Home Buying in Novato>Question Details

kjwong80, Home Buyer in Novato, CA

What are the pros and cons to a rent-to-own property?

Asked by kjwong80, Novato, CA Mon Jul 29, 2013

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Hi kjwong80,
The points that have been made by the other agents are right on the money. But if I may ask you a question, what is preventing you from wanting to buy now? At City First Mortgage Services, I have excellent programs available that suit a wide range of borrower needs. We can help:

* First Time Home Buyers
* FHA/VA , FNMA and FHLMC, USDA, 203K Etc.
* We finance down to 500+ FICO (Lower on a case by case)
* 1 day out of Bankruptcy
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* No Tax Returns **24mos bank statements to qualify income**
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With 21 years lending experience I have seen it all, and we are in a position to make decisions "in-house" because we underwrite our own loans. If you call or click the link below today, for free I can at least let you know where you stand in the world of purchasing a home. Let me educate you on how we work, and then you can make informed decisions on whether to buy now or in the future. Also, if you are hooked on the place you are renting and want to purchase it, what better way to approach your landlord than with an approval and a plan? I look forward to hearing from you.


Thank you for choosing City First Mortgage Services,

Nathan T. Kessler | Sr. Mortgage Loan Originator
City First Mortgage Services
8871 W Flamingo Rd Suite 202
Las Vegas, NV 89147
(C) 702.683.3126 | (F) 702.974.0848 | (O) 702-522-6743
nathan.kessler@city1st.com http://www.city1stlasvegas.com
Company NMLS # 3117 | Branch NMLS # 819501
Individual NMLS # 377217 NV #46175
0 votes Thank Flag Link Mon Jul 29, 2013
Hi -

Rent-to-Own is not common and certainly it's most due to the many restrictions and unknowns (of the future) the agents mentioned below which I will not repeat.

However, I have also seen several successful Rent-to-Own transactions during the past few years. As a home buyer, you want to exam the reasons why you are considering lease with option to buy. The pros and cons are abstract but when they are considered along with your personal situation, then it becomes real.

Personally, when I consult my clients, I think the uncertainty of what the future might bring is the biggest issue with Lease with Option to buy, this is both on the personal level and the real estate market level. A rising market today might not be so a couple years down in the road and vice versa. To protect yourself against this, you will really have to decide what is worth for you in the options you put in even if the market goes against the direction you envision. But then again, this is the same as buying.

Be tied down by a property has a pro and con also - Pro - you have the option for the property you like which you are renting. Con - what happens if there are more properties on the market and you like another property better when you are ready?

Being able to rent the house and get to know the house before you buy is certainly an advantage.

Find out about the owner's motivation which can affect your decision.

I think sitting down with your Realtor and discuss all the options will be the best for you.

Good luck!
Sylvia Barry
Frank Howard Allen Realtors
0 votes Thank Flag Link Mon Jul 29, 2013
Sylvia Barry,…, Real Estate Pro in Novato, CA
Good morning kjwong80,

Rent To Own is a better deal for the Seller than it would ever be for a potential Buyer.

The basic concept is finding a way to "force" savings towards a down payment by including a portion of the monthly rental that goes towards that savings. You pay your rent every month and your Landlord deducts a pre-determined amount to hold in a special bank account, called an "escrow" account. Your Landlord holds that money until you have saved up enough---through this "forced-savings" method---to meet a down payment to purchase the home.

The terms of the purchase price, including the down payment amount, and the amount to be set aside from the rental for down payment, are all set down at the time of lease signing.

It's all about helping the renter/tenant save up enough money for a down payment to buy a home (in this case, the one you're renting). But this is a better deal for the Seller because he gets to lock in a purchase price and a buyer today for a future sale.

Saving money for a down payment? Well, heck, you can do that on your own.

If you are dedicated to the idea of buying your own home, you can create your own savings plan to save up enough money for a down payment. And when you have saved up enough for a down payment, if that takes a year or two or more, YOU get to decide on the price you're willing to pay for the house at that time based on current market conditions. You won't be locked in to a price that may be a lot higher than what the house is worth in the future.

With Rent To Own you'll be locked in both to the house and to the price, even if it takes you 3 years to save enough through the forced savings of the rent payments. What happens if three years from now your life situation has changed? Maybe you need a bigger/smaller home. Maybe your employment has relocated. Maybe your credit or income is insufficient to qualify for a mortgage loan.

Find a way to save up on your own; not with Rent To Own.

Sit down with a local Mortgage Banker and get yourself prequalified, too. You may find you're better qualified than you think you are, and, if you're not, at least you'll know how much loan your income and credit qualify you for, and how much you have to save towards down payment and closing costs.

Trevor Curran
NMLS #40140

*If you thought my answer was helpful, please give me a “Thumbs Up” or “Best Answer.” Thanks!
0 votes Thank Flag Link Mon Jul 29, 2013
Hi Patricia
Most critical; Be sure your agreement is legally binding. An experienced real estate agent is your critical choice. The process and agreement is simple IF the agent is experienced.
An attorney is another choice. Choose a real estate attorney.
It will be difficult to negotiate a reasonable rent to own in todays market so be careful.
Now is the time to buy if you can. Unless you are absolutely sure you cannot buy gather up information and choose a loan officer to interview. Experienced loan officers are the best credit counselors available.
A number of articles on Your-Road-Home.com will serve your gathering information. Consultation Interviewing Loan Officers and the articles on credit. You will find the foundational articles are numbered and if you read them in order you will become one savvy home buyer.
You will also find Trulia to be a good source of information and when you feel you are ready to interview loan officers you will find them on Trulia from your area offering their services.
Best of Luck ! Stephen Webber
Web Reference: http://Your-Road-Home.com
0 votes Thank Flag Link Mon Jul 29, 2013
You are desperate!
Your Credit or Finances, or both, will not allow you to go the conventional route:
You need the Seller to help you out!

The Seller will know it, and you are going to pay dearly for this service:
There aren't too many altruistic Sellers out there.

There is no FORM printed by anyone; there are just too many variables.
The terms that can be written into a Lease/Option can be dangerous to you:
How long is the Option period?
How much money are you putting in to the Option?
What happens if you are not able to execute the Option?
How do you know what your financial situation will be 2-5 years from now?
How much is the rent in the meantime?
Who will be responsible for maintenance and repair in the meantime?
What will be the Market Value of the home in 2-5 years?
What will be the Selling price 2-5 years from now?

This is the Ultimate Caveat Emptor!
0 votes Thank Flag Link Mon Jul 29, 2013
The best time to buy a lease/option is in a rising market such as we have today. Be sure to not pay too much for the option and have a good portion of your rent go toward the agreed upon purchase price.

Downside could be if the market were to crash for some reason and the value drop below the original offered price - you decide not to buy and forfeit your option money and the portion of the rent that was part of the purchase price. If your credit is not stellar a lease option may be a good way to go. Another pro is that t gives you time to build up funds for the purchase.

Make sure the paperwork is correct - there needs to be three separate forms.

I would be happy to walk you through the process so you can decide if this is right for you.

All the best,

Patricia Gross
0 votes Thank Flag Link Mon Jul 29, 2013
If you are either the Buyer or the Seller, the price you agree on can be a double edged sword. Since you are buying something in the future, how do you know what the right price will be? How do you know what twists and turns our economy will take. Overall, it is better to be a Buyer in a Lease to Own deal.
0 votes Thank Flag Link Mon Jul 29, 2013
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