Last Train to Clarksville

Rent To Own. Do You Have Questions?

So you might be driving around Clarksville looking for a home and come across a sign that might look like this…

Do you know how Rent to Own or Lease to Own works?

For the Owner of the property, it is a way to make a pretty good profit by offering a deal that someone might feel they don’t have a choice but to take.  Sometimes customers aren’t sure they can get pre-qualified with that 580 credit score or higher to get a loan with a good interest rate.  So they instead try to do the home buying process on their own, thinking that if they work directly with the owner, they will get a deal! But is it a good deal?

I did a little research on this subject. I have had alot of customers asking me about it.  I have also been seeing signs around my neighborhood with a rent to own.  As you can see in the picture above there is a minimum of $5,000 down.  This $5000 down is non-refundable. Usually with Rent to Own or Lease to Own, the owner wants 3 to 5% down of what the asking price for the home is now and it is non-refundable.  Then some might try to sign over a quick claim deed where you will be making the payments for the property that the mortgage company still thinks the owner owns and is making. The owner doesn’t have to register the quick claim deed. If he did, he would have to claim the $5000 he just pocketed. Also, if he did, then the bank would be wanting to know what is going on. 

The owner usually has a contract with the future buyer agreeing that payments will last for 3 years and then you have the option to buy the home at the price the current market analysis places the home in, unless you agree to a price upfront.

Rent to Own or Lease to Own, really is not a good business decision for the Buyer because you will find that the payments will be $200 or more than what the owner is paying right now. For example: the house on 123 Main Street is offering the option of Rent to Own.  The owner has been in the home for 5 years and bought it at a great price when the market was doing great!  They owe $95,000 on this home and had a comparative market analysis done to see what it could be priced at and sale for today!  The price is $153,000.  So, they will offer you the home for $153,000 and ask that you put 5% down, $7,650, and you can be in it today. 

Well, you decide to pay the money down and move in and you are making them payments of $200 or more than what they are currently paying.  So they are making a profit that they might put in an emergency account in case you decide after 3 years or sooner that you don’t want it. At that time they will start all over and offer the home for rent to own or lease to own and someone else will pay 5% down non-refundable and the process starts again. 

This might not be the case with everyone but this is usually how it works.  If you have an example, please comment.

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