Home Buying in 60619>Question Details

Boom726, Home Buyer in Chicago, IL

Is purchase on contract better than rent to own? Or are they the same thing?

Asked by Boom726, Chicago, IL Sun Oct 23, 2011

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you need an attorney and they are not better or worse than each other.. do not buy a home without a professional representing you.... EVER!
Web Reference: http://www.joeschiller.net
0 votes Thank Flag Link Mon Oct 24, 2011
They are very similar and I would recomend a Contract for deed vs a least to own becasue you have more rights with a c4d. I have worked with clients and both ends of a C4D and it is a great option if written up correctly. The concept of a c4d is the same as holding a mortgage on the propety with a financial institution but the seller holds the title. The forclosure propcess is different and title does not transfer until the contract is paid in full. All terms of a c4d are negotialbe and should be written out in detail in the contract from how proprty taxes are paid to improvements that can be made to the property during the contract. I would also recommend having an attorney review the contract. In this housing market c4d are a great option and can make home buying available to someone that has the money for a down payment but not a great credit score. I have several happy clients that have bought and sold with a C4D!
0 votes Thank Flag Link Mon Oct 24, 2011
In essence they are the same thing. Both ideas are garbage. I would just concentrate on either renting, or buying a place. Rent to own type deals never work out well.
Web Reference: http://AmericorpRe.com
0 votes Thank Flag Link Mon Oct 24, 2011
From the Wall Street Journal.

U.S. house prices have plunged by nearly a third since 2006, and homeownership rates are falling at the fastest pace since the Great Depression.

The good news? Two key measures now suggest it's an excellent time to buy a house, either to live in for the long term or for investment income (but not for a quick flip). First, the nation's ratio of house prices to yearly rents is nearly restored to its prebubble average. Second, when mortgage rates are taken into consideration, houses are the most affordable they have been in decades.

Two of the silliest mantras during the real-estate bubble were that a house is the best investment you will ever make and that a renter "throws money down the drain." Whether buying is a better deal than renting isn't a stagnant fact but a changing condition that depends on the relationship between prices and rents, the cost of financing and other factors.

But the math is turning in buyers' favor. Stock-oriented folks can think of a house's price/rent ratio as akin to a stock's price/earnings ratio, in that it compares the cost of an asset with the money the asset is capable of generating. For investors, a lower ratio suggests more income for the price.
For prospective homeowners, a lower ratio makes owning more attractive than renting, all else equal.

Nationwide, the ratio of home prices to yearly rents is 11.3, down from 18.5 at the peak of the bubble, according to Moody's Analytics. The average from
1989 to 2003 was about 10, so valuations aren't quite back to normal.

But for most home buyers, mortgage rates are a key determinant of their total costs. Rates are so low now that houses in many markets look like bargains, even if price/rent ratios aren't hitting new lows. The 30-year mortgage rate rose to 4.12% this week from a record low of 3.94% last week, Freddie Mac said Thursday. (The rates assume 0.8% in prepaid interest, or
"points.") The latest rate is still less than half the average since 1971.
REGARDS. Tatiana Perry 773 551 6554
0 votes Thank Flag Link Mon Oct 24, 2011
It depends on the strength of the seller, if they are already in trouble and trying to lease the home out of desperation then both methods shift some of the risk to you. I have seen several people plunk down very large sums and loose the entire amount because the seller defaulted on their mortgage. Another trap is everyone is an optimist when it comes to securing housing. If you are not qualified to finance a home today what is going to change before the due date on the seller assisted financing? Look at your own transaction through the eyes of a lender. Underwriting guidelines are actually very liberal in spite of the general consensus. They protect the borrower more than they do the lender. If a lender will not approve the transaction why put your neck in a seller assisted noose? The individual that could get hurt the most is you, not the seller.
0 votes Thank Flag Link Mon Oct 24, 2011
Yes, if your circumstances call for a choice of the two..go for the contract sale. You can deduct the intrest you pay on your tax return where you cannot deduct rent. You can also rent the property since you have equitable title. See your lawyer before you draw up the contract to protect yourself.
0 votes Thank Flag Link Mon Oct 24, 2011
Do you mean contract for deed? All purchases are on a contract. Most of the time, rent to own is done via contract for deed or similar agreement. There is no one way to do this. Not a lot of sellers will do this, but some will. You should get an attorney involved and ensure that you understand all your obligations. If credit is your obstacle to purchase, you should work on credit correction right away. Understand that with a rent to own, you will likely pay more money than an outright purchase right now. But if you can't purchase, it will give you opportunities to get some or all of your rent toward purchase.
0 votes Thank Flag Link Sun Oct 23, 2011
They are pretty much the same thing depending on how they are written. Usually the 'on contract' calls for more $$ than just monthly rent to be given to the seller as time goes on, but they are both full of potential problems for both parties. They are usually preferred by sellers who tend to find a sucker to agree to unfair terms because they are so anxious to own.
I would avoid both. Just wait until you can get a loan. This market is not about to change very much very fast.
0 votes Thank Flag Link Sun Oct 23, 2011
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