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Kelly Lenahan, Home Seller in Chesapeake, VA

What are the pros and cons of rent to own vs owner financing, & is now a good time to do either?

Asked by Kelly Lenahan, Chesapeake, VA Sun Oct 12, 2008

We put our house on the market to rent, & was asked if we would either do rent to own or owner financing. Rent to own was presented & then everything quickly switched to owner financing with them. We have about $40,000 in equity in the house, plus owe $234,000 and have put in about $15,000 in expenses to the house. What do we do in this situation? How do we get our $40,000? This whole thing is very confusing. Our monthly mortgage is 1800 & paying $2,000 monthly, but part going towards principal. They offered to give us $4,000 down, and move in Nov., but not pay the first month's mortgage until Dec. That makes no sense to us. So, far as I can see this is a total win/win for them, but not for us. How & when do we recoup our money, especially our $40,000? They want us to close this week & sign over the title to them. Can someone please clarify for us this procedure? I am an inactive agent, but have only done referrals. We are not familiar with this at all and could use some advise.

Help the community by answering this question:


I've sold properties on an owner financing situation. I retain title, and sell on what's called a "contract for deed". Meaning you fulfill my contract, you get the deed. But not beforehand. What it sounds like, is they are trying to get the property from you at a certain price and resell to someone else at a higher price. While this is perfectly legal, you lose a degree of control when you don't hold title any longer. This isn't a situation for a real estate agent, this is for a real estate attorney. I have a great recommendation for you, he's my attorney and president of the Tidewater Real Estate Investor Group. He'd understand what it is they are trying to do and could give you the proper advice.

Bottom line is, never do anything you don't understand.

By the way, you typically get your $40,000 when they excercise their right to purchase the house, or at the end of a balloon period. They not paying for the first month is a negotiation tool, I've written contracts when I won't agree to make a payment until I sell the property. It's to cover us both, but before I confuse you too much...if you don't get it, don't do it.
1 vote Thank Flag Link Tue Dec 23, 2008
I have to agree with the other agents on here. You need to sit down with a qualified real estate attorney. Ask friends, family, colleagues for a recomendation or call your local bar association for some names of attorney's in your area. Do not sign anything until it has been reviewed by your attorney & you completely understand all parts of any agreement.

Good luck & Happy Holidays
0 votes Thank Flag Link Tue Dec 23, 2008

If you are looking for a renter then that is what the contract should be written as. The 3 scenarios (rent, rent to own, and owner financing) have 3 different contracts and I strongly recommend a real estate lawyer to help with any contract development (think of it as insurance against be sued down the road). It also appears to me that unless there is a reason for the hurry up, you need to slow down the negotiations. If they qualify (good credit and rental history that YOU are happy with) then decide what you want for the security deposit and how much you want as for as money up front (first and last months rent, etc). If you want this to stay as a rental property (or any other of the above for that matter), you need to regain control of the situation, slow it down and do it in a legally correct manner. If you decide to rent to them, once the people are moved into the property AND have a history with you, then YOU can bring up the prospect of Rent to Own or a contract using short term owner financing, with again legal advice to protect you and your interests. Do not let anyone push you into a situation or contract that you are not completely comfortable with. A great place for info is Please let me know how this turns out.

Best regards,

Roger Bequette
0 votes Thank Flag Link Mon Oct 13, 2008
Hi Kelly,

You may want to contact an attorney to draw up the contract. There are different options, but signing over your title should not be one of them. I've got a property in VB in a rent, with the option to buy. Give me a call to discuss further.

Kindest regards,

Alvin Lapitan
Cavalier Mortgage Group
P. 757-333-9033
0 votes Thank Flag Link Mon Oct 13, 2008
Hi Kelly:

Are the tenants trying to just rent or do they want to rent with option to own?

If they are just renting, then you do the normal rental contract. However, if they want to rent with Option to Own, then you normally want to write up a contract that will cover both end and usually the rent will be higher than the market rent with the excess go towards down payment.

There is usually an agreed upon rental period before they have to buy and there will also be a sales price for when they do buy.

The deal you want to struck is a sale price that will cover your $40,000 equity and $234,000 mortgage and the $15,000 expense.

If you only get $4,000; then not only you are losing the equity, you are still responsible for the mortgage balance to the lenders.

I think you really should hurry up and get a Realtor to represent you to draw up the proper lease with Option to Buy agreement with these guys.

And, NEVER, NEVER sign over your Title or sign any contract unless you understand all and every thing that is in the contract!, Yes, this sound bad to me!

Sylvia Barry
Marin Realtor
0 votes Thank Flag Link Sun Oct 12, 2008
Sylvia Barry,…, Real Estate Pro in Marin, CA
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