Home Buying in Deer Valley>Question Details

Karyn Alex, Home Buyer in Phoenix, AZ

Where can you find "lease to own homes"? Do any agents have these or do you have to go through special channels?

Asked by Karyn Alex, Phoenix, AZ Mon Dec 26, 2011

We want to buy a house so badly, but I'm afraid to apply for a mortgage because we literally have $0 down. I don't want to wait and keep living in apartments until we can save up the 20%, so I want to look into lease to own homes. I know they exist, I just have never seen any in the area I want. Do you have to go through a special agent to find them?

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Alain Picard’s answer
A local agent should be able to search for "Lease To Own Homes" however a lot of them also want some sort of down payment. I would talk to some lenders and see what programs they have for first time home buyers because you could be able to buy and not even know it. A lot of times you don't need 20% down and you can ask for closing costs from the seller which is very common these days.
1 vote Thank Flag Link Mon Dec 26, 2011
You are assuming the seller is in a better position than you are, often a very big mistake. Usually the reason a buyer seeks owner provided financing is because the buyer does not qualify for a traditional loan. Underwriting guidelines protect the buyer more than they do the lender. If you try to work around not qualifying for a traditional mortgage the risk on your side increases dramatically. Search around and you will find plenty of “buyers” that tried owner financing or lease to own that did not work out so well. The underlying assumption is the seller will also be able to perform someday down the road. That is a very big what if, people die, get divorced, go belly up, lots of bad things could happen to the seller before you are ready. See the other answers about lower down payments. I hope my observations protect you, good luck,
1 vote Thank Flag Link Tue Dec 27, 2011
Although Renting to Own is a pretty popular topic among many 1st time buyers you definitely want to understand the pros and cons of a Rent to Own deal. If the terms are favorable they can be a good tool for both buyers AND sellers.

Also, I'd definitely recommend speaking with a competent agent and maybe an attorney prior to signing any agreement and reading up on some possible pros or cons on a rent to own deal. There's some good resources online that can help you understand some of the key points for a good rent to own deal and also some of the pitfalls. Here's a few examples:

http://money.cnn.com/2009/06/02/real_estate/rent_to_own/

http://newz-wire.com/rent-to-own

http://www.wikihow.com/Buy-a-House-Using-a-Lease-Option

Just make sure you know what you're doing and don't take a seller's word for it if you aren't sure about a deal. This market where many cities have rising home prices would be a time you'd want to set the sale price NOW and not in the future. The opposite is true in a downward trending market. Keep that in mind also.

Good Luck!

Dustin
0 votes Thank Flag Link Mon Nov 18, 2013
Lease to own homes are laden with pitfalls for the buyer and an exceptionally bad idea in my opinion. They are not an easy way to buy a home without having the sufficient credit, income, and down payment to do so, as most people seem to believe. Here are some reasons why they are a monumentally bad idea:

1. You'll still have to come up with a lump sum (essentially a down payment) or "option" to enter into the agreement. This is due upfront and is usually a percentage of the purchase price. Plan on $3000-5000.

2. You'll agree on a date when you'll have to exercise the option to buy. Let's say 2 years from now. At that time, you'll still have to qualify for a loan, and have sufficient down payment.

3. If you pay the rent late even once, the seller typically reserves the right to keep everything and void the deal.

4. How do you know the price you negotiate down the road will still be a good deal when it comes time to actually purchase the property? Will you qualify for the financing then? Will it appraise out?

5. You'll be responsible for the upkeep of the property throughout the life of the lease. If the furnace goes out, you'll have to fix it. Same for the roof, plumbing, and everything else. Remember, this is for all intents and purposes now "your" house.

Violate any of the above terms and the seller keeps everything you gave them upfront, and also all of the money credited towards your down payment from each month.

Too much risk, too much money, and too much uncertainty about what your situation or finances will be too far down the road in the future.

Hope this helps!
0 votes Thank Flag Link Fri Apr 12, 2013
Finding lease to own homes is highly dependent upon the exact circumstances of the buyer and seller. I've heard of "rent to own" homes simply being none other than pre-foreclosures, so do your homework and look out. I've used a membership site, which has worked well for myself and my fiance. However, sometimes going through a broker can be smart. Even with a membership site, you'll need to contact the owners and make sure the terms of the agreement are suitable. With rent to own homes, let me tell you, the devil is in the details and it makes sense to watch out what you are doing. Please, make sure to incorporate common sense.
0 votes Thank Flag Link Fri Apr 12, 2013
There is a huge difference between "lease with option to purchase" and "lease to own." The lease with option to purchase simply gives you, the renter, the first chance to purchase the home when and if it comes on the market. There is usually a fee the seller charges for this. A "lease to own" is a more complicated arrangement, where the buyer and seller agree on a purchase price for some specified time in the future, let's say 2 years. While the buyer is leasing the home, he/she pays the regular market rent PLUS an additional amount that goes towards the down payment. Then, at the time of the purchase, the buyer finances the balance. Because you are gambling on what the price will be 2 years into the future (or whatever time period), think about what happens if the housing values are higher than that in two years! The seller won't want to sell and will try to get out of the deal. But if prices are lower than what was guessed at, the buyer won't want to buy and will try to get out of the deal. I would always want a real estate attorney to draw up a lease to own contract. You can see why many of them fail.

