Rent vs Buy in Queens>Question Details

Kawin Long, Other/Just Looking in Queens, NY

CAN SOMEONE PLEASE EXPLAIN THE RENT TO OWN PROGRAMS? ARE THEY ALL SCAMS? WHAT IS THE NORMAL DOWN PAYMENT? ANY INFO WILL DO THANK YOU?

Asked by Kawin Long, Queens, NY Tue Jul 31, 2012

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Ron Thomas’ answer
Lease/Option
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.

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 Wed Aug 8, 2012
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
1 vote Thank Flag Link Wed Aug 8, 2012
Great advise
Flag Mon Dec 30, 2013
great article
Flag Mon Dec 30, 2013
Rent to own is similar to a car lease; in this area such opportunities are rare, as most owners prefer to sell outright. Rent to own can be risky and one could stand to lose a bit of money, therefore inform yourself well beforehand and do consult with an attorney who specializes in real estate....
1 vote Thank Flag Link Wed Aug 1, 2012
Ihave a two bedroom Payment 675.00a month i look for a three bedroom home my -credit not so good can you help me get a nice size home i am look to rent to own. Cometra Huddleston 615 5068997
0 votes Thank Flag Link Mon Dec 30, 2013
Thre Rent to Own aption or the more traditional "Lease with Option to Buy" route is one that is quite viable. It gives a buyer the opportunity to purchase a home, when otherwise wouldn't be able to in a more conventional way. I recomend if you are looking to do such a deal, to speak to both a well seasoned Agent/Broker and Real Estate Attorney who is well versed in this type of transaction. I wish you the best of luck.
0 votes Thank Flag Link Mon Nov 4, 2013
I do a RENT TO OWN program for first time home buyers who have difficulties qualifying for a mortgage.. we help you FREE of cost with getting your credit up to par and getting you approved for the mortgage so you can own the home!! IF needed i can put you on rental basis where i would be your landlord til you're approved! No closing cost or fees and 100% of the rent goes towards the house. Its a fast process, especially for people who REALLY want to own a home. We have newly renovated properties ALL OVER Queens and Brooklyn. No closing cost or fees and 100% of the rent goes towards the house.

After seeing the previous comments, i decided to give you a full analysis of what WE do. also answers to the previous agent''s questions/concerns.

Basically we have solutions to all these problems. I represent a company that does RENT-TO-OWN and our clients who are now HOMEOWNERS are still very content with no complains. WHY? Because with us its a case of you get what you see. I will now answer the questions and concerns from the agent below in the same order:


*****QUESTIONS::
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?


********ANSWERS::
1. The option period depends on your qualifications and situation at the time of buying/choosing

2. 100% of the the rent you pay will go towards the house and NOT our company.

3. All of our transactions are FULLY EXECUTED

4. We only sell our houses when we know our potential buyer can afford it.

5. Depends on your qualifications/the house/your budget.

6. We take care of that.

7. With our company it's irrelevant. Our prices are determined by FHA (Federal Housing Administration) Appraisers. So no matter the value, it stays right there.

8. The selling price wont matter if its already fixed =)

Hope that summed it up for you, if you have further questions, feel free to contact me at (917) 407-6520 and my name is KAJAL.
0 votes Thank Flag Link Thu Feb 21, 2013
Rent to own programs are a great way to purchase a house. Not all are scams, but be extra careful when pursuing it. The main idea behind rent to own, is your monthly rental payments go towards the down payment of the house. However, please note not all owners are willing to offer that great option. Some owners will not agree to it, but merely have you pay rent, but nothing towards down, only option you receive is a first option to buy, and even that is not guaranteed.

If the owner does agree, it's in your best interest to get a clear and valid contract or "lease w/option to buy" ahead of moving into the house. All details (rent will go towards down pymt, house will be sold for "x" price, house will be available for sale at "x" date, if owner changes their mind after several months, then what?, if you change my mind, then what?, etc.

Good luck and feel free to check our website
Web Reference: http://www.crrli.com
0 votes Thank Flag Link Wed Aug 1, 2012
Hi Kawin,

There are many posts about rent-to-own (aka Lease with an Option to Buy) on Trulia, so you may want to search around.

It's just like any service out there. There are good reputable companies that do rent-to-own, and many that have no idea what they are doing. It seems everyone has their own idea of how it should work. Just make sure you don't pay any fees upfront (unless someone may want to check your credit and provide you with your credit report), and that you don't wire any money (especially via Trans Union or to anyone overseas!).

For our rent-to-own clients, there is a down payment/option fee required upfront, plus first months' rent. The down payment is typically in the 3%-6% of the purchase price of the home, and is not refundable, but counts 100% towards the purchase price.

Therefore, before you ever enter into any contract/lease, you want to talk with a lender or mortgage broker to first make sure you will be able to purchase the home on/before the terms expire (typically 12-36 months). Check the comps (comparable sales) to make sure you are not paying more than market price for the home. Also, have an attorney review the paperwork before signing.

As for rent credits, the seller may or may not be offering them. Generally speaking rent credits in the 10%-20% of the monthly rent make sense. Be cautious of advertisements with huge rent credits, as the price of the house may be more than the comps support and/or the rent may be much higher than market rents. Remember a seller typically needs to have some equity in the home to offer rent credits.

You will want to consider the pros and cons of just renting until you can purchase a home (e.g., will you potentially qualify for a loan in the near future 3-9 months), renting to own (i.e., you need 12 months or more to qualify for a loan), and buying outright (you may be surprised and can purchase sooner than you think). A mortgage broker or lender will be able to tell you how long you will need before you may qualify for a bank loan and how much you will potentially be able to afford (i.e., the monthly amount which relates to how much home you can afford).

We only suggest you rent-to-own if you absolutely want to purchase the home you are considering. Otherwise, you will lose you down payment/option fee.

We have a frequently asked questions page on our website at http://www.BuyBaltimoreProperties.com/faq. Please check that out for more information.
0 votes Thank Flag Link Tue Jul 31, 2012
Basically it means that you pay rent but if you decide to buy at the end of your term the remaining rents that you paid through the term agreement gets deducted from the price. A normal downpayment for a rent to own in most cases is nothing but in some cases can be whatever you and the seller agree on. Not all of them are scams just make sure whatever you do is in writting. Hope my answer was helpful! Wish you the best! Jeannette Batsikas
0 votes Thank Flag Link Tue Jul 31, 2012
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