Rent With the Option to Buy

We closed on yet another home that was rented with the option to buy. The sale was completed in less time than was allotted in the contract, as the buyers were able to qualify sooner and get the low rates of today. During the time of the Rent to Own contract was in effect, the seller was able to cover the mortgage while the buyer worked on getting the downpayment and bringing the credit score to a level that they could qualify. Increasingly this is an option that sellers turn to to sell their property, especially if the property is vacant.

The way the Rent to Own program works is as follows: Buyer agrees to rent the property until such time (usually up to a year - but can be extended) that the buyer can get a loan. The buyer cannot qualify for a mortgage upfront due to credit, length of time on the job, sufficient downpayment or other reasons. Buyer would pay an upfront "option premium" which would not be refundable (usually around 1 to 2% of sales price ). In addition any amount above and beyond an average rent for a similar property can be credited toward the downpayment of the buyer.

From the standpoint of the seller, the Rent to Own provides a temporary tenant that could look after the property and help with the mortgage. The buyer on the other hand gets into a property they can call their future home. As a result they can make improvements with the blessing of the seller. Most times the sellers agree to the improvements/updates since it makes their property more valuable. At the point in time that the buyer can get a mortgage the property can go to closing and seller can transfer title. Homeowners Concept has done hundreds of Rent with the Option to Buy contracts since 1984, as a result we are very familiar on how to negotiate and structure the contract so that the property does eventually close.