Special offer

Rent To Own Houses, Big Opportunity For Both renters and Investors

By
Real Estate Agent with Coldwell Banker Park Shore 17777

Rent To Own Houses Gives New Opportunity For Aspiring Homebuyers

The financial troubles of sub-prime lenders like New Century Mortgage Corporation has cast quite a pall over the financial markets and prospects to purchase homes with less than prime credit. This has had a dampening affect for hosuing markets across the country but as is usually the case it has been way overblown.

Zero down home loans are still available for credit worthy buyers ( a FICO score of 640 is usually a minimum threshold). There are also a number of first time homebuyer programs available to assist with down payments, counseling and lender referrals.

My Guaranty Home Sales Team in Kitsap County, Washington offers a third alternative for the growing class of sub-orime buyers through our lease to own program. We offer tenants an opportunity to lease own home of their choosing with a firm option to purchase within a two year period. Within that 2 years we work with them to raise their credit scores and take title to the property. After qualifying them for our program we give them a slected list of homes that we determine would be in their price range, allow them to select form that list the home they would like to own and then match then with an investor to purchase the home, lease it to them and grant an absolute option to purchase the home for afixed price at any time within the two years. Getting people into a home of their choice and helping them qualify for the money to purchase it offers multiple benefits for these individuals. It is truly rewarding to help struggling families obtain the home of thier dreams.

Giving renters who would otherwise be excluded from financing to acquire a home is very beneficial to them. But wait,... it is also a very attractive investment strategy. What is does that is so beneficial to the investor is that our method of qualification, incentives and management remove or greatly reduce the "friction points" inherent in the landlord-tenant standard relationship. This is the best way for people who have limited means to get started in real estate investing to avoid the pitfalls of property management, leasing, vacancy and all of the other headaches that real estate investing gurus don't really want to talk about in their high priced investment seminars. By the way, our more seasoned investors are so happy to use our system that they now don't do anything else. Everybody wins in this arrangement.

When I say everybody, I mean cooperating or referring agents too. Think about it. A referring agent can earn income from deals that they are unable to write themselves because of poor buyer credit. That's pure profit. And when we find agents that we like to work with regularly we will enter into a reciprocal referral arrangement wit them, particularly in markets outside our region of expertise in Kitsap real estate, Bremerton real estate, Silverdale real estate and Port Orchard real estate. Rent to own houses can apply to existing Port Orchard homes for sale or new homes in Port Orchard.

Like I say, everyone wins.

Jason Vombaur
Keller Williams - Vancouver, WA
I think rent to owners are good if they are good terms for both sides.  I have seen to many times the buyer is getting ripped off.
Apr 23, 2007 04:03 PM
Michelle Way
AVALAR Pro Realty - Jackson, MS
ABR, GRI, WCR
I really hate the idea of rent to own personally...... Because what I have seen happen to the area afterwards. Renter even in more expensive home don't understand the word homeownership. Also were does the appraiser get comparable properties if there are no comps ?
Apr 23, 2007 04:05 PM
Michelle Way
AVALAR Pro Realty - Jackson, MS
ABR, GRI, WCR

Try www.naca.com This will really help your clients

Apr 23, 2007 04:06 PM
Art Blanchet
On the Outside Lookin' In - Sebastian, FL
Stranger in a Warm Land

There must be integrity for the scenario to work - and a realistic exit strategy.  If a buyer with bad credit gets a home and needs to refi in two years to avoid a huge payment increase, who is going to guide them through a process - wise use of credit - they have been unable to adhere to in the past.

Unfortunately 70% of borrowers do NOT improve their credit in two years, partly due to the added expenses of home ownership and partly due to the fact they are still in their own skin.  Optimistically, 30% DO improve.  It is not an easy call and care should be taken to put people in situations they can truly handle.

Apr 23, 2007 04:15 PM
Jim Freeman
Coldwell Banker Park Shore - Port Orchard, WA
Helping Seniors In Transition

Wow, those were some great (and quick) comments. I am glad to see such an active group.

All of these comments speak to problems that DO exist in some lease to own programs. I agree that integrity is a key. I would also agree that in the normal case (70% was referred to in one comment) tenants will not act on their own to improve their credit. In our system they are provided with professional help from former bank employee credit managers (they must pay for this). We monitor the progress (or lack thereof) in FICO improvement over time and give more help to those who don't make progress. Of course, some do fail (our current track record is that about 80% result in a successful purchase).

It is also true that if they were able a tenant's first best option is to qualify to purchase on their own thus avoiding the returns demanded by the investor for the risk and for profit. In our qualification procedure we first refer prospects to a lender to find out if they can qualify now. If so, we help them with that.

We have closed 2 deals in March and will close 3 in April. Our Washington State pipeline is growing as our lead generation system is working well. We will be posting testimonials from clients as soon as we complete some changes to our websites. Keep posted and Thanks For The Comments.

Apr 23, 2007 04:54 PM
David Doerr
David Doerr Mortgage Team @ Axia Home Loans - Spanish Fork, UT
14 Year Mortgage Professional

It expands financing options as well...

You are doing a great service, just don't get greedy, it is the downfall of soooooo many great programs!

Apr 23, 2007 04:54 PM
Anonymous
Roz Burton-Torres

I, myself, have the the buyer and seller of lease options. There are always pros and cons of any transaction. I have had lease option tenants exercise their option and they are happy homeowners and there are those that didn't and they lost out on their option deposit.

I am also the buyer of a lease option in which I was happy to walk away from my $5,000 option fee because the things that we found out while living there were a lot more costly than the $5,000 option fee. We had also gotten an inspection etc. but who would have ever known the paint would bubble on the exterior of the house?? We had an inspection in the summer and the bubbling happened in the winter of course. The items that were missed in the inspection(not at the fault of the inspector) added up to be about $20,000 worth of repairs.

I sell my properties through lease option and work a win-win solution for everyone involved. You can't MAKE people clean up their credit..we give them the tools to be successful. It's up to them to work with us to get them to where they want to go.

Thanks Jim, More people need to know more about lease options!

Roz Burton-Torres

WA Real Estate Solutions

Direct 425.894.8558

Office 425.825.0121

RozBT@WaRealEstateSolutions.com

www.WaRealEstateSolutions.com

 

We pay $500 referral fees to anyone who refers us to a buyer or seller. Paid immediately on a closed transaction. For more information go to our website.

 

 

Apr 29, 2007 05:26 PM
#7