Rent to Own or Lease Options
I get phone calls and emails from people looking for rent to own or lease option homes all the time. And there is a reason I avoid these types of deals! Please read it and understand that I do not normally deal with rent to own homes or lease options. I am sure that with a little research and due diligence on your part, that you will be able to find a reputable person that does work with this type of financing. Sorry but it is just not me! And I do not know who to recommend so please do not ask.
Please remember that no matter how badly you want to buy or sell a home in South Carolina today, this type of financing is not always the answer!
Always hope for the best and plan for the worst is a great strategy, no matter what situation you are dealing with. So if you are thinking that selling a home by rent to own or lease option is the way to go, start researching the laws and all the various stuff that can go wrong and also research how much it will cost you to hire an attorney to fix. It starts to look like this is not the way to sell a home doesn't it?
And that same saying also applies if you are a buyer because just as much risk can be yours also!
Talk to Your Lender!
The first step in buying a home is talking with a lender, preferably one in Upstate South Carolina. And since getting a pre approval letter is not going to cost a potential home buyer anything, why not at least see what is possible? If you do not take the time to find out, you will never know !
Please take the time to see what a mortgage lender will say! Even if you are unable to obtain a mortgage from a reputable lending institution, you will at least know the reasons why. And then you can work on improving your credit. There is absolutely nothing wrong with renting while working to improve your credit and saving more down payment! It is much better to wait until you are ready than to rush into such a major financial decision and become the victim of a scam or bite off more than you can chew.
Heck, some people rent all their lives and there is absolutely nothing wrong with this either. For some people, renting is just a better decision. I rented for many years because I liked the idea that I could quit my job, pack my car and move 1000 miles at the drop of a hat. And I did it several times!
Pretty hard to do that if you must sell a home! But I eventually grew older, a little wiser and settled down. I found the love of my life and an area that I was happy to stay in the rest of my life. So buying made sense, but only after I talked to my lender and investigated my mortgage options.
Low Down Payment?
If a buyer has not saved a down payment that will more than cover the normal seller's expenses, why should a seller be willing to take a chance on rent to own? And if you are selling a home, why should you take all the risk for about the same amount of money down that a renter would give you? Why wouldn't a home owner just rent the place instead of possibly running into problems later that may require a foreclosure attorney? Do you know how expensive foreclosing is?
As much as I wish the world was a better place and people did not lie, and people did not take advantage of others for their own benefit, it happens. Why let your eagerness to own or sell a home be your downfall?
If a home buyer does not have more down payment than what the seller would get as deposit from a renter why would they want to sell the home in this manner? Think about it, if the normal deposit is first and last months rent, and a potential home buyer is not offering a lot more than this as down payment, why would a seller accept it?
Is it possible that the seller may be planning on the buyer NOT being able to keep up their end of the deal so that the buyer loses the downpayment and any extra money they have been paying each month?
Again there will be exceptions to the rule, but I know from experience what has worked and what has not.
Monthly Payment
Many rent to own or lease option homes will have a monthly payment that is higher than the normal market rent for a similar property. The extra money that the buyer is paying each month is applied towards the purchase price of the home. Sounds great as long as the buyer can qualify for a mortgage at the time specified in the contract. Because if the buyer cannot exercise that purchase option...guess what? All the money the buyer overpaid every month may be forfeited! So not just the down payment or option money, but also the extra money that was paid every month is gone. Poof! Gone! And the buyer cannot do a thing about it because they signed the contracts that said they agreed to this!
Purchase Price
Even if a rent to own or lease option buyer can get a mortgage when it comes time to exercise the option to purchase, if the purchase price of the home in the contract is above what the property will appraise for, no bank will lend the money. And in todays market, getting a reasonably priced home to appraise can be hard, much less one that is overpriced.
So what if the buyer cannot exercise that option? The seller may get to keep the down payment or option money, PLUS all the extra that was paid every month! Of course the contracts should say what happens! Without an attorney to represent the buyer and a different attorney to represent the seller before the paperwork is signed, it might mean both the buyer & seller end up paying much more later!
Is Rent to Own a Scam?
So is rent to own always a scam? No! But maybe if you Google Rent to Own Scams and see that what I am saying has been said many many times by other people in other places! It can work, but there are many many problems for both the buyer and the seller with rent to own homes! I could go on and on with the various pitfalls of rent to own or lease option deals for both the home buyer and the person selling the home, but I think it might be better if you hear it from someone else besides just me.
So after checking out these websites, and researching rent to own, you have decided that you still are going to go ahead with a rent to own or lease option home? Then I have one last very important suggestion:
Hire an Attorney to Represent You!
When I say hire an attorney, I mean do not use the seller's attorneys if you are the buyer! And if you are the seller, do not use the buyer's attorney! Alway have your attorney check all the paperwork before you sign anything, whether you are the buyer or the seller. The buyer and the seller must hire an attorney to represent each of them and make sure no one is taken advantage of. Again do not sign anything until after your attorney says it is OK! It does not matter if you are the buyer or the seller- Get your own attorney!
But Why is Mark Telling Me This?
I am a REALTOR so it goes without saying that I think that buying a home is a great idea. I am tired of getting the emails or phone calls and feeling bad for these people. I know they will not believe me and are determined to own, no matter what. Well with this article about rent to own or lease options, I have officially warned the world. If you choose to hang yourself, I am not handing you the rope! From now on when people ask about rent to own or lease option homes, my reply will always be a link to this web page.
Rent to own or lease options might work out in everybody's favor sometimes.
If a deal sounds too good to be true, it probably is. If you are not financially ready to buy a home then maybe owning a home is not right for you today.I am not saying you will never own a home! Just take your time and do not rush into such a HUGE financial decision!
We were all babies once and we all had to learn to crawl before we walked. It is no different with real estate.