Homes for rent to own are becoming much easier to find. This is largely due to the fact that the current situation in the mortgage market is making is very difficult for many people to qualify for a home loan. When fewer people in the market qualify for a loan, it becomes much more difficult for sellers to sell a house fast. As a result, both buyers and sellers are looking for creative solutions.
A rent to own or lease to own home transaction can be a very good deal for both parties, as long as the terms create a win-win situation. For the buyer, the purchase price should be in line with current fair market value and not over. It is important to note that the buyer should not expect to receive a discounted price that they would receive if they were able to get a mortgage right now.
It is important that the term be sufficient to allow the buyer to have time to correct their credit issues. Credit repair does not happen overnight. Generally speaking, the term should be between two and three years. In addition to this, the buyer should receive a rent credit each month that will go towards the purchase price of the home.
The seller should have certain protections as well. Specifically, it is important that the contract have language in it that avoids the equitable interest argument. This is important to the seller because it means that in the event of non-payment they can simply evict rather than have to foreclose and then evict. The foreclosure process lasts at least six months in most states, so this is a critical point for the seller. Having to foreclose means that the buyer is still living in the property, but not making payments during this time.
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