Scranton Pa Homes For Sale - Rent To Own

Reblogger Bonnie Vaughan
Real Estate Agent

Every week we are asked by buyers to contact a seller to see if they would consider rent to own.  There are several terms which apply to this type of transaction. Rent to own, lease to own, option to buy, contract for deed. 

As a Real Estate professional I caution buyers to be extremely careful before entering into any agreement with a home owner.

Get competent professional help from both a Realtor and an attorney.  Allowing the home owner to write the agreement can result in your "giving away" certain legal rights you may be entitled to. 

A Real Estate agent in Pa is not permitted to write this type of agreement.  They would be guilty of practicing law without a license.  Realtors are highly trained in Real Estate transactions.  If it is illegal for a Realtor to write the contract that should serve as a warning to buyers that it is an extremely complex matter.  Only an attorney should be entrusted to structure such a contract.

The following timely article by Realtor Don Payne offers insight into the rent to own market.

When searching for homes in the Scranton Area use the same MLS search we use.

Scranton Pa Homes For Sale

Original content by Donald Payne

                                                           Rent to Own

The popularity of Rent-to-Own arrangements has grown during the past few years. Because somewould-be  home buyers have suffered the direct consequences of the widespread economic downturn and slow recovery, rent-to-own deals can rescue transactions that would have been impossible through regular purchase and mortgage financing arrangements. If a potential buyer’s cash flow seems strong enough to support an eventual purchase, rent-to-own can overcome credit or cash shortfalls.

 

In a typical rent-to-own deal, the landlord and tenant execute both a lease and a sales contract at the same time. The tenant usually pays an option fee upfront as well as an agreed-upon amount in excess of the rent payment each month. The landlord applies these additional payments toward the tenant's eventual down payment. As a result, the tenant no longer has a feeling that he has nothing to show for his monthly rent payment, and the landlord has current cash flow plus the warm feeling that at a time certain his property sale will be completed. Everybody is delighted.

 

However, there is always some potential for less than smooth sailing in a rent-to-own deal, and all parties should be clear about what they are.

                                                                                   Rent to Own

 

The primary risk to the tenant/buyer in the kind of rent-to-own structure I have just outlined is the possibility that the tenant might not be able to complete the purchase at the end of the option period. When this happens, it usually results in the tenant's forfeiture of both the option fee and the payments made in excess of the rent amount -- money the tenant could otherwise have saved or used to resolve credit issues.

                                                                          Rent to Own

 

There are also a number of ways to make a rent-to-own deal more favorable to the tenant. The first is to make the option fee applicable to the down payment if the tenant purchases at the end of the option period. In addition, the contract can allow the tenant to assign the purchase option in the event that he is unable to make the purchase. This way, if his real estate agent can find another buyer, he may recoup some of his investment. Such a contract might also entitle the tenant to a refund of a portion of the value of improvements he may have made in anticipation of purchasing if he is unable to complete the purchase.

 

Because a rent-to-own deal can have many possible details, both tenant and landlord are well advised to work closely with experienced real estate and legal professionals from the outset. Our office is here to furnish the knowhow that helps turn  rent-to-own and other real estate possibilities into realities.

What's your vision?  Click here to find out how Donald Payne can help with your Columbus OH real estate needs.

 

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Rainmaker
1,275,444
Wallace S. Gibson, CPM
Gibson Management Group, Ltd. - Charlottesville, VA
LandlordWhisperer

I bought my FIRST real estate * 1BR condo in Waikiki * with a $500 down on a 2 year lease and close on a 5 year agreement of sale....I never took title and when I sold it, I had made $16,000 as a down for a 3BR condo - the END financing is the key for making this real estate purchase a VIABLE vehicle....

Mar 07, 2012 07:38 PM #1
Rainmaker
244,734
Bonnie Vaughan
Scranton, PA
CNE SFR - Buyers/Sellers - Lackawanna & Surroundin

Wallace I'm not against the concept at all.  The rent to own market has brought out scams and disreputable investors who are going to cash in.  I want people to be aware that it is not a one way street.  They need legal advice before entering into the agreement.

Mar 07, 2012 07:50 PM #2
Ambassador
878,514
Connie Harvey
Pilkerton Realtors - Brentwood, TN
Realtor - Nashville TN Real Estate

Bonnie, these transactions can be very complicated and I also warn the Sellers about the potential pitfalls.

Mar 08, 2012 05:35 AM #3
Rainmaker
244,734
Bonnie Vaughan
Scranton, PA
CNE SFR - Buyers/Sellers - Lackawanna & Surroundin

Connie:  I agree about the complications.  I caution folks not to tie themselves up for 2 or 3 years.  We have no idea what the future holds.  These last couple of years should have taught everyone that.

Mar 08, 2012 07:44 AM #4
Rainmaker
4,555,095
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Bonnie, great advice, and is the same in Colorado.     It is better to decide - rent OR own...not both!

Mar 08, 2012 09:04 AM #5
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Rainmaker
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Bonnie Vaughan

CNE SFR - Buyers/Sellers - Lackawanna & Surroundin
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