Downturn Makes Rent-to-Own More Appealing
As the housing downturn continues, rent-to-own contracts are becoming increasingly popular.
Rent-to-own allows buyers time to see if they like the property and time to repair their finances and get a mortgage.
Fritzi Barbour, an associate with Coldwell Banker Caine in Greenville, S.C., says many practitioners are unwilling to recommend a lease-to-own arrangement.
The negatives from a buyer’s standpoint: less flexibility than a rental situation without the permanence of owning and the potential loss of a hefty down payment if the deal doesn’t close.
The down side from the seller’s vantage point: the possibility that the buyers will be unwilling or unable to buy, but their presence make a purchase by someone else unlikely. Also, the seller doesn’t get the money right away, nor is there real closure to the deal.
Source: the Wall Street Journal, Sarah Max (12/02/2010)
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Owner Financing Can Expedite Sales
Owner financing can help sell a property even in this challenging market.
Banks generally are willing to accept rent credits for an option to buy as an acceptable down payment, but both buyers and sellers must follow these guidelines for Fannie Mae and Freddie Mac to sanction the transaction.
The rental amount must be determined by a property appraisal with the credit for the down payment clearly calculated as the difference between market rent and actual rent paid for 12 months. For instance, if market rent is $1,000 and rent paid is $1,200, $200 could be credited monthly toward the down payment.
The rent/purchase agreement must be for a minimum of 12 months. The contract must clearly specify a rental amount as well as the portion to be credited toward the purchase.
The buyer will need copies of canceled checks or money order receipts for 12 months, proving rental payments to persuade the bank to credit the funds toward the down payment.
Source: Creative Investor, Rodney Williams (08/23 2010)
Front Gate Properties, We’re selling the BEST Real Estate in Aiken, SC.