Rent to Own Tips
Even though this arrangement is often tailored for a buyer-seller type, the lease with option to buy or renting to own all work about the same. How it works is the renter agrees to lease the home for a pre-determined time usually from one to three years. There may be an up-front consideration fee. The seller allows the buyer to lock in a monthly price for the property till it is paid off.
The buyer needs to decide if they are going to stay in the area since leasing does cost more than just renting. Its a good idea to know that this property is the one desired before entering the lease-option agreement.
Buyers will need to pay an option fee which is the upfront consideration fee that makes the contract binding. Once they understand all they need to, they will need to pay it and sign the contract. At the end of the lease, buyers can choose to buy the property. This is called closing.
Timing is everything when it comes to home financing. Market conditions are a critical factor in finding a lease-option, said Oscar Munguia, real estate broker in Simi Valley, Calif.
This type of agreement works well with those who are new to the housing market or have made a job transition. It also is positive for anyone who needs to strengthen their credit or pay off a obligations to qualify for a home purchase.
Its also advisable to get the property inspected before buying it. Have an independent professional home inspector go through the property to uncover any potential problems the home may have to make sure these will not be an obstacle to a loan. Also, be clear on who is responsible who the repairs as well.
Chris and Sarah Kane of Visalia, Calif. Bought their first home with the lease-option plan. We found a home we really liked for $221,000 and figured we would just have to rent it, said Chris Kane. But as we thought more about it, we knew we didnt want to spend over $2000 a month on a home with nothing to show for it.
They decided to apply the rent to the purchase of the home and after they had an agreement with the seller, they had $20,000 of equity just 12 months later, leaving their down-payment covered.
Lease-options typically favor the buyer, but they can be complicated and dangerous to those unfamiliar with them, Munguia warned. For this reason, they should seek counsel from a broker, and also have a real estate attorney inspect the contract to ensure their financial protection and security.
John Harris is an expert researcher and writer on real estate topics such as economics, credit improvement tips, home selling advice and home buying preparations. For more information please visit Poway Homes for Sale
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