The Rent To Own Transaction…..Is it for you?

In this challenging real estate market sellers who are not able to sell their properties through a conventional sale are more open to proposing rent to own deals.

For sellers, the advantage of this type of transaction is the likelihood that the renter will, at some predetermined point in the future, buy the property. For buyers, rent to own can provide the credit challenged or cash poor buyer a route to homeownership.

Be careful, and make sure to consider your options, because the rent to own transaction can have many potential drawbacks, for both the buyer and the seller. Consider the following issues:

For Sellers:

• Who will take care of the property on a daily basis and pay for routine maintenance?
• Who will pay for major repairs, such as roofing or major plumbing repairs?
• What are the costs of setting up and managing an escrow account for the portion of rent allotted to the down payment?
• Will you manage the property yourself, or hire an agent, if so how much will the agent charge?
• What if the potential buyers change their minds? Who keeps the money in the escrow account?
• If the buyers change their minds, what will be required to put the property back on the market?

For Buyers:

• How much of the monthly rent is going towards the down payment?
• Are you locked in if you change your mind?
• What will it cost you to get out of the deal?
• How long will it take to accumulate enough of a down payment that you are likely to qualify for a mortgage?
• What happens if you don’t qualify for a mortgage by the specified deadline? Can you continue to rent?
• Who will be responsible for routine maintenance?
• Who will pay for major repairs?
• Do you hope to improve your credit rating by paying rent on time? If so, will the owner report your good payment habits to credit bureaus?

As a buyer thinking about entering into this type of transaction you should consult with a qualified mortgage professional, before entering into the deal, to make sure you are likely to qualify for the loan amount if all planned thresholds are achieved.

As the seller you need to weigh your options and consider whether locking in a price at this time will benefit you, after taking into account who will pay for what and for how long. Is your main goal to sell the property or to make as much as possible on the sale? The answer to this question should provide some direction.

If all of these issues are adequately addressed the rent to own transaction could provide valuable benefits for both the seller and the buyer. The devil, as they say, is in the details, so make sure you have a knowledgeable real estate agent working with you in order to successfully navigate this complex process.

This entry was posted on 25. October 2007 at 23:37 and is filed under Seller Information, Buyer Information, Blogroll. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.

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