Rent-To-Own: Also known as a "Lease Option" or a "Lease With Option To Purchase." Rent-To-Own is a lease agreement to rent a property combined with an option to purchase agreement. The lease agreement operates as a standard rental agreement alongside the option to purchase agreement. The option to purchase agreement outlines the terms of purchasing the property for a fixed price, at a future date. The Tenant Buyer is able to rent the property during the option term and they have the benefit and the right to purchase the property, but are not obligated to do so. If the Tenant Buyer chooses not to purchase, they can walk-away, just like a rental. If the Tenant Buyer is late on the rent payments or defaults on any other term of the lease, they can be evicted, just like a rental.
Option Term: The period of time the option to purchase lasts. This term coincides with the lease period and usually last between 1-3 years and sometimes up to 5 years. The Tenant Buyer must perform in accordance with the lease agreement and option to purchase agreement during the option term. The Tenant Buyer can exercise their right to purchase the property at any point during the option term.
Option Fee: A Non-Refundable fee, also called “Non-Refundable Option Consideration,” that the Tenant Buyer pays, in order to receive the valuable benefit of having the option to purchase a property, at a fixed price, in the future. This option gives the Buyer the exclusive right, but not obligation, to make the purchase. In consideration of the option fee payment, the Seller must reserve the property, at the fixed price, for the Tenant Buyer, during the option term, and is not able to sell the property to someone one else or change the purchase price, during the option term. So the Tenant Buyer is paying the Seller a fee to reserve the property for them at fixed sales price, with a fixed rent price, for a fixed period of time. The option fee is property specific and will be different for each transaction. Depending on the amount paid as an option fee and the particular property transaction, the option fee may be applied to reduce the purchase price when escrow is opened. Option Fees are Non-Refundable and any portion applied to the purchase price is only applicable when the Tenant Buyer actually exercises their option to purchase, otherwise, the funds are kept by the Seller as liquidated damages.
Maintenance/Utilities: With Rent-To-Own properties it is more common for the Tenant Buyer to be responsible for All maintenance and repairs of the property. After all, the Tenant Buyer is attempting to purchase the property and should be considering and treating the property as their own, as a homeowner. On some older properties, depending on the property transaction, the Seller may assist the Tenant Buyer with any maintenance and repairs costs. All Utilities will be the complete responsibility of the Tenant Buyer.
Property Taxes/Insurance: The Seller will remain on title as the property owner until the Tenant Buyer exercise their right to purchase the property and closes escrow. Therefore the Seller will continue to cover the costs of the property taxes and hazard insurance. The Tenant Buyer however, must have a renter’s insurance policy and provide proof of coverage to the seller.
Qualified Tenant Buyer: A qualified Tenant Buyer is someone who successfully completes the rental application and is suitable as a tenant, and also demonstrates their financial ability to complete the purchase of a property. Generally, in order to move-in, Tenant Buyers should be prepared to pay the first month’s rent, plus the option fee. A Qualified Tenant Buyer is screened as a favorable tenant through the tenant application and will also provide proof of current employment/income, and proof of funds to cover the initial move-in costs. The most qualified Tenant Buyers will also provide a pre-qualification letter from their bank and/or get pre-qualified with a mortgage broker to have additional assurance for themselves and the home seller that they are capable of performing the purchase now or in the near future.
Exercise The Option To Purchase: The Tenant Buyer actually purchases the house. They open escrow, obtain a mortgage, perform and remove the contingencies, and close escrow. Ownership/Title transfers to the Tenant Buyer and they are now the full owner of the home. If at any time during the option term, the Tenant Buyer chooses or is otherwise unable to complete the purchase of the property, then they can simply walk-away or possibly extend/renew their lease term with the Seller. In the case that the Tenant Buyer does not complete the purchase of the property within the specified option term or they default on any term of lease agreement or option to purchase agreement, then they lose/forfeit all the option purchase benefits and they lose/forfeit their full option fee, as well as any maintenance/repairs/upgrades they have done at the property. The property then reverts back to the seller who can lease or sell the property.
Option Term: The period of time the option to purchase lasts. This term coincides with the lease period and usually last between 1-3 years and sometimes up to 5 years. The Tenant Buyer must perform in accordance with the lease agreement and option to purchase agreement during the option term. The Tenant Buyer can exercise their right to purchase the property at any point during the option term.
Option Fee: A Non-Refundable fee, also called “Non-Refundable Option Consideration,” that the Tenant Buyer pays, in order to receive the valuable benefit of having the option to purchase a property, at a fixed price, in the future. This option gives the Buyer the exclusive right, but not obligation, to make the purchase. In consideration of the option fee payment, the Seller must reserve the property, at the fixed price, for the Tenant Buyer, during the option term, and is not able to sell the property to someone one else or change the purchase price, during the option term. So the Tenant Buyer is paying the Seller a fee to reserve the property for them at fixed sales price, with a fixed rent price, for a fixed period of time. The option fee is property specific and will be different for each transaction. Depending on the amount paid as an option fee and the particular property transaction, the option fee may be applied to reduce the purchase price when escrow is opened. Option Fees are Non-Refundable and any portion applied to the purchase price is only applicable when the Tenant Buyer actually exercises their option to purchase, otherwise, the funds are kept by the Seller as liquidated damages.
Maintenance/Utilities: With Rent-To-Own properties it is more common for the Tenant Buyer to be responsible for All maintenance and repairs of the property. After all, the Tenant Buyer is attempting to purchase the property and should be considering and treating the property as their own, as a homeowner. On some older properties, depending on the property transaction, the Seller may assist the Tenant Buyer with any maintenance and repairs costs. All Utilities will be the complete responsibility of the Tenant Buyer.
