rent to own-would like to know a little more about rent to own or owner financing and if they are any real-estate places that work with you?

Asked by monica7301, Philadelphia, PA Fri Apr 25, 2014

would like to know a little more about rent to own or owner financing and if they are any real-estate places that work with you or realtors that help with credit repair that are well known and not a fly by night place, somewhere like remax any help greatly appreciated thank you.

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Anna M Brocco, Agent, Williston Park, NY
Fri Apr 25, 2014
Rent to own is similar to a car lease. Be mindful that rent to own is really not a good idea, therefore consider fixing whatever is preventing you from purchasing outright. Rent to own can be risky, it favors the seller so one could stand to lose a bit of money, therefore do inform yourself well, and consider consulting with an attorney who specializes in real estate beforehand. If you haven't done so yet, visit with any licensed loan officer, see if you can buy outright, or simply continue renting until a purchase can be made.
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Terri Vellios, Agent, Campbell, CA
Fri Apr 25, 2014
This is rare in a seller’s market and in a high demand rental market. Where rent to own comes into play is when a seller can not or decides not to sell at this current time and wants to get a tenant that will likely pay above market rate for rent and put up money to lock in an agreed to sale price option.

This is how that works. The Seller and Buyer will agree to an option, say in one year the Buyer has an option of turning the lease into a purchase contract. The purchase contract terms are agreed to now. The price, etc. In the contract the Buyer agrees to pay an option, usually this option can be equivalent earnest money and often is higher than a security deposit. Example $5,000. This option money will be applied to any down payment when the option is exercised. In addition the buyer and seller (landlord/tenant) agree that a portion of the rent will be applied to the future purchase price. Example, rent is $1200 but tenant will pay $1500 with $300 going towards the future purchase price. In one year if the Buyer/Tenant decides to exercise their option to purchase than the option money, in this example $5000 plus the option rent $300 x 12 = $3,600 then $8,600 would be considered down payment on the purchase. In the event the Buyer does not exercise their option the $3,600 is not returned, and what ever was agreed in the $5,000 option is either returned or not, per contract.

You will have two contracts, one is the lease the other is the purchase contract with an addendum for lease purchase option.

If home values go up this is a win for the Buyer as they have locked in a lower purchase price. It’s not great for the seller because the seller has locked up their property and can’t rent or sell during the option period. Also if prices go up they are selling at a loss.

If prices go down a buyer may not want to exercise their option to buy and then may forfeit the option money.

The other part of the answer is financing. Some lenders will finance and some may not. If you do have a seller carry back it may be at a higher rate and I highly encourage you to have the documents drawn up by a professional skilled in that type of transaction.
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