Instead of calling my lawyer and asking...I will trust my fellow Yahoo users for an answer.
This lady looked at the house yesterday and loved it but asked if we were willing to "Rent with the option to buy". How does that usually work?
Is there a contract that says she has to buy or can she rent for a year or so then just leave without buying it? Say she does buy it...do the rent payments go towards the purchase price?
2007-11-12 03:54:16 · 6 answers · asked by Anonymous in Business & Finance ➔ Renting & Real Estate
They are renting the property, just like any other tenant would. At the end of their lease, they have the option to purchase the property from you. Usually for going market value at the time. A portion of the rent they paid over their rental agreement goes towards the purchase price of the property.
It coudl be a good arrangement, since you keep the property and have a tenant. There is appreciation over the rental contract. You pay the mortgage and they pay the going rental rate, which is higher than the mortgage cost.
The downsidse is you are still liable for the property. You still pay the taxes, still are responsible for upkeep, so if the dishwasher goes out- you foot the bill. Plus your equity is still tied up.
If you are trying to purchase another home, your mortgage on this one will be taken into consideration as a debt, but the rental income will be considered as income.
It all depends on the reasons why you are selling the home, but I would advise against it, since you may just be sticking it back on the market in a year, with 2 mortgages to pay by yourself.
2007-11-12 04:08:28 · answer #1 · answered by Meghan 7 · 0⤊ 0⤋
Essentially the rent to buy option means they pay a higher rent payment with part of that payment being put into escrow for the down payment to buy. However, it won't add up to the full down payment price after a year or even two years. They have to save on their own too. That's why rent to own doesn't generally work well. You'd really want a lawyer in on something like this because it needs to be iron clear who gets the escrow money if the purchase doesn't take place among other things.
2007-11-12 04:03:15 · answer #2 · answered by Rebeckah 6 · 0⤊ 0⤋
Don't do it!
Its a pain in the *** to get rid of people like that. She is just waving a carrot in front of you. The contract usually states that after a predetermined time, she has the "Option" to buy, at the market price the deal was struck. If you house goes up in value, she gets it at the lower value of lets say the year before. And you can't sell it to someone else at the higher value because she is the one who has the option to buy. She has to pass up on it first. And, if it is rent controlled, you have to pay for her moving expenses.
2007-11-12 04:03:26 · answer #3 · answered by thebigcheese1993 2 · 0⤊ 0⤋
Avoid the 'rent to own' scenario if at all possible. What will you do if this 'lady' trashes your house, and then does not purchase ? You will have a year or two of rent at best, plus a trashed house.
2007-11-12 04:54:58 · answer #4 · answered by acermill 7 · 0⤊ 0⤋
Whoa! You are the Seller! If you agree to something like this it gives the Buyer ownership level rights! Do talk to that attorney or if you are concerned about the cash speak to a local REALTOR about how to handle this one.
p.s. make sure he attorney is a REAL ESTATE Attorney so you aren't paying for them to educate themselves on the laws! Every title company has a real estate attorney in the office.
2007-11-12 04:01:13 · answer #5 · answered by helprhome 5 · 2⤊ 0⤋
That's typically how it works, but final say is up to you and what you're comfortable with. Yes you should talk with the title company you plan on using and have them help you draw up the contract. http://www.choicerealestate.net/
2007-11-12 05:30:09 · answer #6 · answered by Anonymous · 0⤊ 0⤋