Honestly, I think it would be more fruitful to follow some of the other advice here, such as looking for a 3 1/2% loan, or a 0% down USDA loan. The latter only apply in "rural" communities, but there are parts of Maricopa county where you can get a new house with a USDA loan. Work on saving as much as you can at the same time.

Best of luck,
Ann Griffin, Realtor
Coldwell Banker Trails and Paths
2913 N. Power Rd., Suite 101
Mesa, AZ 85215
480-789-9584
0 votes Thank Flag Link Thu Jun 7, 2012
They are out there . I do work with owners who are willing to do seller carry backs or owner financing. I would be happy to help you....give me a call.

Susan Lehmkuhl
Associate Broker
The KUHL Team
Buy and Sell Smart Realty
623-256-7270
Susan@PhoenixRealEstateSource.com
0 votes Thank Flag Link Tue Dec 27, 2011
Karyn,

There has been some good advice given. I would agree, work with an agent with experience in this area. A "Lease Option" can require you to commit to an agreed upon price at time of the lease. But keep in mind market conditions may change by the end of your lease period and that price may or may not look so attractive.

There is a lending program that requies only 1% down. I can put you in contact with the lender if you would like more information on this program. With an FHA loan your down payment can come in the form of a "gift" from a relative. Also, I have information on an additional home buyer's program which provides upto $15,000 towards your down payment.

There are many options available to assist you when buying a home. Contact me with you would like.

Regards,
Todd
0 votes Thank Flag Link Mon Dec 26, 2011
Hello Karyn Alex:

Any realtor who is a member of the MLS can provide the information. While there may not big a large supply of these type of homes - they are available.

I noticed you mentioned saving for the 20% down payment. Are you aware you can purchase a home (not lease option) with as little as 3.5% of the purchase price and have the seller contribute up to 3% of the closing costs? With interest as low as they are today, you should consider looking at purchasing home.

I work the North Valley and noticed Deer Valley is the area mentioned. I will be happy to help you find a well-priced property where you can own and derive the benefits of home ownership. I have provided my contact information and look forward to the opportunity to be of service.

Milly Casas

Milly Sells AZ
e-mail: milly@millycasas.com

Phone: 480-466-0264

website: millysellsaz.com
0 votes Thank Flag Link Mon Dec 26, 2011
I can send you some also I have a list of owner carry too
Web Reference: http://thebrooksteamaz.com
0 votes Thank Flag Link Mon Dec 26, 2011
Karyn

Any Realtor can send you a search of lease purchase or lease option homes. But there are programs such as the USDA rural financing that is zero down. Please feel free to contact us for assistance. It is a great time to buy and you do have options. You can also use this link to search our MLS system for homes: http://link.flexmls.com/ua70wacvime,12

Warmest Regards,

Brenda

Ron & Brenda Cunningham
West USA Realty
602-980-3133
***** Recognized in the Phoenix Business Journal as "One of the Top 50 Agents in the Valley" *****
0 votes Thank Flag Link Mon Dec 26, 2011
Karyn, Alain is right. An FHA loan only requires like 3-4% down, and any lease to own, or lease with an option to buy is going to want some money down. (Based on the purchase price). The benefit of lease to own- or purchase with owner financing would be for someone with poor credit or an unstable situation who has a long term goal of home ownership. If you're interested contact me and I can put you in touch with a few lenders... We can decide which route is best for you right now. I can help you buy or rent depending on what we decide. *Holly K Huntimer* 623-451-8494
0 votes Thank Flag Link Mon Dec 26, 2011
No, you don't need to go through a special agent but you should use an agent who understands a lease purchase. In Arizona, there are tons of investors looking to prey on people with their "lease to own" programs. If you do not use an agent, you should have the forms reviewed by an attorney. You should consult with a lender because programs are changing all the time. There are also down payment assistance programs available. If you would like an experienced agent to help you navigate all the various possibilities, please contact me.

Fred Shocklie
602-330-1840
Web Reference: http://www.morechoices.net
0 votes Thank Flag Link Mon Dec 26, 2011
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