Rent to own? What is it?4/21/2017
So you are interested in Rent to own process to buy a new home? But what does that mean?
I feel there is a bit of a misunderstanding about what a rent to own option means and how the process works - I wanted to clear up a few misconceptions
The most important thing to remember is the lease option agreement is a legal binding document - make sure to have a real estate attorney draft the document. I cannot stress this fact enough.
1. A Rent to own is agreement is also called a Lease Option - it is an agreement for a buyer to rent a home for a set amount of time before exercising an OPTION to purchase the property when or before the lease expires.
2. Potential buyers get to move into the property right away, with a predetermined lease amount of time - one to three years is typical.
3. Before the buyer moves into the property a Rent to own Lease option agreement is signed and the buyer PAYS the seller Option Money. This gives the buyer the opportunity to purchase the house in the future. The size of the option is negotiable and is decided by the seller and buyer when the agreement is signed. It is usually a percentage of the purchase price.
4. The purchase price is also negotiated at the time the agreement is signed, however the seller can have the option of having an appraisal done at the time of the lease expiration and the purchase price can be adjusted to the new appraisal value. In a market where properties are increasing in value this could potentially mean the buyer would pay more than the purchase price that was originally agreed upon.
5. A portion of the rent the buyer is paying goes towards the purchase price. The rest goes into the sellers pocket. Once again the terms of the amount of rent that will be credited towards the purchase price needs to be in writing with the lease agreement -
6. The agreement should also address who will be responsible for maintenance and repair on the property.
If the buyer decides not to purchase the property or is unable to obtain financing at the end of the lease terms all monies that were paid towards the seller will stay with the seller. Including the option credit and all rents.
In today's market it can be difficult for a seller to agree to a rent to own situation - usually a contract for deed might be easier for a seller. A professional Realtor can help you facilitate the process, some conditions will need to be met.
If you are interested in a rent to own lease option I would suggest contacting a local Real Estate agent and/or Real Estate Attorney to find out the specifics that are available and what your options are.
I hope this was helpful
Jen Plute sells Butte