In today’s real estate market, both buyers and sellers are having a arduous time. Many buyers are running into brick walls when trying to obtain mortgage financing, and sellers are dropping the price on their home to attract the small pool of qualified buyers. So if you are one of the many buyers or sellers that do not find the scenario above attractive, there is another option to consider.
A rent to own agreement (also known as a lease option) might be a viable solution for both buyers and sellers. There are many variations of a rent to own agreements, but most rent to own contracts have these basic contract conditions. A seller/landlord agrees to rent the property to a buyer/tenant with the option to buy the property in the future at a fixed price. The buyer/tenant gives the seller/landlord a upfront fee to rent the property with the option to buy it at predetermined date.
From Realtytimes.com, these are some advantages for buyers and sellers:
Advantages for the buyer/tenant:
- Under this type of lease-option contract, for the period stated, you are the only one who has the option to buy the property.
- Typically a portion of your rent goes toward building equity and, when you purchase the home, is applied toward the down payment.
- You have a contract to buy the home when the lease is up.
- Usually you can buy the home at any time during the contract.
- You can see if homeownership is right for you by testing it out.
- In an appreciating market, you may get a good deal if the home goes up in value and you have already locked in a specific sale price for the home that is less than how much it appreciates. However, the reverse is true too. You could end up paying more for the home later on if it depreciates and a set price was locked in for a higher amount than what the home is worth when your lease-option is up.
- You have a chance to clean up your credit and build equity.
Advantages for the seller/landlord:
- Immediate cash flow from the tenant and the opportunity to sell your property later on.
- If the tenant/buyer doesn’t buy your property, you keep the upfront fee (option money).
- You may have a larger pool to market your home to because you are marketing to traditional buyers and also renters and investors.
- You will likely get higher-quality tenants who take better care of the home since the tenants may want to buy it in the future.
- Since you own the home, you retain tax-shelter benefits while you have tenants in the home.
- You may get some peace of mind knowing that you have tenants in your home who are working toward buying the home.
If you are considering a rent to own agreement, it advisable to contact a professional who is familiar with rent to own contacts.
To search for rent to own homes, click on the links below:
Rent to Own Homes
Rent to Own Homes by State
Rent to Own Homes by City
Source: Lease-To-Buy May Be Good Option
