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Ken, Renter in Davis, CA

what options are out there for rent to own?

Asked by Ken, Davis, CA Sun Oct 13, 2013

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If you understand stock options, then you can kind of understand options for a rent to own in the real estate market. Essentially, you sign a rental agreement- straightforward, often at higher rent payments than market and the seller assumes you're taking extra good care of their property because you hope to own it someday. Then you sign a purchase agreement- for a price projected into the future, which may or may not be a good price deal to you before that time expires. Last you sign an option agreement, that specifies a time period by which you have the OPTION to buy the home at the price and terms listed on the purchase agreement. That option costs you money- sometimes as a separate fee, sometimes as the uplift in the rental price you pay, and sometimes in a higher deposit amount which is most often non refundable.

Guess what happens when the option expires? The 'seller/landlord' received above average rental payments, sometimes an option payment, and a house that was taken care of more than another rental might be. What do you have? Less money in your pocket.

We don't recommend against these because we only sell real estate. We recommend against them because they are not in your best interest.

Do the work to get your credit repaired, and then buy a home when you're qualified. The other leads to broken promises. Maybe you can find someone to co-sign now if you're credit is bad, but rent to own options rarely, if ever work for the benefit of the tenant/buyer.
1 vote Thank Flag Link Sun Oct 13, 2013
I agree with Sue, Elizabeth and others. Most of rent-to-own schemes tend to benefit the seller not the tenant (buyer). The rent is higher than normal (cause it includes a premium for the option to buy at a given strike price which is usually higher than market).

Most of the time, the tenant (buyer) will not exercise the option because the strike price is not attractive. Other times, the tenant cannot exercise, cause he has to move, or defaults on the rent, etc.
In both cases, the tenant (buyer) would lose all the extra premium that he has paid over the years.

There are companies (investors) which specialize in rent-to-own programs, the name that I can think of is I believe they have a portfolio of a couple of hundred million $ of properties in the bay area and sacramento.

Hope that helps.
0 votes Thank Flag Link Thu Oct 17, 2013
There is an advertisement right on this page from a company named Cove offering "rent & own"
Co-incidence? I think not.
0 votes Thank Flag Link Sun Oct 13, 2013
Jim Walker, Real Estate Pro in Carmichael, CA
I would check Craigslist and you can also ask landlords with their houses on the market for rent if they would consider a lease option
0 votes Thank Flag Link Sun Oct 13, 2013
I agree with many of my colleagues. Right now we are in a hot seller's market where homes are selling rather easily. Typically, rent-to-own options appear when sellers can not sell their homes flat out.

I would encourage you to rent and save your money until you are able to buy.

Best of luck.
0 votes Thank Flag Link Sun Oct 13, 2013
There are not too many lease options out there, and for the most part they usually benefit the landlord/seller rather than the tenant/buyer. The option money is usually non-refundable (and can be thousands of dollars) So if you have thousands of dollars to put towards a non-refundable option why not just use it for a down payment?

The over market rent you pay is also usually non-refundable so if you don't exercise the option you are out even more money.

Start putting aside some money every month as if you were paying an option rent, get your credit in order (if that is the issue) and you will be ahead of the game.

If you have decent credit but no down payment,/closing funds talk to a couple of lenders and see what types of loans you may qualify for, you might be surprised.
0 votes Thank Flag Link Sun Oct 13, 2013
From what I've seen over the years, rent-to-own programs tend to benefit the companies that run them and not the victims, er, tenants. Tenants typically agree to pay more than market value, their rent payments are higher, many never exercise the option and, if they do, they're sorry later about it or they would be if they knew any better.

My advice is save your money, work on building credit and buy a home the traditional way. Don't get suckered by something that sounds too good to be true, because it generally is too good to be true.
0 votes Thank Flag Link Sun Oct 13, 2013
Hello Ken, there are not going to be any rent to own in this market. You may now qualify to buy FHA ONE YEAR from a BK, short sale, foreclosure or deed in lieu under extenuating circumstances due to the economy. You may qualify to buy from a minimum 580 fico score and 3.5% down payment. Why rent to own when you may qualify to buy to own?

Sheryl Arndt, Real Estate Broker - Sr. Loan Officer CA only
REO & Short Sale Specialist
Credit Repair At No Cost
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0 votes Thank Flag Link Sun Oct 13, 2013

Let me chime in here and give you a quick answer...

There are "slim and none" options out there. We as agents don't recommend them because it's not really a good deal for anyone, especially the Renter/Buyer.

Here's the dirty little secret... over 1/2 of the "lease options" never go to sale... and guess what you as the buyer would lose the "option" money unless you are very careful.

Go see a loan agent and have them run your credit and then they can tell you what you have to do to get a loan.

I hope this helps...

Make it a great day...!
0 votes Thank Flag Link Sun Oct 13, 2013
Rent to own options are very rare in this market. The professionals that you are posting this question to here are Real Estate Agents; we work with people in purchasing homes directly, without rent to own for the most part. I would recommend contacting a local property management company, these guys work with rentals and would have rent to own options if available.

Hope this helps point you in the right direction

Gabe Davidson
0 votes Thank Flag Link Sun Oct 13, 2013
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