[okiemom]

We are selling (or trying to sell) our house and 13 ac. The lending is really jammed up and no one is giving credit.

WE told our realator that we would be willing to offer owner fianance.

We have had and offer on the house,but it is for rent to own. We are doing the numbers and for it to be as good a deal as just outright buying The price of the house has to go way up.

In rent to own we still have to pay insurance and taxes so that is an out of pocket expense. We have a realator so I am not sure how her commisiion works.


Has anyone else sold a house by rent to own and what are some things we need to think about?

 

[Beeman]

I've not done it personally, bought one with owner finance. I have a friend that had a horror story and would be very careful. Do not hesitate to do incredible backround and credit checks.

 

[Witterbound]

I've never heard of a rent to own house sale. If it's like a rent to own furniture or appliance contract, a very tiny portion of each payment goes to ownership, and if the renter backs out at any time you get to keep the property. So, my hunch is, that with such a contract you're going to be much more like a landlord and much less like a seller. In other words, you will get less each month, but giving up almost nothing with respect to your ownership of the property.

 

[DAVID In Wisconsin]

I did an owner finance on some property I owned a few years back. It worked well for me. I charged above market interest and I have great purchasers. I made good money.

Your realtor's fees could vary, but mine charges a fee equal to the first month's rent on a commercial building that I was recently trying to sell but leased out instead.

Good luck!

 

[Windy in Kansas]

My best suggestion would be to wait for the market and lending to recover some and then sell.

One now deceased landlord in my area made much more money off of rent to own houses than he ever did off of straight rentals. He said they are generally taken better care of because they think the house will become theirs. However things can go sour fast and with one house the buyers even broke out all of the window sashes before they left, knocked holes in drywall, etc. If you sell that way be sure to get a substantial down payment to cover rebuilding of such.

 

[featherbottoms]

Maybe I'm missing something but how is Rent to Own any different than Owner Finance? Are you not able to set your own rules, interest, down pmt, time limit, conditions, etc?

We have sold 3 properties Owner Financed in the last few years. We had different terms, interest, etc with each property. We did not use a realtor but the 1st property we did sale on eBay.

With one we pay the taxes and all the upkeep. With another, the buyers are responsible for everything - all we do is provide them with the tax statement.

We did get 20% down on one property and almost 50% on the one that sold on eBay but we didn't get for a down payment on the last one as the buyer just didn't have the money.

With the one that sold on eBay the buyer resold the property 2 years into the 5 and paid us off.

If we were doing it again there are a few condition and restrictions I would ask for that we didn't in the beginning. But so far we've really no complaints.

Deb.

 

[pistolsmom]

I am buying this house on rent to own...also known as "Article Of Agreement" or land contract. [ One payment left and it is mine YAHOO!!] The lawyer drew up the paperwork with the seller and the seller DOES NOT pay the taxes or insurance. It is right in the contract that we must pay it and we had to show proof of insurance at the time we signed the papers. Basically the seller is carrying the mortgage the same as a bank would and if the buyer defaults the house goes back to the seller. Worked great for us!!!

 

[Cygnet]

What about this?

Lease the house to them for a period of time. At the end of the period of time, they have an option to buy it. Hopefully, in a year or two, the economy will be in better shape. If they don't complete the term of the lease, you have no obligation to them and still own your house.

Less PITA than owner financing. You don't have to foreclose on them if they stop paying, you just have to evict them. And you can also evict them if they start trashing the place or something.

(I know someone who owner-financed a property. The buyers TRASHED it, completely, and he couldn't do anything because he didn't "own" it, he was just carrying the note. If I say they were cat hoarders and trash pickers and made a living parting out cars, do I need to elaborate further on the mess he had? It was practically a superfund site outside, and you needed a respirator inside.)

-- Leva

 

[DQ]

The lending is really jammed up and no one is giving credit.

I am in ne ok too and if this info is what the buyer gave you I would think again about doing an owner carry deal with them. we can get approved for a mortgage that no one in their right mind would get with our income. we didn't have any trouble getting our pre approval letter a few weeks ago. a freind of mine is a real estate agent and said there is no problem with loans in our area if people are QUALIFIED. she also told me there are special mortgage programs available for rural land (we are selling by owner but she has given me pointers) if they can't get a mortgage then you probably don't want to have them indebted to you. we are approved for a new mortgage at a reasonable dollar figure in relation to our income without even selling our current home! :shrug:

edited to add. if the down payment is the problem you can help them with that, jsut up the dollar figure you are selling for.

 

[edcopp]

Well, you will get what you pay for as far as advice goes, on this board. Bear in mind that all state laws are different. While portions are based on common law there are about as many variations as there are people.

Understand that "rent to own" and "Land Contract" are not the same thing. Rent to own is a rental agreement. Be aware that the renter is going to think he owns the place from the start.

"Rent to own" people often have poor credit. I would sugges that you run a full (written) credit check on your "rent to own" suspected buyer (occupant). Find out just how bad his credit is. You may have second thoughts about this course of action.

