Rent To Own | Lease To Own Homes Greenville SC Simpsonville SC

Lease To Own Homes

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In today’s economic condition, most people find it difficult to buy a house. Mortgage loans are difficult to get; some even have bad credit history that prevent banks from providing finance to buy a house. What the majority does is to opt for rented houses or apartments. However, there is still an option for those who are dreaming of owning a house. It is called lease purchase or rent to own home. It is the most widely practiced real estate technique these days. The essence of lease purchase is that you make a contract with the house owner, pay a monthly rent, live in the house, and when the contract expires buy the house. There is no need for paying the full price of the property up front. You can pay in monthly installments in the form of rent while you start to live in the house even before the seller has transferred the title to you. In the meantime, the buyer can arrange the finances to buy the property at the end of the contract period. It is like buying a home in installments.

The greatest benefit of a lease purchase arrangement is that the buyer can actually start to live in the house he is intending to buy. When the buyer and the seller enter into a lease purchase arrangement, it is typically done in two different ways. There is the lease option method and the lease purchase method. When the buyer chooses the lease option method, there is no obligation to buy the property at the end of the lease period. He can buy if he wants or he can let it go. But, if the agreement is made as a lease purchase, the buyer is required to buy the property before the lease period expires.

When a the agreement is made, it has to include some basic elements like the names and addresses of the buyer and the seller, the details of the property, the value of the property, the amount of rent to be paid each month, the date for paying the rent, penalties for late payment, down payment amount and the mode of payment, deposit amount, date of the contract, expiry date of the contract, final amount to be paid for buying the property, penalties for breach of contract, etc. These details have to be filled in the appropriate forms for lease option and lease purchase.

Buyers are the greatest beneficiaries of this method. They get to live in the house while they are still paying for it. But, the down side is that if they cannot buy the house at the end, their deposit money will not be reimbursed. Sellers also benefit from lease purchase. They may not be getting a lump sum amount from the sale; but, they still can sell the house. And, if the buyer does not use his option to buy the house, the deposit money will be a bonus for the seller. The only issue is that they cannot change the value of the property according to the fluctuations in the market. The buyer will be paying only the mentioned amount in the contract.

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Rent to Own / Lease options, are moving into the mainstream, according to Robert Eisenstein with HomeRun Homes, an online classifieds website dedicated solely to rent to own transactions.

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The benefits of rent-to-own for tenant/buyers are obvious: the chance to scope out a neighborhood before buying, and getting into a house without having to apply for a bank loan. Apportioning the lease option payment in each month’s rent payment also forces buyers to stick to a budget.

But the advantages for sellers are more subtle. “For sellers, it’s a matter of being stuck with a property they can’t move in this sluggish market,” explains Eisenstein.

Selling rent-to-own is not for everyone. But it does work for those investors who need to do something rather than sit on a vacant property. A rent-to-own contract gets the property off the market, and gets someone in there that can watch over the property.

Then, it’s a matter of wait and see if the market improves, and whether the tenant/buyer remains motivated.

“At least you know you have someone in the property who wants to be there,” Eisenstein continues. “Rent-to-own gives investors a creative option when dealing with slow-moving or distressed properties.”

Not all markets are the same when it comes to rent-to-own. HomeRun Homes sees a lot of action in Atlanta, Central Florida, North Carolina, California and Chicago. “That’s because of the severe decline in home prices in those areas, coupled with a rough economy that poses credit hardships on many buyers. Many are self-employed or cash business buyers that can’t get credit.

In fact, selling rent-to-own offers the opportunity for the landlord/seller to help the buyer rehabilitate or create credit over the term of the lease, by offering rent and lease option payment receipts and reporting the steady payment history to credit bureaus.

For these transactions to succeed, it’s important for investors to carefully evaluate the tenant/buyer. For instance, find out why they are looking for a rent-to-own, rather than buying a home. Also, consider the applicant’s time frame for purchase. While most lease options run at 12 months, some go for as long as 36. The longer the term, the harder it is to agree on a purchase price. It is also important to look at the applicant’s residence history — whether they have been renting or recently lost a home, for instance.

In some cases, the seller may be able to offload some of the maintenance of the property. Rules vary from location to location, so it’s best to work with an attorney in developing your rent-to-own contract.

July 29, 2:37 am