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Rent To Own Home Seller Guide

 

Rent To Own and Lease Purchase Options are becoming increasingly popular in today's real estate market. Homes are becoming harder to sell in the traditional manner largely because fewer people qualify for a standard mortgage. With lenders tightening credit because of recent losses the market promises to become even tighter.

Selling a home on a Rent To Own basis is a hybrid between a rental and an outright sale. As a seller you have the option of setting the standards that your buyer must meet in order to purchase your home. When choosing a buyer it is important that you meet with several candidates, review their credit and references, discuss their situation and expectations, and let them know yours in return.

Opportunity For A Quicker Sale

There are large number of people that are locked out of the traditional market by the inability to qualify for traditional financing. Many of the people have only minor credit issues or have been unable to accumulate enough cash for a down payment. Others may have been the victims of their previous home becoming unaffordable due to increasing payments. By including this growing number of people in your market you will increase the likelihood of a quick sale.

Your Rent To Own Agreement

Your Rent To Own Agreement should reflect all of the terms of the lease and purchase of your home to your seller. Consider the following questions:

• Who is responsible for maintenance of the home during the lease period?
• How much of the Monthly Lease Payment will result in a Monthly Rental Credit?
• Does the Lease Option Fee count as a down payment upon purchase?
• Will you monitor your tenant's credit to insure they are able to buy at the end of the lease?
• Is an extension available if they cannot qualify for a loan at the end of the lease?
• Will the purchase price be set or will it be the result of a formula?
• What changes to the property may the tenants make during the lease period?
• Are there specific state or local requirements in your area for Rent To Own Homes?

Make sure that your agreement covers all of your concerns and conditions. Consult an attorney or a real estate professional if you have questions about your agreement BEFORE you finalize it with your tenants.

Integrating Credit Repair Into Your Rent To Own Strategy

Many of your prospects for Rent To Own and Lease Purchase tenant/buyers will have some credit issues. This investment strategy relies on the tenant/buyer improving their credit over the period of the lease. Successful credit repair on your tenant's part means that they will be able to qualify for a loan in order to purchase the home at the end of their lease.

While this requires more attention from the investor than a simple rental agreement, it should also provide you with better tenants and more profit in the long run. It is probably a good idea to include a provision in your Rent To Own or Lease Purchase Contract that requires your tenant to provide you with a periodic credit report in order to verify that they are working to improve their credit.

An understanding from the beginning with your tenant that this is a joint effort to provide them a path to home ownership is always the best. Emphasize that you want to help them own the home and that improving their credit rating is paramount in that process.

If your tenant/buyer is sincere about their effort to own a home the credit repair facet of this strategy should never be a problem. Scheduling a credit review meeting every quarter or six months can help keep your rent to own strategy on track.