Q: How do I go about to start the process with making my home a ?rent to own? are there any special things I need to do?
A: There?s a lot that goes into a rent to own or lease option. I highly suggest consulting a Realtor who?s done them before, as well as a good real estate attorney to draft the lease. A bit about both types of transactions:
Rent-to-Own or Lease-to-Own (also called a Lease Purchase):
* Buyer pays the Seller a deposit or ?option? money to purchase the property. This option money may be substantial. A typical amount might be $5,000-$25,000.
* Buyer and Seller agree on a purchase price, often at or a bit higher than market value.
* During the term of the option, the Buyer agrees to lease the property from the seller for a predetermined rental amount.
* The term of the lease purchase agreement is negotiable, but the common length is generally from 1 year to 3 years, at which time the Buyer applies for bank financing and pays the Seller in full.
* The option money generally does not apply toward the down payment and is non-refundable if the Buyer defaults and does not purchase the property. Also as this is a purchase agreement, the Seller can sue for specific performance if Buyer defaults and does not purchase after the term ends.
* A portion of the monthly lease payment typically applies toward the purchase price. How much is negotiable.
* Nobody else can buy the property unless the Buyer defaults.
* Buyers are often responsible for maintaining the property and paying all expenses associated with its upkeep, including taxes and insurance.
* Again ? The Buyer is obligated to buy the property at the end of the option or lease period.
Lease Option:
* Buyer pays the Seller option money for the right to later purchase the property. The lease option money may be substantial. A typical amount might be $5,000-$25,000.
* Buyer and Seller may agree to a purchase price now or the Buyer may agree to pay market value at the time the option is exercised. It is negotiable. However, most Buyers want to lock in the future purchase price at the time the agreement is signed.
* During the term of the lease option, the Buyer agrees to lease the property from the Seller for a predetermined rental amount. * The term of the lease option agreement is negotiable, but the common length is generally from 1 year to 3 years.
* The option money generally does not apply toward the down payment.
* A portion of the monthly rental payment typically applies toward the purchase price.
* Option money is rarely refundable.
* Nobody else can buy the property during the lease option period.
* If the Buyer does not exercise the lease option and purchase the property at the end of the lease option, the option expires.
* The Buyer is not obligated to buy the property.
In any of these situations, your Realtor should use a Real Estate Attorney to draft such a complex document ? these types of transactions are not very common and are not part of our normal real estate forms.
Liane Jamason, REALTOR Smith & Associates Real Estate St. Petersburg & Tampa, FL
Liane Jamason is a Realtor? with Smith & Associates in Tampa, FL.
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Related posts:
- Lease Options Make For Viable Options
- Can A Realtor Help Me Find A Rent To Own Home In Pittsburgh?
- How Can I Change A Rental Property To A Rent-To-Own Property?
- What Portion Of Lease To Buy Goes Toward The Down Payment?
- Can I Lease To Purchase A Home?
Source: http://www.realtor.com/blogs/2012/10/26/how-do-i-make-my-home-a-rent-to-own-home/
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