Everyone is talking about the “economy” today and everyone has their own opinion on the current situation of the market. As a Real Estate agent in Jacksonville, Florida, my personal opinion is: Today’s market is today’s market. What does that mean? Many of us, whether we are in Real Estate as a profession or simply as an owner or future owner, are still desperately holding onto 3-5 years ago. Interestingly, that market was just as unbelievable as this one! However, history always repeats itself and you have heard the saying, “What goes up, must come down.”
Here is the bright side, there are great opportunities out there today, not only for home buyers, but for home sellers as well! My sales pitch today is about Rent to Own properties. My Real Estate team in Jacksonville has a few of these types of listings. In all reality, a Rent to Own home does not bring in much monetary gain for the listing agent, but for the seller, it could be the pot of gold at the end of the rainbow. These deals are few and far between even in a market that would benefit from them a great deal. This is an option that more home sellers might like to explore. Here is a quick overview of how a Lease Option or Rent to Own works:
A homeowner offers their property for rent with a lease option. This means that the party who enters into the rental agreement for one year (or two in many cases), has the option to buy at the end of the lease or even during the time in which the property is leased with no penalty. Typically a down payment or substantial deposit is required at the time of the agreement in order to secure the property, similar to an intended purchase. The deposit is then held to be used toward financing or down payment at the time of purchase. The homeowner takes a portion of the rent toward principal reduction as well. The renter is normally in charge of repairs after a certain amount is exceeded. For example, if the HVAC needs a small repair, the homeowner may pay up to a couple hundred dollars and the renter is in charge of the rest of the bill. The scenario is advantageous to both parties.
Lets take a look at the advantages for the seller.
– Seller gets a nearly preapproved renter who takes care of the home since they intend to purchase. – Seller gets a more substantial downpayment or deposit so as to secure the future purchase. – Seller sets a mutually agreed upon sales price with some knowledge of when it will be purchased. – Seller in a down market has a future buyer who pays the mortgage until they can purchase. – Seller gets more peace of mind in today’s environment versus hoping the home sells while sitting vacant.
For the buyer: Today, many buyers have the income to support a mortgage, but something on their credit report hinders the ability to obtain a mortgage. A Rent to own is oftentimes a great way to begin building equity while working on their credit.
– Building equity while renting. With most Lease purchase agreements, the renter/buyer receives a monthly rent credit from each timely monthly payment. This goes to reduce the principal or final purchase price. – Allows a flexible time frame for a home purchase. Normally, a renter can sign a year or two year lease with the option to buy at any time within that period. – Begin caring for their own home for future benefit. – Assistance with repairs but responsibility and ownership of the remainder of certain costs. – Buyer can secure the residence that they would have normally purchased without the ability to obtain a mortgage, therefore, not letting an opportunity slip away due to lack of credit.
Rent to Own is a phenomenal way for all parties to be successful in a transaction. Our team gets calls constantly for Rent to Owns and we simply do not have the supply for the demand.