rent to own homes. how does this work. Im the seller. How does this work for me?

Answer 1

We're in rural northern N.M. north of Santa Fe and we do them all the time. Here is a super simple explanation
There are two types of rent to own programs the seller can give
1. Rent/Lease with an option to purchase
2. Rent/Lease with a right of first refusal
Under one you execute a lease for the rental and you negotiate a purchase agreement that both parties agree to but it will not be executed until a future date. Monthly payment to rent and a portion to accumulate for the renter/buyer in the event they execute the option to purchase according to purchase agreement. If they fail to execute the additional payments become rent.
Under two you execute a lease for the rental and you execute an agreement clause within the lease that stipulates that before the owner can sell to someone who has presented an offer that owner is willing to accept that the renter has the right to match the offer and acquire the property. In some cases a certain amount of money is paid for this right in most cases only the rent is collected.
Pretty simple actually just need the right representation and the right forms. It is usually done to allow a buyer to accumulate a down payment or when a buyer is not sure of a recent job promotion
Buena Suerte

Answer 2

If you are the legal owner of the home you can lease option or rent to own. The purpose is two fold. One line of thought: The owner wants to get out from under the payment but may be faced with a poor selling market. On the other hand, offering the option could help a buyer who might have a credit issue, or not enough money for a conventional (and other types) loan (down payment ).

Here's the basics: Based on a home worth $100K, a lease option buyer would be required to put up a down payment. Usually (your choice though) non-refundable. Let's put that at $3K. Then the option buyer should begin a payment schedule, this is similar to renting (no last month payment). Just starts paying the monthly bill, which should be enough to cover your mortgage payment. Let's put that at $1K per month. You collect the $1K per month until the lease is up, at which time, the buyer has to perform or the contract is over. You can also, restructure the contract at this time if agreeable, or you can simply advertise to do it again or sell.

You can structure you deal to last from one year to three or even five if you want but the shorter the better. You want the person to buy your home eventually. During the period that your home is under the contract, the occupant should be making arrangement to get their own mortgage and pay yours off. You should look at a lease option as a sale as far as maintenance goes. The buyer should take care of all. Also, give yourself the right to survey the property if you are suspicious that it is being unkept or damaged you need to have the right to correct the situation, in other words; protect yourself from the home being damaged.

A good mortgage broker or property management company can help you out a lot. Some real estate companies also handle lease options. Not knowing what state you live in, I would advise you to be careful. People have lost big time in real estate deals.

Answer 3

It's called leasing with an option to buy, or leasing to own (LTO).

An LTO is a lease combined with an option to purchase the property within a specified period, usually three years or less, at an agreed-upon price. The borrower pays an option fee, 1 percent to 5 percent of the price, which is credited to the purchase price. The borrower pays rent and an additional rent premium that is also credited to the purchase price. If the purchase option is not exercised, the buyer loses both the option fee and the rent premium.

An LTO deal thus has five major provisions. The sale price of the house and the rent are market-determined, yet subject to negotiation just as in a straight purchase or rental transaction. Buyers often know less about the market than sellers, which places buyers at a disadvantage unless they do some homework, which is advisable.

Buyers generally prefer a long option period because it provides more time to build equity and repair credit. A long period can boomerang on them, however, if they are never able to exercise the option, since they lose the rent premium they have been paying all the while, in addition to the option fee. Sellers generally prefer a short option period, but if it is too short, the house won't be sold.

The option fee and rent premium are viewed differently by buyers and sellers. To the buyer, they are part of the equity in the house they will soon own. Fully anticipating that they will exercise the option, the only cost is the interest they would otherwise have earned. To sellers, however, these payments are the best guarantee that their houses will sell; if they don't sell, the payments are retained as income. That the benefit to the seller generally exceeds the cost to the buyer makes the lease-to-own deal a possible win-win.

Using an LTO to Buy: LTOs offer home-ownership opportunities to consumers with little cash and/or poor credit, who are prepared to bet on themselves. The bet is that before the option period expires, they will qualify for the mortgage they need to exercise the purchase option. During the option period, they have the opportunity to rebuild their credit and accumulate equity while living in the house.

The development of the sub-prime market, in which consumers with poor credit or no cash can obtain loans, does not seem to have lessened interest in LTOs. It is very likely that those who succeed in exercising their option under an LTO do better than if they had financed a conventional purchase in the sub-prime market. The savings in finance costs will more than offset a higher price on the house. But those who can't exercise their option will lose their bets.

Consumers who need to rebuild their credit rating during the option period should understand that paying their LTO rent on time won't do it. Rent payment information is not used in compiling credit scores. While Fair Isaac, the company that developed credit scoring, has recently unveiled an "expansion" score based on "non-traditional credit data," it does not yet include rent payment information from individual homeowners. LTO buyers who need a higher credit score must focus on their credit cards and loans.

Even though it is costly, the right not to exercise the option is of value to buyers. If there is something seriously wrong with the house, neighborhood, or neighbors, the money left behind on an LTO is much smaller than the cost of an outright purchase followed by a sale.

Using an LTO to Sell: Most home sellers want a cash sale, but for those prepared to hang on to the property awhile longer, the benefits can be compelling. There are almost always more LTO buyers than sellers. As a result, buyers generally pay top dollar, perhaps including some assumed future appreciation.

To be sure, the deal may fall through, but in that case the seller gets to pocket the option fee and rent premium. The seller also enjoys the tax deduction on his mortgage interest payments during the option period.

Answer 4

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