What Are Contract for Deed and Rent To Own In Ct?

Real Estate Broker/Owner with DMK Real Estate Ct RE Broker 0789963

Many Connecticut first time buyers are interested in "Rent to Own" or even "Owner Finance" properties. For first time buyers it is important to have experience professional real estate agents and attorneys on your team when looking for property.

Looking to buy in lower Fairfield County, Ct contact David Popoff at William Pitt Sotheby's in Darien.

Eric Hempler from Minnesota explains the basic principals of these arrangements below with links to further detailed articles.



Why Contract for Deed and Rent To Own Fail 80% of the Time

A Contract for Deed or Rent to Own can be a good option for a buyer that has credit issues, but going this route doesn’t solve the other issue a buyer may have and that’s their credit. If a buyer goes this route and never works on their credit then the money they’ve paid towards a Contract for Deed or Rent to Own can be loss forever, which could be tens of thousands of dollars.

I’ll explain a Contract for Deed and Rent to Own in their simplest form.

Contract for Deed

A Buyer pays a Seller a down payment and then a monthly amount plus interest. Sometimes this interest rate is higher than permanent financing and other times it isn’t. Once terms are agreed upon a down payment of about 10% is made. These contracts usually last about two years and at that the end of the two years the Buyer would get permanent financing.

Rent to Own

In a rent to own situation the buyer agrees to rent the property for a period of time and part of the rent is set aside for the down payment. When the contract reaches the end of it’s term the money set aside is used as the down payment IF the buyer can get permanent financing.

The Risks to of Rent Own and Contract for Deed

  • The Seller could decide not to pay the mortgage any more and the Buyer would be out their down payment plus monthly payments they’ve made. There’s the potential risk of losing tens of thousands of dollars.
  • The Buyer can’t get financing after the term of the contract. If the Buyer hasn’t worked on their credit during the rent to own or contract for deed period they again risk losing thousands of dollars if they didn’t also work on their credit during this time.

The bottom line is if you’re looking to buy a home you HAVE to work on your credit at some point. With the two risks I mentioned I would strongly recommend renting something that’s inexpensive since it’s only temporary, rebuild your credit and put money aside for permanent financing on a home.

Related posts:

  1. How Does An Installment Sale Land Contract (Contract for Deed) Work (30.1)
  2. How does rent to own work? (18.3)
  3. To Buy or Rent (14.9)
  4. I want to use the listing agent because they’ll get me a better deal (6)
  5. How to Buy a Home with Bad Credit (5.8)


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Eric Hempler is a Minnesota Realtor with the Agent Referral Network and works in conjunction with RE/MAX Advantage Plus on the Minnesota Real Estate Team, #1 Real Estate Team in Minnesota since 2006.

Eric Hempler can be reached at 651-491-3393 or EricH@MNRealEstateTeam.com

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Posted by

David Popoff
Connecticut Licensed Real Estate Broker
Realtor® Green
Seller Representative Specialist
Accredited Buyer Representative


DMK Real Estate, Darien, CT.
Cell (203) 228-0646




DMK Realty, 06820 





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Diane Daley
Caron's Gateway Real Estate - Northumberland, NH

Very nicely stated thanks for posting.  I have people asking me this all the time.  

Feb 05, 2013 09:49 PM #1
Wallace S. Gibson, CPM
Gibson Management Group, Ltd. - Charlottesville, VA

People who want rent-to-own often think that they are applying their rent to the down payment and this needs to be cleared up ASAP so that their true status is not confusing.

Feb 05, 2013 10:04 PM #2
David Popoff
DMK Real Estate - Darien, CT
Realtor®,SRS, Green ~ Fairfield County, Ct

Something like this should be hanging in every Real Estate's window. Make our jobs easier  :-)

Feb 06, 2013 04:27 AM #3
Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

I can't begin to tell you how many properties I have controlled over the years by many different instruments, such as lease with option, rent to own, bond for deed and deed of trust. There are many other instruments, but these are the most common. This is not any area for folks to get involved with if you don't know what you are doing.

Feb 06, 2013 09:21 AM #4
David Popoff
DMK Real Estate - Darien, CT
Realtor®,SRS, Green ~ Fairfield County, Ct
Joe, this is why buyers need to be associated with experienced local professionals, even first time buyers can navigate this process with the right help.
Feb 06, 2013 09:59 AM #5
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David Popoff

Realtor®,SRS, Green ~ Fairfield County, Ct
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