Home Selling in 36532>Question Details

Rterrell, Both Buyer and Seller in 36532

How does rent to own work?

Asked by Rterrell, 36532 Sun Jul 20, 2008

I have a home that I am selling, which as with everybody else, need to sell quickly. How does offering a rent to own program work.

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11
OK. To actually anwer your question, from a lender's standpoint, the cost to rent similar property in the same market is determined by an appraiser. Then, any amount paid in excess of this is credited towards the purchase in the form of a credit towards the downpayment. For example, 3 bedroom, 1500 sf homes in the area rents on average for $1000 per month. If the renter/buyer pays $1500 per month, then $500 per month is credited towards the purchase. It must be a minimum 12 month lease.

To be honest, I have never worked a deal like this, but this is my understanding of how it works. There may be other variations or opinions, and definately more details to learn, but I do hope this helps.

Best Regards,
Dan Mengedoht
1 vote Thank Flag Link Tue Jul 22, 2008
In reviewing Q&As I found your post.

I agree with the general opinion of the other posts. Unless you are able to get a decent downpayment and do owner financing, you are setting yourself up for a lot of problems.

Have you sold your home yet? If not, I would appreciate an opportunity to assist you.

Please give me a call and tell me about your property. If you don't feel you can afford to list it, I'd at least like to come see it in case I get a buyer for a one-time-showing agreement.
0 votes Thank Flag Link Wed Jul 4, 2012
In my experience Lease to Own does not often work out. What does is if the Seller owns the property outright, so they can actually transfer the deed. In this case, the buyer will now actually own the home. They will be more likely to take care of or improve the home. They will be paying the taxes and insurance on the home as well. The Deed of Trust (Lien) that the Seller now has can be written very tightly so that any missed payments can proceed to foreclosure rather than having to go through a long drawn out eviction process. A buyer is going to fight much harder to stay in a place they own outright than they are something that they have little investment in. If it is someone buying the house that might have credit problems, you can owner finance the house for interest only with a two year ballon. This gives them 2 years to ment their credit straight to get into a conventional mortgage and you have collected 5-6% interest on the balance and will still get 100% of your equity when the new mortgage is procured. In the meantime they have been able to save and improve their credit. Owners are going to take way better care fo a house than renters.
This scenario is a win-win for everyone
0 votes Thank Flag Link Fri Jan 13, 2012
RT
You might want to look at the Trulia information below.
There are a couple of truths in home selling that you should know.
1. Homes always sell at the right price. The problem is that many people insist on listing their home at
"their price" in order to get the most. Which always fails. The price to list a home is a price that will cause it to sell. That price is not based on how much you owe, how much need to net, or what you paid.
2. Homes that sell in the first 30 days will sell closest to asking price. In my market homes that sell at 120 Days On Market (DOM) are selling at 92.7% of asking price. Homes that sell within 30 days are selling at 99.7% of asking.
3. Only about 20% of homes, on average, sell within 30 DOM. So that means that the rest of the inventory makes up the 80% and much greater DOM, and the sell for less.

So to sell your home for the most money:
1. Preparation - clean, declutter, paint, stage, photos
2. Proper professional photos, marketing
3. Price it right

Expect 10-12 showings or one offer in the first two weeks, otherwise lower the price about 5%.

If you are unable to price realistically, then don't waste everyone's time and effort trying. Rent it out, check with a CPA on the tax implication, don't worry about a lease option, it rarely works, and it does not matter. We became accidental landlords and in the long run it was great, we made a lot of money.

