Why Rent-to-Own or Lease Option?

By
Services for Real Estate Pros with WA Real Estate Solutions

Most people don't know about this unique opportunity. If you ask most agents about these programs they will say that Sellers won't do that. That is not true! Here are the benefits on both sides of the equation.

Seller will still get all the tax benefits of owning the house until the RTO (rent to own) Buyer gets financing to cash out the Seller.

The Seller will have a quality tenant who will take care of the property since the intention is for the RTO Buyer to purchase the house. No calls about the toilet not working, etc. That is the responsibility of the RTO Buyer. They are in training to be a homeowner.

The RTO Buyer benefits by moving into the house that they want to purchase. They don't have to worry about moving again unless they decide they don't want to buy the property any longer. The RTO Buyer and Seller negotiate the terms of the Option to Buy. There is usually an Option Fee that the RTO Buyer gives to the Seller. This is usually similar to 1st & last month's rent plus deposit. This fee tends to be non-refundable but gets applied to the purchase price.

The purchase price is determined by the Seller. Sometimes it is not determined until the time of financing. Sometimes it is determined today and is usually higher than market value is today. Every situation is different similar to mortgages. The more you put down as a down payment, the lower your monthly payment is as well as your debt.

 

For available properties go to www.WARealEstateSolutions.com or you can email me at RozBT@WARealEstateSolutions.com

 

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Location:
Washington King County
Tags:
bad credit
first time home buyer
lease option
rent to own
no credit
renttoown
wa renttoown
leaseoption

Post a Comment
Spam prevention
Spam prevention
Show All Comments
Rainmaker
235,410
Patricia Beck
RE/MAX Properties, Inc., GRI, CDPE - Colorado Springs, CO
Colorado Springs Realty
Thanks for the info Roz, that is helpful...you're right about the RTO buyer taking care of the property since they are planning on living in it!  Does the seller charge the RTO Buyer the mortgage payment for rent each month or do they charge them more?
Apr 28, 2007 04:49 AM #1
Rainmaker
45,210
Carla Starkie
Aspen Home Mortgage, NMLS# 396174 - Colorado Springs, CO
Mortgage Loan Originator, NMLS #1013160

Hi Roz, From my experience this has been a better deal for the sellers than the renters.  The sellers do get better quality tenants most of the time.  But the truth is that 90% of the time the renters never buy the home.  After they have lived there a few years chances are they've had a job transfer, decided on a different area, or can never qualify for the home.  The buyers don't realize that chances are they won't buy, so many put a lot of money into the property.  I've seen renters pay for landscaping, decks, and even a basement finish, and then end up not purchasing the home.

The sellers can have a little more risk if they're not careful too.  Some sellers/ landlord tend to be a little more lax with tenants they expect to buy the home.  I have a current seller who allowed the renters to paint the inside of the home bright BRIGHT red and yellow and have 2 large dogs in the home (that trashed it) just because they expected the tenants to buy.  Well, now the tenants are moving out without buying the home.  The sellers are having to completely re-paint and replace carpet in a home that is less than 2 years old- and they didn't get a large enough deposit from the renters to cover the $10,000+ bill to get the home back to it's original condition.

Also, landlord/sellers can have a much higher legal risk in many areas.  Many judges have ordered that landlords have to FORECLOSE on tenants who are late on rent because the lease option is an agreement to sell.  Attorneys were suggesting that landlords keep the option completely seperate from the lease to avoid this situation, but that hasn't always worked either.  My landlords now offer a first-right-of-refusal instead of a lease-option.  Keep in mind that many judges feel like real estate investors are out to get naive tennants,and they will find any way to rule against the landlord they can.  You never do know what's really safe, because you never know who your up against when it comes to different judges opinions.

There are a lot of legal ramifications here.  Please talk to an attorney and advise your clients to talk to an attorney.

Apr 28, 2007 05:34 AM #2
Rainer
146,402
Robert Whitelaw
Whitelaw & Sons Real Estate Services - Morgan Hill, CA
Broker, CEO, Realtor , ePro

I agree that sadly, these kinds of things fall outside the comfort zone for many agents, and therefore rarely get used. If the parties involved fully understand what is going on and this type of arrangement fits with their long term plans, it can work out well for everyone.

I did one of these for a buyer back in 2003 and they ended up being able to buy the home at the 2003 price. When they exercised their option, the home was worth TWICE what they paid!

Apr 28, 2007 05:55 AM #3
Rainmaker
87,192
Paula Henry
Home to Indy Team @ HomeSmart Realty Group - Avon, IN
Realtor - Indianapolis Real Estate - 317-605-4174

I have just recently started researching this as an option for sellers. There seems to be pros and cons on both sides. I'm sure, like regular transactions, there are both good and bad deals.

Do you find buyers willing to put up a substancial amount for a deposit. I would think it would make a difference in the quality of buyer/tenant.

I have also heard the issues Carla talks. For now, I am a bit reluctant, but still researching

Apr 28, 2007 06:24 AM #4
Ambassador
2,136,511
Respect Realty LLC
Respect Realty LLC - Milwaukie, OR
Brokers - Oregon / SW Washington Real Estate

Roz,

Great to see someone else that understands that it is a win-win for everyone and if I run into anyone wanting to buy or sell in your area, I will be sure to send them your way.

Apr 28, 2007 05:11 PM #5
Anonymous
Roz Burton-Torres

HI Patricia, To answer your questions, it really depends on the Seller and RTO Buyer.  Everything is negotiable. It would be good for the RTO Buyer to pay the mortgage amount so the lender can see that the RTO Buyer is able to make that payment instead of jumping from a 'rent' payment to a 'mortgage' payment. It depends on the RTO Buyer's credit as well as what they have for a down payment. I usually work with our mortgage brokers who are familiar with these programs to finance the RTO Buyer.

Let me know if you need help structuring it. I can only go off of my experience and every state has different laws, etc. But I'm willing to share my experience!

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 12:46 PM #6
Rainer
5,291
Roz Burton-Torres
WA Real Estate Solutions - Kirkland, WA

Hi Todd, That is great that you understand WIN-WIN on the Rent-to-Own! If I have anyone who is looking in your area I will be sure to pass on their information. We have some properties in Issaquah, South Everett and Bellevue. Let me know if you know of anyone. Thanks!

 

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 30, 2007 01:31 AM #7
Ambassador
2,136,511
Respect Realty LLC
Respect Realty LLC - Milwaukie, OR
Brokers - Oregon / SW Washington Real Estate
Will gladly do!
Apr 30, 2007 02:27 AM #8
Post a Comment
Spam prevention
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Rainer
5,291

Roz Burton-Torres

Ask me a question
*
*
*
*
Spam prevention