The most common method of buying a house in this country requires the buyer to have a good credit rating so that he can apply for a loan. The buyer is then required to pay about 20% of the total price of the property in the form of a down payment.
The sad part is that most of the buyers in this country do not have a good credit rating. And even if they do, they still may be unable to come up with the down payment. The rent-to-own option, however, allows them to obtain a home without having to come up with the down payment first, regardless of their credit rating.
Here's how it works. The tenant/buyer agrees to rent the house for a designated period of time. During this period, the tenant/buyer pays monthly rent, half of which is usually set aside in escrow towards the down payment of the property. In some cases, the amount may simply be deducted from the actual price of the property instead.
As long as the prospective buyer fulfills the lease requirements and rents the house for the designated time, their money will accumulate in escrow as agreed and be applied toward the purchase of the house. If the prospective buyer decides to break the lease and not rent the house for the designated period of time, they will forfeit all the money being held in escrow and it will all go to the seller instead.
There are usually special clauses in the contract to protect both the tenant/buyer and the seller during the lease period. For example, the seller cannot sell the property to someone else during the time the lease agreement is in place. Similarly, the tenant/buyer cannot take out a loan against the property, since they don't own it yet.
There are other features that make renting-to-own an attractive option to buyers. For one thing, the required down payment is usually only 2% instead of 20%. Besides that, the seller pays the annual taxes on the property since they still hold the title on it. In addition to that, the closing price of the property is agreed upon upfront by the buyer and seller and remains constant during the course of the lease, so the sale price isn't going to increase at the end of the lease, even if the property value increases.
Most rent-to-own contracts are handled directly between the buyer and the seller, but it's always good to proceed with caution. This kind of contract can be a bit tricky, so it's a good idea to have a real estate attorney look it over before you sign on the dotted line.
The rent-to-own option can definitely be a win-win arrangement for buyer and seller when conventional methods of financing are not available.
Mark E. Moebius
CEO of MILJONAIR Development
3451 St. Albans Road
St. Albans MO 63073
636-300-9000
http://miljonairdev.com
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Very well defined...
ReplyDeleteAs with rent to own the buyer and seller may agree to a purchase price or the buyer may agree to pay market value at the time the option is exercised. But still it is negotiable. However, most buyers want to lock in the future purchase price upon inception of the lease option.
Are you considering buying a home? Maybe you want to do a rent to own purchase on a property? Whatever your plan is make sure that you do your homework and research your local area before you put down any money (or sign any paperwork). If you are thinking about finding a property that you can rent to own, you are probably at a stage in your life where you want to settle down (and invest in your future
ReplyDeleteThank you for sharing your knowledge with us. We hope this will help other's in making decission, to buy there dream home at affordable price rent to own in cavite is one excellent choice to be consider.
ReplyDelete