Good luck
0 votes Thank Flag Link Thu Oct 23, 2008
Keith Sorem, Real Estate Pro in Glendale, CA
MVP'08
Contact
Harper Realty , 311 Magnolia Avenue, Fairhope offers property management. Call Sandra Harper, broker, 251-928-1060 office or cell 583-7503. email sandra_harper@bellsouth.net re: rentals. http://www.trulia.com
http://www.harperrealtyonline.com
0 votes Thank Flag Link Thu Oct 23, 2008
This issue is becoming more prevelant these days as more and more sellers are out there and few buyers.
Sellers are anxious to move on, yet are still in their same home, perhaps they have completed their newly constructed home, or have transferred, and now are having 2 notes! What to do? Well we as realtors like to offer options, so here's what we do:
#1 Attempt to sell it.. (for obvious reasons that's the ultimate goal)
#2 Lease the home at XXX amount of dollars.. at least you'll be able to offset until the market fairs better.
#3 Lease Option to Purchase (sounds better than RENT TO OWN) With a lease option, you are allowing potential buyers to come in pay XXX amount of dollars with a portion of the monthly note example = 200 towards closing costs or just reduced from the asking price.
The best way to see this through is to get the buyers locked / invested into the home, and what we recomend is that the potential buyer would place a 3k - 5k NON - REFUNDABLE DEPOSIT prior to moving in, also we prepare a ACTUAL PURCHASE AGREEMENT signed by both parties. Afterall you are selling you home correct? And your just allowing this party to purchase the home 1 year from now. This keeps the party invested in the home during this 12 month process, and prayerfully they will go to close at the end of that contract agreement. We do not recomend you go beyond 1 year. And we do not recomend you lower the price, we recomend for Lease Option to be for FULL LIST. Afterall you are the one still paying the insurance on the home and it's still in your name, so you are responsible, your just being the good guy / gal and allowing them to clear up some issues, and get ready to get their financing in order.
Best of Luck to you.

John and Linda Cramer
Prudential Nichols Real Estate
251-599-5799
0 votes Thank Flag Link Tue Sep 16, 2008
Dan answered this question perfectly. Re-read his comments, and let me add, that rarely will a rent-to-own scenario actually lead to a closed sale. A large number of renters will use this approach as a way to entice a seller to let them move in and occupy the home, but seldom do they end up buying the home. Also, many, many tenants do not understand that the entire rent payment does NOT apply to the purchase price. Kudos to Dan for such a well formulated answer!
0 votes Thank Flag Link Tue Jul 29, 2008
Our company has a Rent to Own program for mobile homes in a residential park setting. Since the company I work for owns the park, it has a good control over the situation. The 'renter' pays a minimum down payment, and makes payments per month amortized over a period that will allow the payment to best fit his financial situation. In addition to that payment, there will always be a lot or space rental, which includes water, sewer, trash pickup and snowremoval. The 2 amounts equal his monthly payment, and must fit his debt to income ratio. At the end of the term of amortized payments, he owns the mobile home. We are VERY forgiving for bad credit with this program, and it is a wonderful way for someone who has really gotten down on their luck to get back into a home of their own. It can be a positive thing, or it can be (and has been) abused. If the 'renter' does not pay, the company evicts and we then fix up and re-sell the homes. Obviously, the park ownership factor eliminates a lot of risk that a typical single-family home owner would have.
0 votes Thank Flag Link Tue Jul 22, 2008
Actually the seller is the one most at risk here. Once you have a 'tenant' in residence, if they fail to pay, the eviction process can be more complicated when you have a 'contract'. The other risk, is that once a person has occupied as a renter, they may decide they do not want to complete the purchase after all. The primary message here is that once someone takes possession of your property, they have certain rights that protect them that can make things very difficult for the seller. A well-written solid contract is your best protection, however, not full proof.
0 votes Thank Flag Link Tue Jul 22, 2008
Good question,
Currently we have a situation like that. Our sellers have a home for sale and there new home is ready for them to move in. So we now offer 3 options to buyers. #1 Buy the home. #2 Lease the home with an option to buy. #3 Lease under our Prudential Rental Program.
So the issue is for you you have a home, you need to sell it quickly. Time is a factor, well we would suggest that you get a good Real Estate Consultant that can help you through the process. We know the ins and outs, and what it takes to get your home prepared for sale, lease or otherwise. So give us a call @ 251-599-5799 and we'll share with you ways to assist you in this process, so you can ... Smile and Start Packing!
Web Reference: http://www.cramerteam.com
0 votes Thank Flag Link Mon Jul 21, 2008
yes it can work, can be dangerous and risky for the renter. late payment, your out, no recourse
0 votes Thank Flag Link Sun Jul 20, 2008
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