Property Taxes/Insurance: The Seller will remain on title as the property owner until the Tenant Buyer exercise their right to purchase the property and closes escrow. Therefore the Seller will continue to cover the costs of the property taxes and hazard insurance. The Tenant Buyer however, must have a renter’s insurance policy and provide proof of coverage to the seller.
Qualified Tenant Buyer: A qualified Tenant Buyer is someone who successfully completes the rental application and is suitable as a tenant, and also demonstrates their financial ability to complete the purchase of a property. Generally, in order to move-in, Tenant Buyers should be prepared to pay the first month’s rent, plus the option fee. A Qualified Tenant Buyer is screened as a favorable tenant through the tenant application and will also provide proof of current employment/income, and proof of funds to cover the initial move-in costs. The most qualified Tenant Buyers will also provide a pre-qualification letter from their bank and/or get pre-qualified with a mortgage broker to have additional assurance for themselves and the home seller that they are capable of performing the purchase now or in the near future.
Exercise The Option To Purchase: The Tenant Buyer actually purchases the house. They open escrow, obtain a mortgage, perform and remove the contingencies, and close escrow. Ownership/Title transfers to the Tenant Buyer and they are now the full owner of the home. If at any time during the option term, the Tenant Buyer chooses or is otherwise unable to complete the purchase of the property, then they can simply walk-away or possibly extend/renew their lease term with the Seller. In the case that the Tenant Buyer does not complete the purchase of the property within the specified option term or they default on any term of lease agreement or option to purchase agreement, then they lose/forfeit all the option purchase benefits and they lose/forfeit their full option fee, as well as any maintenance/repairs/upgrades they have done at the property. The property then reverts back to the seller who can lease or sell the property.
I Don't Want to Deal with Tenants.
- Then SellRent2OwnHome is the perfect solution! The Seller is not a Landlord. Sellers don't deal with tenants (unless they choose to) because I deal with the Tenant Buyers directly.
- Tenant Buyers are good people looking to buy a home and typically just renting up front to save money for a down payment.
- Tenant Buyers have a pride of ownership and take care of properties they are renting/buying.
- With SellRent2OwnHome you don't pay any property management fees.
- When you sell/lease your property to me, you permit me to sublease and/or assign the property or the agreements, so then I will serve as the landlord and handle all advertising, maintenance, and tenant issues until the property is purchased.
- There are no real estate commission fees to be paid when you sell/lease directly to me.
- This can be addressed a variety of ways as stipulated in the agreement. Seller can pay, I can pay, or the Tenant Buyer can pay.
- I prefer to pay the mortgage payment automatically to the bank directly through electronic deposit so everyone knows and can verify the monthly payments are made correctly, fully, and on time.
- This can be addressed a variety of ways as stipulated in the agreement. Typically about $1,000 cash in the seller's hand, but can range from $100 to a few thousand. Depends upon our agreed terms.
- If a seller just rents a house, they do not receive an option.
- If a seller just sells a house, they do not receive an option fee.
- If a seller does a lease option with me, I will pay them an agreed upon fee up-front that is a bonus for the seller to keep.
- I try to help as many sellers as possible with as successful lease option transaction and need available funds to give everyone their fair option fee.
- I commonly have qualified Tenant Buyers signed-up ready to go in days.
- They understandably need some time to move, so can be expected that the property will be occupied within 20-60 days.
- Most times the option to purchase is exercised and the home is sold between 18-24 months.
- If I do not ultimately exercise the option to purchase the property by the end of the lease option period, then I can either extend the lease and option to purchase, renew for another term, or return the property to the seller.
- The property reverts back to the seller in the same or better condition.
- The seller can then lease the property again or sell the property, probably at higher market rates.
- The property has been paid down and maintained for the seller, hassle free, during the lease term, so ultimately, the seller benefits and profits more.
- Of course this depends on the cause...
- If the damage is from something that normally would be covered by the owner's homeowners insurance policy (tree falling down, forest fire, water heater explodes, etc.), and not caused by the Tenant Buyer, the the seller's standard homeowner's insurance covers.
- If the damage is caused by the Tenant Buyers, then it is their responsibility and I handle whatever is not covered by the seller's insurance.
- Sure, but sellers will be paying all the fees and commissions that go along with it.
- If we have a signed lease option agreement then sellers cannot list the house for rent or sale to someone else, unless it's stipulated in the agreement. In our agreement, sellers don't have to pay any commissions.
- Sell it to me as a lease option.
- If you owe more than the current value of your home, also said to be "under-water" or "upside-down," we can still work out a deal that makes sense all around.
- I can review your property data and value and work out a lease option purchase with you that saves you tons of hassles and can even still earn you profits.
>> Not every potential seller will qualify and each property is addressed on a case-by-case basis. Potential lease option sellers are matched with terms, conditions, and payments that meet their criteria as best as reasonably possible.
>> I am not a real estate agent, lawyer, tax consultant, or lender, and not acting as such. I do not provide legal, tax, or financial advice. I do not represent anyone other than myself in any real estate transaction. I am a principal in the transaction as a buyer/lessor/investor/seller. I may own and/or control the property and/or the lease/option rights for each property that I buy, lease, and sell as Rent2Own. I may assign my rights.
>> I am not a real estate agent, lawyer, tax consultant, or lender, and not acting as such. I do not provide legal, tax, or financial advice. I do not represent anyone other than myself in any real estate transaction. I am a principal in the transaction as a buyer/lessor/investor/seller. I may own and/or control the property and/or the lease/option rights for each property that I buy, lease, and sell as Rent2Own. I may assign my rights.