Rent to Own? – Part II

Published by cravat | Filed under Buyer / Seller Tips, Listings, Miscellaneous, Real Estate, Shout Outs, Uncategorized

Continuing our previous discussion, this is the nightmare part of our rent to own option when you are finally decided to get that lovely home that you dreamed of.  

#2 You can waste all your initial investment 

I will lay down all the cards and show you all the scenarios: The owner or seller does not make the mortgage payment and the bank forecloses the property. The person in the lease option covers no protection at all. The bank does not have any binding contract with you, whether you are religiously paying the rent or not. That scenario is the same on foreclosure scenario, you would both lose your investment. It is also a possibility that the owner tries to shove you out to sell to a higher bidder in outright payment.  

Overall, the owner wants you to put in to effect your choices and purchase the home. But there are times that the owner changes his mind, maybe prices in the market have gone up and he could think he could get more money to another buyer. Then the owner might give you a difficult time for you to give up thinking on buying. If the conditions of the rent option are in black and white and in his favor, you could lose your option to purchase with a late payment even if it is just only once. 

#3 Gone with your investment and never be able to buy the home 

Can you really pay for the home? At this point, there is no bank telling you otherwise. Some owners will consider a rent option payment even when they clearly see the buyer has no hope in his loan being approved. Nearly all rent to own buyers are not capable to get a standard loan because of bad credit. They only need to be committed to recover their credit reputation. The entire idea of a lease option is that later on buyers qualify for a good mortgage.  But you got to clean up your credit and never to go back to ruining your standing. 

Make the agreement work out for you 

Still want to take that dive, locking in the price on a property home now? Remember to educate yourself, if you need to talk to an attorney, do it before you enter and seal the deal. Find someone who can stay on your side. Understand the lease options from the owner’s perspective because it will come in very handy that you are knowledgeable of your investments.  

Locate a house at a reasonable cost 

The simplest manner is to find a house that as “rent to own.” This way it automatically reduces your options. Another alternative is to look for a house for sale and talk to the owner whether he is keen to lease the property. When the owner agrees for you to view the house, refrain from using technical terms, if possible. Using the word rent to own will toss them for a loop. Try using “Would you be willing to sell this property at a pre-agreed price if I make my payments on time for the next couple of years?” You are likely to have a higher chance with a home being sold by its owner, especially if the property is vacant for some time. 

Go back to basics; make some research on the price. Look at similar sales not just similar asking prices, to understand whether a property is a good deal. Comparable means properties with the same characteristics in the similar area and locality that is purchased within the couple of months. 

Once everything has been decided on and you are going through the final stage and finally closing the transaction. On the last part of my article, I will be focusing on what you can expect and what you should look for in a contract.