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Kingmoi510, Other/Just Looking in Tracy, CA

I would like to know more about Rent to own programs

Asked by Kingmoi510, Tracy, CA Tue Jan 24, 2012

I would like to know more about the Rent to own programs

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A rent-to-own is essentially an 'options contract.' What that means is you are purchasing an option to buy a house that you are renting. In virtually all cases, you will have to put down a deposit to secure the option.

A rent-to-own option can lead to problems for you later on. The two biggest problems are:

1) What happens if for some reason, you are unable to obtain a mortgage and/or otherwise be in a position to be able to afford to purchase the home at the end of the contract? For example, what happens if you lose your job and don't have an income? What happens if you are the subject of a lawsuit? What happens if your credit scores drop because of late payments on credit accounts? What happens if you go into bankruptcy?

2) You enter enter a contract to purchase the house at an 'agreed upon' price. What happens in the value of the house drops say 10% and you can't afford to make up the difference between what the lender will let you borrow and the purchase price? And, what happens if the sellers stops paying his mortgage and subsequently goes into foreclosure? And, what happens if the sale of the house turns into a short sale and the lenders won't approve it?

Other considerations may arise. But, as you can see, rent-to-own is fraught with too many potential pitfalls that many sellers (and buyers) don't really want to enter into such arrangements.

You are actually better off renting until such time as you are ready and able to purchase a home.
1 vote Thank Flag Link Tue Jan 24, 2012
They've pretty much gone the way of the brontosaurus ...
0 votes Thank Flag Link Wed Feb 1, 2012
Great guidance provided already.
I work with an associate who only does rent to own. 13 properties are owned and all are enrolled in these 'rent-to-own' programs. Each has been sold no less the 7 times. My associate never lost possession of any of them. These are incredible profit centers... unfortunately, they are structured to keep home buyers in a permanent renter status and much poorer in the end.

Each rent-to-own contract is written differently. One objective is to ensure the buyer does not attain an equitable interest in the property. These evasion tatics will be hard for you to detect. Often, you will need a great big pile of cash for the initial down payment. This money goes directly into 'Hip National Bank."

If a mountain of cash is not required up front, a bigger mountain will be required to execute the purchase. YOU the buyer will end up paying ALL fees. If you can't scrape together $15,000 for a down payment now, what makes you think you can have $30,000 when the time arrives to execute the purchase?

The moral to the story is, if you are unable to exercise the discipline to qualify for a traditional mortgage, this is not a short cut to ownership, it is a trap.

HOWEVER, if recent calamity has compelled the big banks to turn you down, but you are well qualified, this is, indeed, an option. You will still need a pile of cash upfront, but this situation will not be a trap. You will need the aid of an experienced professional or attorney to review these contracts. Your agent will be able to profile for you the properties that are most appropriate for those in your exact situation. Tread carefully.

Annette Lawrence
ReMax Realtec Group
Palm Harbor, FL
727. 420. 4041
0 votes Thank Flag Link Wed Jan 25, 2012
Hello secret person: There is no real "rent to own" program per se. I am sure that by now you have looked up as much as possible on the internet about these types of "purchases". It is simple in its theory that you pay rent for a certain amount of time and it will lead to you buying the property at a later date. What is not decided is, how much the rent is, how much of the rent goes towards the purchase price, how long can you rent, what will the purchase price be, when does that get decided, is there a way out and at what cost if any, etc, etc. Of course, there is a seller involved as well.
Talk to/work with a broker with investment experiences and you should be fine.
0 votes Thank Flag Link Tue Jan 24, 2012
Rent to own properties are a dying breed. It really is not a good idea not knowing where rates or values are headed. I would rent a place and stick money aside for purchasing in the future.

Good Luck.
0 votes Thank Flag Link Tue Jan 24, 2012
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