Home Buying in 30314>Question Details

kimbonjovifan, Home Buyer in Crystal Lake, IL

interested in a short sale townhome, can't qualify for mortgage at this time. anyway to do a rent to own?

Asked by kimbonjovifan, Crystal Lake, IL Sat Aug 18, 2012

really like this townhome but can't get my scores up fast enough and worried by the time we do the home will be gone. asking price is fine not the problem just worried about losing out since it may take several more months to improve our scores. thank you

Help the community by answering this question:


Hi Kim,
I see you're from Illinois. Are you relocating to Atlanta? Rent to Own is probably the most risky way to buy a home and with a Short Sale involved, it's almost sure disaster. If you want this townhome, you need to buy it outright. For one thing, you can probably get it cheaper now than later. In a Rent to Own or a Lease Purchase you are guessing what the property will be worth somewhere a year or two down the line. In his market that is all but impossible..
The first hurdle would be to get the seller to agree on a price. The seller will have no incentive to sell it to you for what the Bank will accept for a Short Sale. That would leave him walking away empty handed. The second hurdle would be to get the Bank to agree. Most Banks are not going to look favorably on this kind of arrangement. Thirdly, if the seller defaults, you may lose everything you have in the property. In most cases a property is sold subject to a lease but I'm not sure that applies to a Short Sale or a foreclosure.
The safest way for you to acquire this property is to buy it outright using a Private Lender. They will require a larger down payment than a Conventional Mortgage Lender and their Interest rates are higher but, provided you have the income and the price of the property as Appraised is within range, your credit scores will not matter.
May I suggest that you contact a Lender that I have worked with in the past with great results. They are a licensed lender in the State of Georgia and have placed many Home Mortgages here. They will lend up to 12 years on a Residential Mortgage, giving you plenty of time to get your affairs in order and not have to deal with a Rent to Own. They will not include a pre-payment penalty clause in their agreement, allowing you to refinance at a more favorable rate as soon as you can quality. You can give them a call and clarify some of the issues and see if they can help you. Their contact information is:

The Westmoore Group, LLC
Ph: (646) 801-6190
Fx: (646) 619-4291
The Westmoore Group, LLC is a licensed lender in the State of Georgia and operates under the license #30544.

Good Luck!
0 votes Thank Flag Link Thu Jan 10, 2013
A lease purchase is generally not a suggested option. There are too many things that could go wrong and that is especially true with a short sale.

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Apply Online at http://www.rodneymason.com
Licensed in Alabama & Georgia

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0 votes Thank Flag Link Sun Aug 19, 2012
It is hard enough to get a short sale to the closing table. If a lender is going to forgive debt on a property, they want it to be a done deal when the papers are signed. I would recommend that you get with a reputable lender and have them help you formulate a plan to get your credit fixed. Often times the solution to a buyers credit issues is not as difficult to correct as one might think. It can sometimes take a little time to correct, but if you are following the advice of a lender who is motivated to eventually get you a loan, then you will be following the correct path to get your credit issues fixed.
0 votes Thank Flag Link Sun Aug 19, 2012
You should not try for rent to own. If your credit is not good enough to get a mortgage, then it's probably best if you don't stretch yourself to buy a house. If it takes a few months to improve your scores, then wait.
Web Reference: http://www.archershomes.com
0 votes Thank Flag Link Sat Aug 18, 2012
I can't imagine that any lender would approve a rent to own on a short sale and if it's a short sale it would need their lenders approval. I would sit down with a good lender of your own and see what they can do to improve your credit scores.
0 votes Thank Flag Link Sat Aug 18, 2012
The information Don and Terri provided is correct you dont want to do a rent to own on a short sale. The seller is in likely having trouble making payments.
0 votes Thank Flag Link Sat Aug 18, 2012
It wouldn't make sense to do a rent-to-own on a short sale. Here's an example:

Let's say the amount owed on the townhouse is $300,000. But it's only worth $200,000 in today's market. The reason the owner is doing a short sale is because he can't find any buyers at $300,000. All they're willing to offer is $200,000.

You come along. First, a short sale can be highly risky is the seller is having trouble making payments. If he defaults, he loses the house and you are left out in the cold.

But let's say, even though the seller is claiming a financial hardship, he's current on his payments. You negotiate a rent-to-own. But at what amount? There'd be no reason for the seller to sell it for $200,000. It's still have to be a short sale when it came time for you to buy. After all, he owes $300,000 on it. And there's no incentive for him to do a rent-to-own today with you. It's a short sale today; it's a short sale six months from now.

So, do you and he negotiate a price of $300,000? That'd be fine for him and terrible for you. Let's say you're ready to buy in two years. The value's gone up a bit, to let's say $220,000. But you've agreed to buy for $300,000. You apply for a mortgage. The appraiser comes out and finds that the house is only worth $220,000. In other words, it won't appraise for what you've agreed to pay. You won't get the loan.

As for doing a short-term ("several months") rent-to-own: That's a terrible idea in any case. What if your scores aren't where they need to be in several months? You lose. A rent-to-own should be for at least two years. That gives the buyer time to clean up his credit and have a cushion in there in case something goes wrong.

My suggestion: If you really want the townhouse and think it'll only take several months to improve your scores, then gamble and submit a regular purchase offer. Even conventional purchases take 45-60 days to close. Short sales typically take longer--3-6 months, if not even longer. If you really can clean up your credit in a couple of months, make the offer now and gamble (I'm using that word deliberately) that the short sale and bank approval take long enough for you to get your scores up . . . and that the lender even approves the short sale.

Hope that helps.
0 votes Thank Flag Link Sat Aug 18, 2012
Don Tepper, Real Estate Pro in Burke, VA
The reason the seller is selling short sale is that they owe more money on the house than they can sell it for. Also, they may not be able to pay their payments and may be near foreclosure. Even if they would consider it, it is risky for you. If you pay them and they don't pay the bills, keep your money, then the house goes to foreclosure you are out of money and out of a home.

If they did make the payments and when you are ready to buy, there is still going to be more owed on the house, how is that going to be paid?

I don't recommend a rent to own on a short sale.
Web Reference: http://www.terrivellios.com
0 votes Thank Flag Link Sat Aug 18, 2012
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