Whether you are a buyer or a seller, a rent to own home may seem like your best option. For buyers, renting to own means you will have a better chance at buying a home even if your credit score is bad. You will be able to live in the house during process, which is an average of three years. For sellers, you will have more time to sell the house without paying double mortgages. However, the most important factor when choosing to rent to own is to create and agree on a thorough contract to avoid any loopholes or misunderstandings.
Choose the price of the home
When choosing the price of the house, the buyer and seller must agree on a price. Once that price is in the contract it cannot be changed unless the buyer’s lease is up and the buyer chooses not to buy the house. This means you must take into consideration the trends of the housing market and prices of houses in similar neighborhoods to yours. This is a gamble because as housing prices rise or fall the price you choose for your house will remain the same.
Agree on an option fee and rent premium
In rent to own homes – an option fee is a portion of money paid that goes toward the down payment of the house if the buyer chooses to buy the house at the end of the lease. If the buyer gets evicted, cannot afford to buy the house or chooses not to buy the house when the lease is up the option fee is profit for the seller. The rent premium is the rent per month plus an extra fee that goes toward the down payment of the house. Buyers must carefully make sure these fees fit into their budgets before agreeing to them because if a payment is missed they could be evicted.
Include the purchase option in the contract
After deciding on the money aspects of the deal you will need to come up with a contract that includes this information as well as stating that the buyer/tenant has the option to buy the home at any time before the lease expires.
The rest of the contract will resemble a lease contract
Because the buyer is a tenant until the home is purchased, the seller is responsible for fees such as homeowner’s insurance and real estate taxes. However, the seller can decide the terms of the lease and decide whether or not the buyer is responsible for lawn and pool care and general upkeep. The seller must also come up with house rules and reasons for eviction. This is necessary so that the buyer/tenant can be evicted if she violates the law or severely damages the property.
You may wish to have a lawyer look over the contract
Before you sign a rent to own contract you may wish to have a lawyer look it over to determine whether or not the contract is reliable. This is recommended for both buyers and sellers in order to avoid bad situations such as inability to evict an unlawful tenant or unfair eviction of a law-abiding tenant. The goal is to create a successful situation where a buyer can buy a house and a seller can sell a house.