It’s not surprising that rent to own home deals have grown in popularity in recent years. The concept makes a lot of sense. If a motivated seller is comfortable with a potential buyer who lacks the short-term ability to purchase, this arrangement helps both parties make progress toward their ultimate objective.
This Team Move/OVM Financial blog article provides in-depth guidance on the positives, pitfalls and prep work that need to be addressed by the prospective buyer, during the process. Here are some of the key points to keep in mind.
Always pay rent, deposits and any other bill by check & make sure the seller cashes checks promptly. The buyer needs to be able to document each transaction and the lender will usually regard the check clearing date as the day of the transaction. So if the check doesn’t get cashed, the potential buyer may be penalized.
Take the process seriously and follow customary home buying steps. Just because a future owner is comfortable in their home and feels good about the relationship with the seller, doesn’t make it okay to cut corners. Hire an attorney to get deal terms in writing at the start of the arrangement. Get a full home inspection, consider doing a title search and be sure to document everything. The future owner has a right to know what condition the house is in, and in many cases, has already invested funds toward the eventual home purchase that should be protected.
“Buyer beware” — don’t invest more than you can afford to lose. Even in the best arrangements, there’s always the slight possibility for a deal to fall through, for reasons such as natural disasters, or unpaid taxes or mortgage by the seller. Potential buyers should try to keep the deposit as low as possible, for this reason.
Plan ahead. It’s not uncommon for rent-to-own transactions to take longer to close than the parties anticipate. Future buyers should get their financing in order well in advance of a likely deal, and both parties should be prepared to set aside appropriate amounts of time and funds to address every facet of the sale process, such as home inspections and unexpected repairs.
The team at Sanford’s Team Move is always happy to answer questions and review every aspect of the home financing process in greater detail. They can be reached at 919-777-0114.