Rent to Own
Homes, Condominiums (Condos) and Town Homes
Author: Todd Levinson
We may be seeing a significant increase of rent (or lease)-to-owns these days due to the current foreclosure crisis in America. A rent to own property can give those who may otherwise not be able to obtain a mortgage, a chance at owning their own property. As with any financial undertaking, renting to own requires some critical thinking on the part of the buyer. Rent to own is also known as a lease option sale. The principle behind renting to own in real estate is that the tenant rents with the option to buy. Thus, most rent (or lease)-to-own tenants end up with both a rental lease and a purchase agreement. This ensures that both the owner and the buyer are very clear on what their rights and responsibilities are in terms of both renting and purchasing a property. The tenant pays the owner what is known as an "option fee" or "option money", which can be any amount. This is the first sticking-point. Unlike a down payment that you can get back with the sale of a house, option money does not generally go towards the purchase price and is seldom refundable if you decide you don't want to or can't buy the home. Your option money ensures that no one else can buy the home while the "option period" lasts. If you do not choose to buy the home by the time the option period ends, in most cases, the seller is then under no obligation to sell it to you, return your option fee or what is known as a "rent premium". The rent premium is the money paid above and beyond the rent price and, if you choose to buy, goes towards the purchase price, thus increasing your equity while you rent. This also provides additional incentive for both parties to stick with the plan.
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About the AuthorPhiladelphia Real Estate Guide: Find Washington Square West real estate and homes for sale. Easy-to-use search and neighborhood info from Todd Levinson, Philly Buyer's Agent.
Looking For Homes For Rent to Own? Here Are Things to Consider!
By Wendy Polisi
If you are looking for homes for rent to own, chances are you are not in a situation currently that allows you to qualify for traditional financing. Perhaps you are self employed and unable to provide the underwriters with two years tax returns that verifies your income. Even more likely is that your credit score is not strong enough to get a mortgage now that the guidelines have tightened up so much.
Whatever your reasoning, getting a rent to own home can be a great step towards a positive future. But, there are some things you should consider as you go through the process.
First - make sure you are really motivated. Statistics show that most tenant buyers who enter into rent to own contracts never actually end up purchasing the home. Most often, the reason is that they were not serious enough and therefore did not take action to immediately begin fixing their financial situation.
Let's face it - credit repair isn't a fun process. Very often, you need cash to pay off old collections and pay down credit card debt. This takes disciple and hard work and, unfortunately, most of us are more interested in pleasure today. If you doubt your resolve to correct your financial situation, then you should probably consider renting until a time in which you feel more motivation. It simply doesn't make sense to pay an upfront option fee of between 2% and 5% of the home's value if it is not going to help you in achieving your goals.
You also need to make sure that the current home owner is really serious about selling you the home and not just more interested in having a renter who is willing to pay them an upfront fee.
While most home owners do want to eventually sell, there are some who advertise their homes for rent to own simply because they like collecting option fees. They then structure the contract in a manner that does not give you the opportunity to purchase the home. Typically, this involves a very short term (less than two years) so that you do not have the opportunity to repair your credit. Alternatively, they may set the purchase price so high that you are not able to get a loan because the appraisal will not be accepted by the bank.
By making sure that everyone has the same goals, a rent to own contract can create a win-win for both the tenant buyer and the home seller.
For help finding homes for rent to own [http://www.financethedream.com/rent-to-own-home/] or to learn more about whether a rent to own home [http://www.financethedream.com/] is right for you, please visit us at FinancetheDream.com.