Let's say, for example, that the fair market rent for the property is $700 per month. You would pay that plus a specified amount, let's say $200 per month additionally that goes towards the down payment.
Imagine that you want to purchase the home 2 years from now. Right now, the home is worth $150,000. And imagine that you and the landlord agree on a purchase price in 2 years, of $175,000. Now, two years down the road, the property if the property is actually worth $160,000, the landlord gets a great deal and you figure you are being robbed. So you want out of the legally binding contract. But if, two years down the road, the property is worth $185,000, you think you were the genius of the century, but the landlord figures he could get more elsewhere, and he wants out of the contract. You can see the problem.
However, people do these deals. Its a question of (a) going into it with your eyes open, and (b) getting a contract written that will be binding no matter what the future value of the property. I strongly recommend getting legal advice and having the attorney write up the contract.
The advantage to the buyer is allowing you to pay your down payment in small increments, and having a commitment to sell from the owner.
The advantage to the seller is not having to list the property for sale, and being able to collect the down payment money well in advance of the sale.
If you decide not to go this route, but you don't have a down payment to buy, get busy saving on a regular basis, and soon you'll have a down payment ready.
Best of luck,
Ann Griffin, Realtor
Coldwell Banker Trails & Paths
I assume you cannot qualify to purchase a home at this time. If you can negotiate a selling price and a time frame with the owner upfront on the property that you intend to rent with the option to buy, you can actually get a good deal out of this.
Please feel free to call or email me if you have any questions about this, I would be happy to help!
Real Estate Professional / Prestige Realty
Bianca Bennett / 602-570-7898
You received some very good feedback, below, especially from Ann Griffith who took the time to dive into some of the details for you.
One other pitfall you would have to look out for is if the owner of the property has financing in place on the subject property; what happens if the owner stops making the loan payments & just pockets your money? The bank will ultimately foreclose on the property. You will then need to seek an attorney's advice on what your rights & next steps are. It happens!
So if you are determined to go down this road, may I suggest you consult with a real estate attorney prior to signing the final paperwork with the owner.
Please feel free to contact me directly if you have any further questions, I'd be glad to help.
All the best,
Roswell Moore, CMPS
Certified Mortgage Planner
We are a Direct Lender, Mortgage Bank where we originate, process, underwrite, fund, AND SERVICE our loans, in-house, with FHA (starting at a 580 score AND still only 3.5% down), FHA Streamline refinance loans (NO minimum credit score, NO appraisal required) Go Green rehab loans, HomePath, Investor Friendly (10 financed properties), VA, VA Refinance loans (NO appraisal required on IRRRL loans), USDA loans, Jumbo loans, Conventional loans, plus, we allow Escrow Hold-Backs!
Usually in a rent-to-own situation there are two agreements - one is for renting the place, and the other is for buying it/ or for the option to buy it, at a certain future date at a price that is agreed today.
Please call me to discuss in more details, if you have a specific area in mind.
Steffy Hristova, MBA, SFR, RealtorÂ®
Tel: (480) 966-9353 Fax: (602) 507-3703
3131 E. Camelback Rd. #125
Phoenix AZ 85016
I wish you the best in working toward your dream home!