isn't going to walk away.
What happens to it upon closing? Is it applied to closing costs?
What happens to rent paid? Is some of it applied? None of it? All of it?
What happens to money already paid as down or rent if the buyer decides not to close? If the seller decides not to sell?
What happens if the value of the home goes up? If it goes down?
Expect to give on one item if you want flexibility on another.
For example, we had someone do a Lease/Purchase last year. They didn't have much to put down, so we agreed to a higher than market rate rent with part of it applied to their down when they closed. If they didn't close, the rent just stayed rent.
We had another one that we agreed to sell at a lower than market price, with lower than market rent, with a large down/deposit.
Another one, we agreed to sell at "today's price" in a declining market, but with all the rents applied in full toward the buyer's down, to give him time to build up enough. That one ended up not closing, so the money all was retained as rent.
Its all negotiable, but don't expect to get a deal in every category. From what you are saying, it sounds like you understand that, and are being realistic on your expectations.
Most are a rent/own contract that has a high interest rate and very specific clauses on when you lose the property if you get behind. It bascially is done like in renting as to how a person is evicted same as renting which in most cases is easier than foreclsuore. Otherwise it makes no sense to not just finance the property for the person.
The seller agrees to apply all or most of the rental fee toward the purchase of the house, if you decide to buy. You may have to decide after a period of time lapses. Generally the owner carries the papers. It is a great way to get into a home if you have little or no credit, not much money to put down, or bad credit. I have even found a place on the internet that connects potential buyers with sellers around the country that want to do a rent-to-own plan with their houses. They are at: [URL]http://www.stoprentinghomes.com[/URL]
Most home like this I have seen could not be financed thru any normal loans because of condition really. The one thing that is usually the same as a mortgage is the maintence is at the supposed buyers expense.You leave; you can't sell the house and payofff because you have no equity.
The amount of spam in this thread should be additional evidence that it's a horrible idea.
Only morons who rent-to-own their furniture and buy their PC through pre-authorized charges on the monthly home phone bill, would be dumb enough to rent-to-own a house.
JS1,
Not everyone has good credit score to obtain a brick card to pay for furniture 15 months later as well as a home mortgage in these tight ruled-market. You cannot know their circumstances, and take a wild guess on their financial situations. Thousands of people lost their jobs in last years. Many people bankrupted. And they still need housing and furniture.
If you think you were in the same situation I bet you wouldn't like to be called a "moron".
Quote:
Originally Posted by JS1
The amount of spam in this thread should be additional evidence that it's a horrible idea.
Only morons who rent-to-own their furniture and buy their PC through pre-authorized charges on the monthly home phone bill, would be dumb enough to rent-to-own a house.
JS1,
Not everyone has good credit score to obtain a brick card to pay for furniture 15 months later as well as a home mortgage in these tight ruled-market. You cannot know their circumstances, and take a wild guess on their financial situations. Thousands of people lost their jobs in last years. Many people bankrupted. And they still need housing and furniture.
If you think you were in the same situation I bet you wouldn't like to be called a "moron".
If you don't have 400 bucks for a computer, then just deal without it. Paying three times as much for it via the monthly phone bill is moronic!
I went bankrupt and broke thanks to divorce, so I don't have furniture. I sleep on the floor on an air mattress.
My wife and I bought our house as a land contract and was wriitten up with an attourney we knew and trusted. The seller asked us what the most we were comfortable with in a monthly payment and we told him 500/mo.
We put 5000.00 down and financed rest for 7 1/2 yrs at 8%. If we fail to make payments seller can take property back with no refunds on downpayment or improvements. We can well afford it and can make double payments so not worried about losing it.
Also we have not so great credit so this worked out good for us.
How does selling a property as a "Rent to Own" work? I've tried researching online but haven't much info. Please advise. Thanks1
There are different shades of "rent to own". You can also do a "contract for deed" or a "land contract".
Basically, you are still on the deed until the place is paid off. You are responsible for taxes and insurance (unless your contract states otherwise). Although I know personally of a few people that it has worked out for, speaking in generalities. It's never a good idea. Trust me.
20yrsinBranson
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