Also note that the marketplace is a mess. For several years anybody that could brethe could get a home loan for up to 125% of the purchase price. During this period of time all the folks who would not pay rent were able to get mortgage loans even with a couple of evictions on their record.

Combine that with a lot of inflation in the housing market and, wah lah; you end up with a "credit crises". Now the people who are the occupants of oversized and over priced houses are getting tossed out on their rears.

They are now looking to rent, or "rent to own" and are looking for new victims. They like to live free, paying payments on a regular basis is a pain for them. Often they are short of cash for the security deposit (you will need to "work with them" on that issue). Don't bother to mention first and last months rent to them they might have a stroke. Don't bother to mention any rules to them either, remember they think they own the place from minute one.

Most generally they will know all about "free" lawyers. Legal aid and so on will provide them with a lawyer to fight the mean landlord who thinks that he/she still has some ownership interest in the property. Note that water bills in most places will attach to the property if not paid, so set aside a few hundred dollars to deal with that issue.

Also bear in mind that when the new occupant causes some sort of civil problem it will become the problem of the owner of record, That will be you for a long time yet. Such things as junk cars, new buildings, and pit-bull kennels come to mind right away just from my own recent experiences.

Realtors like to be paid. They prefer cash, but can usually work with checks too. In the case where your rent to own deal is done by your freindly Realtor the fee becomes "by agreement". Often the Realtor will want half of the sales commission up front with the other half later on. They hate this because they often do not get paid the full amount ever. Occupants, who need "rent to own" services are often not dependable and have ruined credit. Likely their income is irregular. They will not hesitate to ruin the "rich" landlord if they need to (or can). So often the Realtor does not get fully paid.

Be very careful with this issue, it can eat you alive.:croc:

 

[Shadow]

The credit market is back to where it should be. If you have good credit you can get money if your credit is in the toilet you can't. We sold several by contract. Some went well but three of them went really bad one was so bad we had the fire dept burn it down, one we sold the 35,000 morgage to the lady that owned the house next door for 15000 and the last we spent 22,000 to get it into shape to sell and then the bottom fell out of the housing market. If they can't get credit why in the world would you want to play banker and finance it for them do not do it. What you are thinking about doing is a sub prime loan. Think it through. my experience never again

 

[Alice In TX/MO]

I am getting 9% on a home I am owner financing. My attorney said not to "rent to own." The attorney did the paperwork for the owner finance documents.

I'm in Texas. Your state may vary.

The occupant/purchaser pays insurance and taxes.

 

[plowjockey]

Rent-to own, is not tha same as a land contract.

RTO mean that much, or all of the rent money collected, may be put down towards buying the property, when the renter can and wishes to purchase the property.

A land contract is a "mortgage" written up by the property owner/seller.

IMO, a rent-to-own offer on your property, mean that they do not have any money to put towards a purchase.

You will be, in effect, a landlord, renting your property, instead of selling it.

 

[featherbottoms]

I'm not the originator of this thread but I did put that "what's the difference in RTO and OF" in my post.

That said, I'd like to thank the people who pointed out the differences in the two. I really was stumped about the difference between the two. Having it explained makes it easy to see why one would want to OF and not RTO.

I hope the original poster asks his atty, and not just the realtor, some questions before stepping into the whole thing.

I wish them well whichever way they go.

Deb.

 

[Quint]

Quite a few folks around here sell on contract. I'm told that essentially you pay for the house in monthly installments. The catch is that most contracts have a clause written into them that if you miss a payment the house reverts to the owner and you forfeit any money you've already paid into the house. I'm told several guys around here make a good living doing that. In one instance the person was within months of paying off their house, missed a payment and they lost it. Most of the time though they miss after a year or two and they figure it is easier to start over than to find another place to move to. As I understand it, very few of the places actually ever get "sold" since invariably someone eventually misses a payment. Miss a payment or not it is an extremely expensive way to buy a house form what I'm told and about the only people who do it are those with bad credit who can't get into a house any other way. Probably become even more popular now that credit rules have tightened back up.

 

[plowjockey]

Quite a few folks around here sell on contract. I'm told that essentially you pay for the house in monthly installments. The catch is that most contracts have a clause written into them that if you miss a payment the house reverts to the owner and you forfeit any money you've already paid into the house. I'm told several guys around here make a good living doing that. In one instance the person was within months of paying off their house, missed a payment and they lost it. Most of the time though they miss after a year or two and they figure it is easier to start over than to find another place to move to. As I understand it, very few of the places actually ever get "sold" since invariably someone eventually misses a payment. Miss a payment or not it is an extremely expensive way to buy a house form what I'm told and about the only people who do it are those with bad credit who can't get into a house any other way. Probably become even more popular now that credit rules have tightened back up.

That is the fault of the buyer also, as they agreed to the terms of the land contract, which could/should always be negotiable, prior to sale.

Stuff can happen, but "miss one payment - lose the farm", is not a land contract term, I would ever agree to. There should a little bit more buffer than that, before "forclosure".