Fern Rice, Real Estate Pro in Westlake Village, CA

what ar the risks for buyers to rent to own in Mt. Tabor -Portland Oregon

Asked by Fern Rice, Westlake Village, CA Thu Jun 23, 2011

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REITrust Cor…, Both Buyer And Seller, Vancouver, WA
Wed Oct 26, 2011
If your question is specific to the Mt. Tabor neighborhood, it is certainly a better choice than many neighborhoods in Portland because of the property values in the area maintaining better than most, and a somewhat lower crime rate. Regarding rent-to-own risks, we highly recommend you consult with an attorney knowledgeable in the subtle nuances of this area of law rather than rely on advice from any well-meaning real estate brokers because recent case law negatively impacts this kind of transaction and most brokers may not be aware of the changes. As a buyer, you would also do well to discuss what your rent/lease-credit standing might be at the end of the lease period with a mortgage broker well-versed in these types of transactions. What is commonly known as rent-to-own, lease, and lease-options are often incorporated into our method of helping first-time home buyers and buyers who have lost their homes to foreclosure discover a viable path to home ownership - but our agreements are unique to each situation and carefully crafted by real estate attorneys to avoid the pitfalls many unknowing buyers and sellers typically stumble into. One common pitfall for sellers using boilerplate agreements is that recent court decisions have determined that many lease-option and rent-to-own agreements constitute defacto sales agreements. Because of these findings, landlords are being legally forced to use the expensive and time-consuming judicial foreclosure process to evict a tenant-buyer instead of the simpler and much less expensive eviction process. This is detrimental to the landlord recovering their property because it can take up to a year to re-gain possession in many states; and, also detrimental to the renter-buyer as it appears on their credit record as a foreclosure, almost certainly quashing any future hopes of qualifying for conventional financing for many years to come. If you are the buyer in the transaction, and your seller-landlord defaults on their loan, you could end up losing everything you have paid into the deal. Buyers/Sellers beware - especially when entering into any lease-to-own scenario. Structured properly, they can be a viable solution for both buyers and sellers. Structured incorrectly, they can be a nightmare.
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Tom Inglesby, Agent, Portland, OR
Tue Sep 6, 2011
Renting to own as a lease option is a tough spot to be in for the buyer. Buyers want to do this because they think that their rent can be credited towards the purchase price. You better ask a lender because this has not been the case for a number of years and most sellers don't know this either until one year has passed and you don't qualify for the loan with out the rent credit. First question why can you not buy today? If you cannot buy to day what lender says you can buy in 1 year if they don't change the rules and if they do then what? What happens if the house goes down in value and it does not appraise? What happens to your option money? Where will rates be in a year? If you cannot qualify to day don't put yourself at risk 1 year from now. Get a good attorney to write up the contract. You could do a delayed closing 1 year out but again wonder if you can not qualify? Under most conditions I would never suggest a buyer to go into this kind of transaction it just has to many potential problems. Good luck to you. Tom Inglesby, Broker
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Anita Desilva, , Portland, OR
Fri Jun 24, 2011
Hello Fern Rice,

Mr. Kevin Sucher is absolutely right.

Additonally, you will need to investigate if the mortgagee had any late payments and if so, you probably you should negotiate your Option Money.

Best wishes,
Anita Desilva, Broker
Realty Solutions, LLC
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Kevin Sucher, Agent, Beaverton, OR
Fri Jun 24, 2011
There is big risk for the buyer in any transaction where they do not get title up front either with lease option, seller carry, rent to own etc.

Have it all setup through an escrow and do not give money directly to the seller. That way mortgage, taxes, insurance get paid. If you are putting a down payment what is it for? To come off the sales price in the future? If so let escrow handle it until that future time comes.

You should also have a home inspection before moving in and settle any items now not later. Also have a sales contract signed with a future close date.

Just to list a few items of risk and don’t do this on your own get an real estate attorney to complete it.

Kevin Sucher
Principal Broker
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BXT AXT, Agent, San Diego, CA
Fri Jun 24, 2011
Hi Fern,

Your question is a common question so common I wrote a blog regarding it, see link below.
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Dragos Tavir…, Agent, Portland, OR
Fri Jun 24, 2011
If you are asking only about the market conditions then you can rest assure about Mt.Tabor area. It's still a good place in town, where the prices have not seen a really big drop like other places in town. However nobody can predict what the market does in the next months or a year from now. We can only come with opinions but nobody can predict it (or we'll be on a TV show making some good money out of it, like others out there).
But if I would be in your place I'd like to hear at least 3-4 opinions coming from different Realtors on the house you think of renting for now (thinking of buying it later). I can provide a free market analysis if you'd like. No problems.
As for the contract between you and the seller my fair opinion is that you better have an attorney specialized in real estate so you can sleep well at the time when you sign the contract and one year from now (or more) when the buying time comes. Good luck.
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Marge Bare, Agent, Portland, OR
Fri Jun 24, 2011
Hi Fern,
If you find things you don't like about the home, and you have an "out" in the agreement, then you'll likely lose some of the deposits you've given the seller. and by the way, will you have an out? There is a difference between a lease option and a lease purchase, so finding out exactly what the seller expects as far as deposits, rent amounts, and turning into a purchase at the end, is critical to answering about risks to the buyer. I would also wonder about why the seller is going this route.... is there a reason the owner is offering these terms? Is there an issue that he/she can't sell it today? Are they asking more money at the end of the agreement than they would get now? If so, that could be an issue.

There are many variables that would bring up more questions so it really depends on the terms they're offering and the specific home and situation. Always good to get legal advice on any agreements the seller wants you to sign. Some risks might be worth it if you have reasons that you can't/don't want to commit to a purchase now, so you need to understand your needs as well. Sitting down with a Realtor you trust to help you evaluate the price and terms will help you make a more informed decision as well.
Best to you,
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Kevin Levy, Agent, Portland, OR
Thu Jun 23, 2011
Mt. Tabor is a lovely place to live. having that park so local is a huge bonus.
Every rent to own, or lease option might or might not have it's "risks".
Read through any contract to make sure it is written in your best interest. Have a professional represent you.
You are going to be missing out on great low interest rates and low home prices happening right now, who knows what the future market could bring?
Read more about Mt. Tabor Real Estate http://relocationtoportland.com/2009/01/21/mt-tabor-homes-fo…
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Nathan Neuba…, Agent, Portland, OR
Thu Jun 23, 2011
The top one I can think of is what the interest rates might be a year from now. No one knows, but my guess is at least one and half points higher. Now is a great time to buy even though there might be a near term slide in prices.

And seek legal advice before signing anything.

Good luck - Nathan
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Sameer Punja…, Agent, Vallejo, CA
Thu Jun 23, 2011
Well, in general rent to own, it just forces you to put some extra money away for the down payment and you must buy within a certain time period. I think you are better off just renting and saving on your own. Then, you aren't forced to buy that home you are renting.
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