The rent to own market is one that can benefit both the buyer and the seller in the right transaction. Having a clear contract and understanding of terms helps mitigate risk on both sides of the equation.
The Basics of Rent to Own Your Home in San Antonio
Today’s lending market has a loan for almost everyone. However, there are borrowers who don’t fit into the normal lender’s guideline book. It may be for a variety of reasons but usually has to do with not having enough of a down payment. The rent to own model permits a renter to pay a comparable price as if they were actually renting while accumulating the down payment. All of this is done while living in the home they want to buy.
It may not seem as though there’s much for a seller to profit from a rent to own situation. After all, who doesn’t want to liquidate the property and take their profits and move on, literally? There’s a group of sellers out there that aren’t in a rush for the funding and see it as a chance to ensure a better sales price.
Sellers may continue to benefit from property tax deductions and perhaps mortgage interest. If for any reason the buyers balk on the deal, the seller had income for the property for the length of time the buyers were living in the property.
Nicer Rental with Caring Upkeep
Both parties win when it comes to property condition regarding rent to own properties. Renters are usually looking at nicer homes compared to most rental market properties in the same price range. On the other hand, the seller now has renters with a vested interest in the property to help maintain and take care of it.
Elements of the Agreement
There are four basic components to the rent to own contract: the option money, the purchase price, the rent and also the maintenance fees.
- The option money is sort of a good faith deposit when buying a home traditionally except it isn’t refundable in a rent to own situation. This is money given to the seller that enables the buyer the option to buy the house later. This option expires if not used. The sellers generally keep the option money.
- The purchase price is the amount the buyer pays for the house once they execute the option to buy. Negotiating this price is tricky because it needs to take into account the future value of the house. It can be hard to know if the housing market will be higher or maybe even lower. The buyer might decide if the market drops to walk away from their option or attempt to renegotiate. Sellers will look to negotiate higher prices compared to the present market value.
- The rent is the monthly obligation during the option period. Whereas rent is sometimes more than typical rent, some is credited toward the purchase price of the home. This could be 10% or more of each rent check.
- Maintenance is an option the seller can include. This would be an extra fee to pay property taxes, repairs, and general home maintenance.
Should You Rent to Own Your Home in San Antonio?
While rent to own isn’t for everybody, it’s a good choice once a buyer and seller each see the value in the arrangement. The buyers get time to repair problems preventing financing today but still get the property. The sellers get option money with the possibility of a future higher value sales price.
Buyers need to work diligently to execute the option and be ready to qualify for a conventional loan by the time the option is due. Check credit and consult with a lender early in the rent to own process so you can establish the proper elements of credit and income to qualify for a loan that buys out the seller when the option is exercised.
If you’re looking for more information concerning rent to own properties, we can help.