Unfortunately there are fraudsters that owe more than the property is worth and yet they dupe buyers into signing a lease-option or rent-to-own agreement. Then what can happen is the "buyer" would pay above market rents and also have to make any repairs. After a few months or maybe longer, the bank will foreclose and the seller will then tell you have to allow Realtors in to show for a Short Sale.
For this reason, it's crucial that you have a Real Estate attorney review your contract and also perform a title search to discover all liens (mortgages).
If you have credit issues that are preventing you from getting a regular mortgage, you may want to try:
Also if you have verifiable income and a large downpayment, you may be able to find a credit union to lend you money.
All the best,
Future Home Realty
A lease option while a smaller time frame also relies on the property owner keeping the property free and clear and putting some of your funds towards your down payment or your closing costs. In exchange you will put down a larger non-refundable deposit, usually around $3-5,000. Make sure you have a lawyer review the property and the documents before you move forward. If you making this option because of your credit - make sure you do credit repair so you are ready to finance and not stuck with financing issues. Good-luck
The answer usually is: the house is overpriced.
Every real estate transaction can be good for both parties, just make sure you do your homework before you sign anything. Consult a lawyer.
If you decide to do lease with option or rent-to-own, check the owner, make sure they are not in foreclosure or they are not late with their payments, check the title and finally make sure you are paying a decent price.
A lease to purchase option holds the buyer to an obligation to buy the home at the end of the predetermined lease period. One drawbrack is that the predetermined price may be higher than the value of the home when it comes time for the purchase. Also, lease to own generally requires a large downpayment that is forfeited if the purchase is not completed at the time determined. However, lease to own is a good, viable option for someone whose credit is not good enough to qualify for a standard type mortgage loan.
A rent to own agreement has a bit more flexibility. Generally, a predetermined amount of the rent per month is credited to the future buyer as a "down payment" towards the purchase when the time comes to purchase. However, if the purchase does not happen, the renter is not refunded any of the credited amount.
As to better or wiser, it all depends on what the terms of the agreement are to be as to whether or not it is a good and viable option for you. I always advise my clients who are considering either of these as a home purchase option, to hav the contract reviewed by a real estate attorney to determine any legal recourse the buyer/renter may have. I have seen this save my clients thousands of dollars down the road.
If I may be of further assistance, please email me at firstname.lastname@example.org
Lauren Rodriguez is licensed in Florida for real estate. Van Wert Real Estate Services, LLC