2013 Housing Trends & Predictions

Rent to Own, Lease Purchase

Can’t get a mortgage?

 

No problem..welcome to the world of ‘rent to own’ (lease purchase) real estate.

This is not a new concept. Way back in the 70s a majority of all real estate sales were lease purchases. When done correctly a lease purchase is a no-brainer for the buyer and the seller. If not drawn up correctly and legally by those professionals who understand real estate contract law...it can be disastrous and cause the unaware consumer/buyer many legal headaches and disappointments he did not bargain for.

 

It is important that you have a professional Realtor® or attorney in your corner to assist you in writing up the contract documents for consumer protection. The difference between the two are: The services of a licensed, professional Realtor cost you nothing!

I have seen unfortunate situations where the consumer has signed a lease to own, then thinking that they were good to go, made his payments on time for a period of time then decided to make improvements on the property (finished off the basement, which involved a good-size of monetary outlay, and then received a shocking surprise.

Apparently the owner was in financial problems not only with his rental property but with his personal property where he lived. The owner then leased out his rental property, took the payment received for the rental property and applied it towards his own residential property. Needless to say, the consumer in the lease to own was evicted in the foreclosure process and of course the owner ended up losing both properties in the foreclosure process. The consumer/leasee ended up having to find another place to rent and lost his initial investment that he had to pay up front for the lease-to-own, not to mention all the outlay of $$ involved in his improvements on the leased home.

If you are savvy with real estate law and contracts and feel confident you understand everything in real estate contractual law without the help of professional licensed Realors or Attorney, by all means...carry on...but beware!

If there is one advice I can give if you choose this route, make sure that the payment you make on this lease agreement is arranged and collected by a third party (title company, etc.) so you can assure that the payment is being made to the lender who holds the deed on the home til paid in full and doesn't somehow go into the owners pocket, leaving you left with absolutely nothing!

One more item of caution, until you actually own the property which means you have fulfilled the full course of the lease agreement timeline, go to settlement and signed all the necessary documents required by real estate law through a title company and it is recorded and funds disbursed, DO NOT make any improvements on the property. That might come back to bite you with legal issues that could have been avoided and money wasted! 

It cost you nothing for the services of a licensed, professional Realtor®

who can safely guide you through the land mines and save you thousands of dollars in the initial negotiation process of the agreed upon price. Lease to own are not easy and usually very expensive with up front costs, much more than when you buy a home traditionally with a lender. 

So be cautious or how we say in the real estate industry "Caveat Emptor," which means "Let the buyer beware!"

This article is not meant as legal advise. Please seek the advice of your attorney.