The average home buyer or seller has a pretty narrow concept of purchasing a home through the typical avenue of the buyer obtaining a mortgage from a major lender. Let’s expand our home sales and purchasing options by taking a look at what you should know about buying or selling a house via rent to own in Riverside.
What Is a Rent to Own Agreement?
The traditional path to buying any home requires the buyer to apply for and then get approved for a sizable loan through a licensed mortgage lender. In rarer circumstances, the buyer may bypass a lender entirely by making a full cash payment.
A rent-to-own agreement is a contract signed between the seller and the proposed buyer of a property that spells out the terms allowing the buyer to live in the property first under a lease.
An initial reaction from sellers to this sort of arrangement is oftentimes rather negative, but – just like with any real estate deal – finding the right buyer is the key.
Why Use a Rent to Own Agreement When Selling a House?
With a red hot real estate market chugging right along, some potential homebuyers are being left out in the cold due to sky-high prices and unrelenting bidding wars.
This is generally great for sellers but can lead to some for sale homes sitting on the market for extended periods of time depending on location, features, and market value.
If a buyer is interested in buying your home but does not have the financial means to make a full 20% down payment, entering a rent-to-own agreement with them could be a mutually beneficial solution.
Rent-to-own contracts regularly contain language dictating what is called an option fee. This fee replaces the normal down payment a buyer would make when buying your home to instead rent it according to the agreed stipulations in your lease agreement. If you’re having a hard time selling a house but a buyer comes along that just needs a slight boost to close the transaction, a rent-to-own agreement could be the help they require.
The Additional Details
Before everyone gets straight to signing on the dotted line, it’s incredibly important to iron out all of the details to ensure protections for everyone involved.
The first major piece to hammer out is if this contract is meant to be a lease option or a lease purchase. A lease option means that the tenant rents the property for a given period of time and then has the option to purchase it throughout the term of their lease.
On the other hand, a lease purchase means the tenant has agreed to buy the home either during or at the end of their agreed lease term. This means you want to have the agreed purchase price of the home finalized and put into the lease agreement.
Another point that should be decided upon is stating who is responsible for any maintenance of the property.
A buyer who is truly motivated to eventually purchase the home may be not only willing but desiring to take on the regular maintenance of the home immediately to make sure things are handled to their standards while also helping to begin shaping the home to their liking.
Enlist a Professional
When crafting a rent-to-own agreement, it is highly advisable to hire a qualified and experienced real estate attorney to manage all the details.
They will go out of their way to protect both buyer and seller from any pitfalls while helping your agreement stand the test of time and the courts, if necessary. The additional expense of hiring a lawyer now could easily outweigh the dangers of a costly court battle down the road.